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  New Order accessories Winter 2012 | Source: BoF

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  Boys playing in Santa Teresa | Photo: BoF

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  Sandy sidewalk on the edge of Ipanema Beach | Photo: BoF

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  Fabrica in Lapa district | Photo: BoF

RIO DE JANEIRO, Brazil – Arriving in Rio de Janeiro in the middle of the Brazilian summer, in a country experiencing an ongoing economic boom, certainly puts the bleak, uncertain economic outlook of wintry Europe and North America into sharp relief.

I was invited to Brazil on the generous invitation of ABIT, the Brazilian Textile and Apparel Industry Association, to attend Fashion Rio, the smaller of two semi-annual fashion events just concluded in Rio and São Paulo this week. And as ever on my trips to international markets, it was the perfect opportunity to explore firsthand one of the fastest growing luxury markets in the world, to see some local designers, and to get to know the local BoF community as well. Brazil ranked 13 on our list of countries with the most BoF readers, based on website traffic in 2011.

I came to Brazil with three questions on my mind: what are the prospects for the Brazilian luxury industry, what’s it like to do business here, and who is the Brazilian consumer?

HOMEGROWN LUXURY

With a population of 190 million people – the fifth most populous country on the planet – for years, Brazil received little attention from the international luxury goods industry, which was content to serve the market through other channels, primarily via licensing and franchises.

For years, Brazilians also simply bought luxury goods from their friends, who imported luxury products in their suitcases from their trips abroad. This is how the São Paulo-based luxury emporium Daslu is said to have been founded, before growing into the beacon (and then target) for a superrich elite in one of the world’s most unequal countries.

On my last visit here in December 2007, Brazil had yet to welcome stores from major international luxury brands like Prada, Hermès and Bottega Veneta. But all of this has changed. The aforementioned brands have recently opened new stores in Brazil and more than 30 other new retail openings are expected to follow in 2012, Carlos Ferreirinha, president of MCF Consultoria & Conhecimento, a São Paulo-based retail and luxury consulting company, told WWD. In short, the luxury retail landscape is being completely redefined.

This seems well-timed. The number of millionaires in Brazil is on the rise, spurred by a commodities boom and new oil discoveries, and is predicted to surpass 1 million by 2020. Property prices in Rio De Janiero are sky-rocketing. Meanwhile, this year, the Brazilian luxury goods industry is expected to grow to more than $12 billion. In comparison, there is also a thriving homegrown apparel and textiles industry, valued at more than $60 billion, with only $1.5 billion going to exports.

Brazil’s answer to LVMH and PPR is In Brands, a multi-platform “consolidation of lifestyle and premium fashion brands – the iconic brands – in Brazil,” but relatively unknown outside the country. These include high fashion line Alexander Herchcovich, menswear lifestyle brand Richards, swimwear label Salinas, online website FFW.com.br, and the branded fashion weeks organised by Luminosidade in Rio de Janeiro and Sao Paulo, whose fashion week is touted as the fifth largest fashion event in the world.

But the Brazilian fashion brand with greatest international visibility (if not sales) is Osklen, built around the relaxed lifestyle of Rio, founded in 1989 by orthopaedic physician Oskar Metsavaht. With 63 stores in Brazil and 10 stores and growing abroad, Metsavaht’s business is estimated to turn over between $170 to $230 million each year. Reports in Brazilian and international business media say that a majority stake in the Osklen business is currently for sale, with LVMH and PPR as two of the potential suitors.

BYZANTINE BUSINESS ECOSYSTEM

But beneath this glossy surface is a complex market with a complicated future. Despite the sense of optimism, the Brazilian economy has actually been slowing down. After rapid GDP growth of 7.5 percent in 2010, growth fell by more than half in 2011, to about 3 percent. Consensus forecasts peg 2012 growth to be slightly more than this. The spectre of a Brazilian bubble is debated in the financial newspapers.

Many local business people also complain that the Brazilian market is impossible to navigate. The country was ranked 126 in the latest “Ease of Doing Business,” report published by the World Bank in June 2011. As one expat described it to me, Brazil will welcome you with open arms, but when you actually try and do business here, you will eventually find yourself stuck in a morass of government bureaucracy, corruption and an incomprehensible system of taxation.

Indeed, nobody could definitively explain to me the country’s byzantine tax system. According to Rafael Cervone Netto, chief executive of Texbrasil, a textile and apparel industry export program, tax rates differ depending on the product category, the state into which the product is imported, and where the product is purchased, resulting in more than 300 different tax positions within the textile and apparel sector alone. What’s more, these tax policies are constantly changing, at multiple levels of government. A staggering 38 percent of Brazil’s GDP is comprised of taxes, versus 8 to 20 percent for other countries, Mr. Netto said.

Not only does this make Brazil extremely difficult for global luxury brands to manage, it also makes imported products as much as two or three times more expensive than in their home markets. According to Jenny Barchfield, fashion writer for the Associated Press, “at the Burberry store in Sao Paulo, a trench coat that retails on for $915 on its UK website was selling for 3695 reais, or $2075,” or more than twice as much as it costs in the UK.

WHO IS THE BRAZILIAN LUXURY CONSUMER?

All of this begs the question: who exactly are these Brazilian luxury consumers and why are they willing to pay such outrageous prices? Why don’t they simply shop abroad like their counterparts in China and India?

Brazilians do shop abroad, particularly in Miami or New York, but contrary to popular opinion as gregarious people, they “tend to be shy and prefer to buy at home because they are more comfortable here, where they can speak in Portuguese” said Graça Cabral, a director of Luminosidade. Customer service is also a magnet for shopping. In Brazil, clients have close relationships with their favourite sales people, who constantly feed them information.

On the recommendation of a Brazilian friend, I flicked on the television in my hotel room one night to watch Mulheres Ricas, or ‘Rich Women,’ a new reality TV show based around the lives of extremely wealthy women in Rio who apparently have nothing to do all day but flaunt their designer dogs and Birkin bags. One character named Brunete Fraccaroli, with her blown out hair and extreme plastic surgery, spent much of the episode clutching a Barbie-style doll, of herself. As it turns out, the doll was a gift from Mattel, who bestowed her with this honour.

Are these the kinds of consumers snapping up luxury goods at inflated prices in Brazil? Not entirely, said Monica Mendes, founder of the country’s leading lifestyle public relations firm that has worked with Daslu, and global luxury brands like Hermès, Chanel and Prada. “Of course we have these kinds of clients, but these are the very new rich, who want to show everything,” she said.

And then it came out. “The woman in Brazil is completely crazy,” said Mendes enthusiastically. “She is completely fashion-oriented. She knows everything about fashion.”

These women, said Ms. Mendes, follow American Vogue as much as they follow Brazilian Vogue. They see all the same editorial and advertisements at the same time as the women in America. “They tear out the pages, mark them with post-its and send them to sales girls who bring it all to their homes.”

“We like fashion,” agreed Ms. Cabral. “It’s a media phenomenon in Brazil. It’s not like [this] anywhere in the world. You see fashion on television, in every kind of slot and programme. You see fashion in all the newspapers. You see fashion in magazines — even magazines that are not fashion magazines.”

But still, how can they afford it? Luxury prices in Europe and America are already stratospheric, but in Brazil they are in another galaxy. “We’ve had a lot of economic crises. We’ve changed our [currency] I don’t know how many times,” recalled Ms. Mendes, and with no irony added: “The Brazilian people are very creative with money.”

You see, in Brazil you can buy everything by payment plan, even luxury goods from Chanel and Hermès. You can pay for your tweed suit in four payments or pay for your luxury handbag in seven installments, and so on. Depending on the kinds of stores you’re visiting, and how much you’re spending, you can split your payments into smaller and smaller chunks.

More than one expert suggested that these payment plans are also a convenient way for women to disguise their luxury purchases from their husbands, splitting up payments across credit cards, cheques and cash.

“We like to dress up. It’s different from other cultures. Maybe more similar to the Arabian culture,” said Ms. Cabral. “Don’t forget, we come from Indians and Africans, and all of them like to wear things and decorate themselves. It’s part of our DNA. It’s there.”

“We want to be cool and have everything that everybody has. We want to wear the Brazilians, but also the international designers,” she added. “We have more and more consumers that want [to buy] quality as well, who are more demanding. And even if you can buy a bag from a Brazilian designer that is 2,000 reais, or a bag from Balenciaga that is 2,000 euros, they prefer [the latter],” she said.

“It brings status as well, because they need that too.”

Imran Amed is founder and editor-in-chief of The Business of Fashion

Hermès Flagship, Mumbai | Source: skyscrapercity.com

In our second article this week focused on India, we investigate the barriers impeding the growth of India’s international luxury goods market, which go beyond the recently lifted restrictions on foreign direct investment.

MUMBAI, India — “By the end of 2015, emerging markets should account for more than 50 percent of luxury sales,” Antoine Colonna, a luxury analyst at the asset manager Carmignac Gestion in Paris, told The Wall Street Journal in the spring of 2011. “This isn’t evolution. It’s revolution,” she continued.

But in India, the revolution has yet to take hold. Despite having the world’s second-fastest growing major economy and a rapidly expanding population of high net worth individuals, the country’s market for international luxury goods, worth around $1.3 billion, remains surprisingly small. In fact, while China currently accounts for an estimated 10 percent of the global luxury market, India makes up a mere 1 to 2 percent.

So why has India’s market for international luxury goods failed to take off?

FOREIGN DIRECT INVESTMENT REGULATIONS

Recently, enormous attention has been focused on India’s foreign direct investment (FDI) laws, which for years capped foreign ownership of India-based retail operations at 51 percent. In a landmark decision earlier this month, India formally lifted restrictions on foreign investment in its single-brand retail sector, allowing global fashion brands like Louis Vuitton, Gucci and Burberry to acquire 100 percent ownership of their India operations and trade without local partners.

“This was the last frontier to open. It will make India a preferred market,” Tikka Shatrujit Singh, chief representative in Asia for French luxury conglomerate LVMH, told BoF. But the decision comes with a caveat: foreign companies are required to source 30 percent of their production from small and medium-sized enterprises (SMEs) in India. “We’re delighted with the decision, but the 30 percent caveat about working with small industries has to be carefully looked into, since there are concerns over child labour and quality factory production,” added Singh.

“Sourcing from Indian SMEs will restrict investments since it’s difficult for brands to match their quality standards and positioning,” said Abhay Gupta, executive director at Blues Clothing Company, a firm that represents Versace, Corneliani, Cadini and John Smedley in India. “Besides, most brands cannot alter their DNA and signature specialisation of ‘made in country of origin.’”

“A bureaucrat’s delight, a business person’s nightmare,” commented Darshan Mehta, president and CEO of Reliance Brands, a subsidiary of Indian conglomerate Reliance Industries, which represents international brands Ermenegildo Zegna, Diesel, Paul & Shark and Kenneth Cole in India. “India’s cottage industries are not equipped to even produce H&M quality goods, forget catering to luxury brands.”

But new sourcing requirements aside, FDI reform only addresses one of the many challenges that international fashion brands face in India.

HIGH IMPORT DUTIES

For one, high import tariffs mean that luxury products can cost between 20 and 30 percent more in Mumbai and Delhi than in London or Paris. “The government has assured us that at an appropriate time, the duty structure will be adjusted to realistic levels,” said Singh. But for now, the problem persists. “We have only seen year-on-year growth, but the reason that the business suffers, even if slightly, is on account of high import duties,” said Bertrand Michaud, president of Hermès India. In fact, affluent Indians, who are extremely price-conscious even when shopping for luxury goods, buy more than 50 percent of their international luxury goods abroad.

Brands also face significant difficulties finding suitable retail space and understanding and catering to Indian tastes and sensibilities, challenges that can make partnerships with savvy local allies highly advantageous.

NO RUSH TO END LOCAL PARTNERSHIPS

Indeed, despite recent changes to FDI law, few brands are in a hurry to snap their ties with their Indian partners. “The FDI announcement doesn’t affect Hermès at all,” said Michaud. “Our partners in India, Ashok and Neelam Khanna, have been friends of the brand family for 50 years. They are in sync with our aesthetics and the Indian market.”

“The relaxation in FDI norms is a progressive move in the economic reforms process; it opens up the economy further to competition from global players, resulting in better processes, improved supply chains, better pricing and of course, more jobs,” said Sanjay Kapoor, managing director of Genesis Luxury Fashion, which holds Indian franchising and distribution rights for Burberry, Paul Smith, Bottega Veneta, Canali, Jimmy Choo and Etro. “But on their own, brands may not have enough understanding of the Indian market, its nuances and customer demographics; all critical to the luxury retail business,” he added.

A SCARCITY OF SUITABLE RETAIL SPACE

In particular, the challenge of finding suitable retail space in a country without equivalents to London’s Bond Street or New York’s Fifth Avenue makes local knowledge highly valuable. “One of my jobs is to continue an ongoing dialogue with real estate developers,” said Singh. “Purchasing property is extremely expensive and quality rental space in India comes at a premium.” Ambiance, cleanliness and security can be significant concerns, as well. As a result, luxury retailers have historically favoured opening stores in five-star hotels and upscale malls. But in cities like Mumbai, for example, brands face a shortage of premium mall space and selecting the right retail location is no simple task for those unfamiliar with the local landscape.

Hermès was the first international luxury brand operating in India to open a stand-alone boutique with an open storefront to the street in South Mumbai’s Fort District in 2011. The brand’s two other outlets in Delhi and Pune are both housed in hotels.

“Retail is about detail,” said Mehta. “Galleria gets 10 footfalls a day! Tod’s had to shut down,” he continued, referring to retail space at South Mumbai’s Hilton hotel. “The next best bet is malls. Palladium in Mumbai is doing well,” he added, mentioning a luxury mall in Mumbai’s Lower Parel neighbourhood that houses international brands like Burberry and Zara (which in India is positioned as a premium label).

CULTURAL COMPLEXITY & LOCAL LUXURY COMPETITORS

International brands operating in India also face a market with cultural complexity and culturally-attuned, local luxury goods. “Indian consumers are price-sensitive when buying Western high fashion. They won’t spend easily on that one lakh-plus rupee ($2,000) eveningwear dress. But they’d splurge on Indian couture-based wedding wear in a jiffy,” said Sanchita Ajjampur, a design consultant to international fashion brands including Lanvin, Gucci, Marni and Etro, underscoring the enormous cultural and economic importance of India’s wedding market and the local designers who cater to it. Indeed, a wedding outfit by Indian designer Sabyasachi, for example, can come at couture prices, which leaves less “share of wallet” for international brands. “This probably explains the decision to launch the Hermès India sari collection,” she continued.

“I am not here to get tourists. I want Indians. I want Hermès to be in the hands of Indians,” said Christian Blanckaert, senior executive vice-president of Hermès, at the launch of the brand’s first India store at New Delhi’s Oberoi hotel back in 2008. But achieving this is no simple task. To attract local clientele, Hermès has experimented with a number of India-inspired product lines, including a recently launched line of saris, based on the company’s famous scarves.

Other international fashion brands have also offered Indianised products, tailored to local tastes, like Bottega Veneta’s Knot India clutch, Jimmy Choo’s Chandra clutch and Canali’s Nawab line, all designed to cater to the country’s large wedding market. But while most India experts emphasise the importance of a tailored offering, localising product isn’t a guarantee of commercial success. “India-inspired collections add PR value to the brand, but they don’t always translate into serious sales,” said Mehta.

“Every brand has a different approach; global but tinged with local ideas,” said Singh. Indeed, knowing exactly when and how much to localise is a delicate act and each brand has a different formula that must be fine-tuned to its specific positioning and target customer. “When we tied up with Diesel, my friends asked me, ‘Are you launching desi (local) Diesel or the real Diesel?’” Mehta continued. “Luxury brands have a Western quotient attached to them. That’s what adds the aspirational value for Indians.”

LONG-TERM DIVIDENDS

Indeed, despite recent FDI reform, the on-going challenges of cultural complexity, scarcity of suitable retail space and high import duties mean the “Indian problem” is far from solved. But for brands with staying power, India presents a compelling long-term opportunity. According to Swiss wealth manager Julius Baer, the number of high net worth individuals in India with assets of over $1 million is expected to reach 403,000 by 2015. Furthermore, according to the United Nations, India is set to enjoy favourable demographic momentum for another three decades and will add over 241 million people to its working-age population by 2030 (far more than Brazil or China) boosting the country’s economic growth prospects in the coming years.

“Doing business in India doesn’t have a wham-bam-thank-you-ma’am formula,” said Gupta. “It’s a slow process but it’s one that will eventually pay long-term dividends.”

Shweta Shiware is a freelance journalist based in London and Mumbai.

Bandana Tewari | Photo: Johan Sandberg for Industrie Magazine

PARIS, France — Bandana Tewari has made a name for herself as one of the fashion industry’s smartest commentators. As fashion features director of Vogue India, she has quickly become the go-to source for anyone who wants to learn about the country’s rapidly evolving luxury market. Recently, she was named to Industrie magazine’s Fashion Media A-list, alongside other leading fashion commentators including Cathy Horyn, Tim Blanks and Suzy Menkes.

So, I am delighted to reveal that Bandana Tewari will pen a regular column for The Business of Fashion, offering her unique perspective on the Indian luxury market, starting with this interview originally conducted for Industrie.

I sat down with Bandana in between shows during Paris Fashion Week in September to talk about India’s fast growing fashion market, tailoring luxury products to Indian sensibilities, the power of Bollywood and wearing Tarun Tahiliani saris with Manolo Blahniks.

BoF: How would you describe your point of view on fashion, your angle?

BT: Every time someone asks, ‘How do I become a fashion journalist?’ I say, ‘Forget fashion.’ You’ve got to be a social anthropologist first. That for me is the hook. I don’t think I could think of fashion in a uni-linear way. Fashion is like a fantastic hydra-headed monster that is influenced by everything around us – pop culture, state of the economy, global warming, you name it. I can only understand fashion in this holistic way.

BoF: You’ve been working in fashion for eight years now, and India has gone through a massive change in that time. Can you tell us what you’ve observed as India has become part of global fashion culture?

BT: In India everything happened so quickly. In the first phase, when fashion became corporatised and institutionalised into Fashion Weeks, it started off being very Indian. Then the media cried foul: ‘No one’s wearing just these traditional clothes – what are these Indian designers doing?!’ And then suddenly everyone was into – what I think is a reductionist Indian fashion term – ‘fusion-fashion’, as in Indo-Western fusion, which was basically Western silhouettes with dollops of very ethnic nuances and motifs. We were following all the clichés that we punish the rest of the world for using on us. A nice little jacket but paisleyed to death, you know? Or skirts that were too embellished.

BoF: But today, Indian fashion has morphed into something more defined.

BT: The third stage of fashion in India was the period when we reconciled ourselves to the fact that there is a certain DNA that cannot be taken out of the country. We do have a forte that lies in handicraft, in decorative arts, in embellishments, in technique. But what designers started doing was to not use them literally: they took little bits of it and used it in fluid silhouettes. And then we had beautiful collections from designers like Sabyasachi Mukherjee, Anamika Khanna, Varun Bahl, Savio, James Ferreira. They brought this very coherent vision of India, which unfortunately I feel the Western world still hasn’t seen or utilised.

BoF: What do you mean?

BT: Well, here we are at Paris Fashion Week for spring/summer 2012. I look around me there are events promoting all young emerging designers from London. I’ve just come back from a CFDA presentation of American designers. Then, you have the Koreans in ‘Seoul to Soul’ in the Museum of Decorative Arts. It’s phenomenal how much support different countries are offering to these designers. When I went to ‘Seoul to Soul’ I thought, ‘We now need to’ – and I’m definitely going to spearhead this –‘get five, six Indian designers to have a platform like this, where we, as Vogue India perhaps, can support it.’ I saw the emerging talent, and we are no less accomplished.

BoF: But we’ve been through this phase where Sabyasachi and Ashish N Soni were showing in New York and Manish Arora was showing in London. And it seems to me that, except for Manish Arora, most Indian designers have gone back to refocus on the Indian market.

BT: Well we’re at the stage where a top Indian designer like Sabyasachi Mukherjee can sell a garment for the same price as a couture dress by Dior and conclude, ‘I know my forte lies in doing Indian clothes for Indian people and catering to a market that is worth close to 11, 12 billion US dollars per annum’ – which is the Indian wedding industry. Some designers are like Manish, who [has shown] his first collection for Paco Rabanne: he’s very clear he wants to make it in the international arena. But other designers have decided their marketing focus is in India, and they are doing phenomenally well in their own country.

BoF: And maybe that makes sense. Because some global brands have failed to understand that the Indian market requires a really tailored offering.

BT: Absolutely. Not just tailored, but you have to understand India in terms of its spending power and when that money is spent. In a certain month you’re not supposed to be ostentatious, so forget about any grand opening in that month. You have to do full research of the rituals of India. Come August, September and right up to February, it’s the wedding season. It’s also the season with all the top festivals, Diwali, the festival of lights, where money is spent, buying for others and for yourself.

BoF: Do you think global brands are starting to understand this?

BT: Absolutely, and to respond to it too. Gucci did a limited-edition ‘Made for India’ series, which you can only buy in India. And it catered the Indian sensibility, which is a little bit bling. The India Knot clutch, which is by Bottega Veneta, was a sell-out, inspired by the architecture of India. Then Hermès recently launched six or seven beautiful saris – an extension of the scarves they’re doing, and I can tell you now, it is going to fly. There are so many customisations happening, on a small level: Jimmy Choo does bridal shoes for the Indian wedding industry. All these brands realise that just a bit of tailoring for the Indian aesthetic goes a long way for them to establish themselves in the hearts of the Indian consumer.

BoF: You have this interesting dichotomy between these big local Indian designers and the international superbrands. How does this divide represent itself in Vogue India, in terms of editorial and advertisers?

BT: When you flick through Vogue India, everything is customised for the Indian reader. So we put Indian designers alongside all the international designers irrespective of who’s advertising and who’s not. Because if you walk down the streets in Bombay, go to cocktail parties, go to dinner parties, we’re still wearing Tarun Tahiliani saris but with Manolo Blahniks. We are taking international fashion the way we want to. Not necessarily getting into gowns yet, because that’s something to be talked about and discussed further. The way we are indulging in [Western] fashion is really through accessories.

BoF: And so the consumer has created their own fashion fusion in the way they dress.

BT: Absolutely. So there is no way Vogue India would not put designers together. You know, we don’t care that Tarun Tahiliani doesn’t show at New York Fashion Week. He shows in India Fashion Week and that’s good enough for us. And he sells and he’s loved by his consumers and our readers. So if he’s doing a black sari that becomes the It-sari of the season and we do a ‘Midnight Black is Back’ page in the front of book, you’ll see a Jil Sander black shirt with that Tarun Tahiliani black sari, with a Dior black clutch and a black dress by Gaurav Gupta, who’s a young Indian designer.

BoF: Do you also Vogue India as playing a role in educating consumers about international fashion? Because before Vogue fashion magazines in India were not nearly at the international level.

BT: When we launched we said ‘education first’. Every brand story we did was almost like a profile: the legacy of Louis Vuitton, of Bottega Veneta. We’d customise it for our Indian readers. So if it was Gucci, it was about what Frida Giannini thinks about women all over the world and what she thinks about Indian women. And we’d weave the brand story with it so they get to know about the brand. A few seasons later, the next stage was to engage international designers properly with the Indian consumer. So it was about going back to the designers and saying, ‘How are you engaging out customers? What is it about India?’ So all our stories would revolve around that.

BoF: Condé Nast set up Vogue India as a fully owned subsidiary, so Condé Nast India operates as part of Condé Nast International. How does that relationship work?

BT: We were the first international magazine in India to be 100 per cent owned by the parent company, Condé Nast, and it makes a huge difference when you don’t have another partner. Your marketing strategy, your sales strategy, your editorial strategy is in tandem with the rest of fully-owned Vogues all over the world. In terms of the quality and content we want to bring to the consumer, I’d say it’s as good as even American Vogue, British Vogue. And that happens because we have full control of our magazine’s destiny.

BoF: Do you have interaction with the other Vogue Editions? Do you take content from time to time from British Vogue or American Vogue?

BT: We do that all the time. Because someone picking up Vogue in India wants to know what’s happening in the rest of the world too. So we take syndications, not just the English-language magazines but from Vogue Japan Vogue, Portugal, Brazil. We are global citizens. But globalisation is a dirty word today: I think the international community is getting so tired of everything that’s globalised. So we’re not homogenised – we have such an intrinsic indigenous quality to our lifestyle and we celebrate that. Because that indigenous quality is absolutely imperative.

BoF: You mentioned cultural clichés earlier. I wanted to talk about the power of Bollywood. There’s a lot of Bollywood in your covers. Is it is still very powerful force?

BT: Bollywood is by far the biggest marketing tool for anything that you do in India. I’d prefer to call it Indian cinema, but Bollywood is what it is right now. And we took a conscious decision to Voguify the Bollywood styles.

BoF: How do you mean?

I mean all these young actors and actresses are gorgeous. Whether you like the kind of movies they choose to act in… that’s a subjective choice. But we took these amazing women who are successful and extremely powerful. And there were a lot of designer gowns and designer saris, and they’re on the cover with the top make-up artists and photographers: Patrick Demarchelier shot our first cover. We’ve had Gisele on the cover wearing an Indian-style bikini done by Tarun Tahiliani and a Balmain jacket, and we’ve had Bollywood stars in Gucci dresses. So we’ve brought that Vogue element to Bollywood. And it has changed the way people now want to present themselves in public. Because the whole red carpet thing didn’t exist in India then, but it does now.

A version of this interview first appeared in Industrie magazine.

Xiu.com screenshot | Source: Xiu.com

We continue this week’s focus on e-commerce by turning our attention on how to succeed in the rapidly expanding e-commerce market in China. 

BEIJING, China — According to a recent report by The Boston Consulting Group (BCG), China is set to become the world’s next e-commerce superpower, surpassing the United States to become the largest online commerce market in the world, with an estimated market size of $300 billion. In 2006, less than 10 percent of China’s urban population shopped online. By 2015, that figure is expected to have quadrupled, reaching 44 percent, while the total number of e-commerce shoppers in China will grow to 329 million.

What’s more, according to BCG, China’s massive geography, a middle class that is rapidly expanding beyond the country’s largest cities, and widely accessible, heavily subsidised high-speed internet — broadband in China costs just $10 per month, compared with $30 per month in India — make the country unusually fertile ground for e-commerce, with internet access far outpacing the reach of physical retailers. Indeed, up to a quarter of e-commerce demand in China is for products consumers cannot find in physical stores, with apparel and skincare amongst the fastest-growing online categories.

But for fashion companies aiming to crack the online retail opportunity in China, it’s imperative to understand that the country’s e-commerce market is very different to established markets in the United States and Europe and that online shoppers in China — much younger, on average, than their Western counterparts — have different expectations, preferences and patterns of behaviour.

“Chinese consumers’ recognition and preference for fashion brands is quite different from mature markets,” said George Wenhong Ji, founder and CEO of Shenzhen-based fashion e-tailer Xiu.com, which sells international luxury brands like Gucci and Chanel, and last year raised $100 million in a second round of funding from elite venture capital firm Kleiner Perkins Caufield & Byers and private equity firm Warburg Pincus.

“Fashion brands that are not so popular could be received very well in China and vice versa. [Chinese consumers] are still price-sensitive and have poor loyalty towards brands,” said Ji. “It’s important to study Chinese consumers’ income and expenditure – how much money they earn in different cities of China and how much they would spend on fashion; how much they would spend on fashion online,” he continued.

According to the BCG report, 7 percent of online shoppers are responsible for 40 percent of online spending. For fashion retailers, the importance of these “superheavy spenders,” each of whom complete over 50 transactions a year and have a preference for heavily branded goods, cannot be underscored enough.

To entice superheavy spenders, first and foremost, it’s vital for online retailers to get the product mix right, Morgan Tan, vice-president of e-business at Lane Crawford, told BoF. These high-spending consumers are looking for must-have seasonal items that aren’t available elsewhere, she said, noting a growing demand for niche labels. Indeed, Xiu.com, which last year recorded sales of approximately $150 million, plans to carry more international and Chinese labels that competitors do not offer, while The Corner, a luxury e-tailer owned by the Yoox Group, which operates a China-specific site at thecorner.com.cn, recently launched The Vogue Talents Corner, an initiative promoting less known emerging designers in collaboration with Vogue China.

Compared to their counterparts in the West, affluent consumers in China have a lower baseline knowledge of fashion products and are ravenous for information, an opportunity for retailers to engage them more frequently with content and advice. “It is about engaging her daily,” said Jeff Yurcisin, president of Shopbop.com, which recently launched a site in Chinese. “We send out daily emails to our customers, so she gets her fashion fix every day,” he continued. “The opportunity is for us to be a personal stylist, to spend more time telling stories and introduce her to brands that the American customer already knows.”

But despite their hunger for information, Chinese consumers are distrustful of online retailers. Amongst the world’s most highly social shoppers, Chinese shoppers trust information and recommendations from their peers on blogs, social networks and user review sites far more than official brand communications. In fact, according to BCG, only 19 percent of Chinese consumers even visit official brand sites, as compared to between 41 and 60 percent in Japan, the US and Europe.

“Online shoppers in China are much more wary than the US and UK,” said Fabienne Pellegrin, Asia business development director for Salvatore Ferragamo, who also oversees the brand’s digital development. “They need more information than the average online shopper. There’s so much abuse online, so they are programmed not to trust anything,” she continued, emphasising the importance of peer recommendations and user reviews. In fact, over 40 percent of Chinese shoppers surveyed by BCG had both read and posted online product reviews, nearly double the rate in the US. “Encourage [consumers] to write reviews about your product because so many people read them,” advised Ms. Pellegrin.

As in the West, a high level of customer service is another essential part of a successful China e-commerce strategy. “[Chinese consumers] will become loyal to an e-commerce company because of high quality service,” said Mr. Ji. “It’s about making the online shopping experience as convenient and risk-free as possible with reliable deliveries and free returns,” said Ms. Tan. “Unlike many other online retailers, we offer a multi-channel approach for customers that allows them to collect or return their order to our stores,” she continued.

While shipping costs are low, China has a poor delivery network dominated by local, independent couriers that are neither efficient nor reliable, a major hurdle for online retailers. To address the issue, The Corner has partnered with international shipping service Fedex to provide couriers who wait at customers’ doorsteps while they try on their purchases and facilitate on-the-spot returns. The Corner also leverages sophisticated RFID technology to seal packages with anti-counterfeit microchips (according to the BCG study, 45 percent of shoppers worry that their goods will be swapped for fakes while in transit).

Alongside delivery-related services that lower risk and make shopping more convenient, affluent Chinese consumers also expect rewards for their loyalty. As a result, VIP reward programmes or other special incentives are critical to success. For example, VIP shoppers on Xiu.com can view fashion shows and pre-order next season’s products months in advance of others. “We find that for more high-end customers, they value additional services, such as VIP sales alerts, pre-order, seasonal gifts,” said Mr. Ji.

But for international retailers targeting China’s fashion e-commerce market, consistently delivering a high quality experience that’s localised to the needs, behaviours and expectations of Chinese consumers often means investing in China-based operations. Indeed, while Net-a-Porter has long shipped to China, the company recently announced that it would open a distribution centre in Hong Kong this summer to better serve the Asia-Pacific region.

“Throughout 2010, we set up local operations — an office and logistics centre — in Shanghai to run the business locally,” said Federico Marchetti, founder and CEO of Yoox Group. “A local structure and local team ensures we provide Chinese customers with a unique online shopping experience characterised by completely localised, best-in-class customer service,” he added. “Although e-commerce enables brands to have an international distribution, the online shopping experience still works better at a local level.”

Ultimately, a successful China e-commerce strategy is composed of the same fundamental elements that matter in the West: engaging content, great customer service, dependable deliveries and easy returns are all critical. But in China, these elements count in different ways and weights, with editorial-style content, peer-to-peer persuasion, risk-free deliveries and rewards programmes carrying particular importance.

Divia Harilela is an associate contributor at The Business of Fashion.

George Condo x Supreme Skate Decks| Source: Hypebeast.com

In Part I, we examined how New York-based streetwear company Supreme became a global cult brand with its own myths, iconography and belief systems. Today, we explore the creative and commercial philosophies that underpin Supreme’s lasting success, courtesy of our friends at 032c.

NEW YORK, United States — The mythology behind legendary New York streetwear brand Supreme is so potent, it’s easy to imagine founder James Jebbia as a king pin of downtown Manhattan. But as he will be the first to tell you, that couldn’t be farther from the truth.

In fact, Supreme’s core creative and business philosophies are the sum of Jebbia’s patchwork retail past; not, as one might assume, a storied legacy in skateboarding. His resume reads like a series of interconnected Google-map pins on a late-80s and early-90s SoHo New York. A British-transplant who arrived in New York around 1984, Jebbia got a job working at the now-defunct Parachute clothing store in SoHo.

“I didn’t know what I was doing, but I knew I enjoyed clothes,” he says. He quit five years later to open, along with his girlfriend at the time, a small flea market on Wooster Street inspired by the myriad of stuff he coveted from The Face and i-D magazines. The project evolved into his first proper store, Union, an experimental shop on Spring Street that carried “mostly English brands” and one very important streetwear juggernaut at the time by the name of Stüssy. This allowed Jebbia to work with Shawn Stüssy, who asked him to partner with him to open one of his eponymous boutiques on Prince Street in 1991.

When Stüssy left the business, Jebbia opened up Supreme in 1994 in a small storefront on Lafayette, a then-desolate street that was a perfect place for his clientele to skate first, shop second – an order that would very quickly be reversed. “I opened Supreme because there were no other decent skate shops around at the time,” Jebbia says. “I thought, cool, I might as well be the one to do it.”

The store was able to become the holy grail of high youth street culture by curating a mix of the city’s iconography – fashion, music, celebrity and politics – within its walls and then instantly sledge-hammering the city’s high-low playing field.

Limited-edition Damien Hirst skateboards are around the same price as decks featuring lyrics from Public Enemy; custom Spalding basketballs might be sold under the artist Nate Lowman’s gritty canvases hanging on the wall. The brand’s iconic T-shirts, like everything in the store, have become collector’s items that are collages of controversial provocations and heady imagery. Designs have included an oversized New York Times logo, a portrait of Kate Moss, lyrics from the reggae musician Lee “Scratch” Perry, Mickey Mouse’s hands praying with rosary beads, Budweiser labels, and alarmist political slogans such as “Illegal business controls America.”

Juxtapositions abound: images of naked girls playing with a hose pop up in a calendar from 2006 but more cerebral women like Chloë Sevigny and Jenn Brill act as brand ambassadors in Japanese style magazines; one of the brand’s most iconic image is of the rapper Raekwon, an Elmo doll, and an Uzi show by the photographer Kenneth Capello. And really, who would have thought Lou Reed would ever become the label’s face, as he did in 2009?

“Supreme embraces the outsider and always does things off-value from their brand,” says Richardson. “But they’re consistent and have always embraced the outsider and the individual. At the end of the day, Supreme is about the legacy of punk through skateboarding and you can really genuinely feel this in everything they do.”

The brand’s insidery-outsidery brilliance often made them precursors to trends that would later pop-up on the catwalk, such as their collaboration with Richard Prince as part of their art deck series well before Prince joined forces with Marc Jacobs to make handbags. “I like to point that out,” Jebbia says with a smile. “Not to be that guy, but just, you know, to point it out.”

The Supreme brand and its products soon became viable forms of creative expression, which in turn became catnip for a particular breed of male consumer hungry for that indefinable but high-quality cool, resounding most immediately with Japan.

“We never purposefully went after a Japanese customer,” Jebbia says. “It wasn’t like that. It’s always been about that really picky New York customer, but I think that translates all over the world.” Nonetheless, the Japanese consumers hyper-related to Jebbia’s choosy modus operandi and were quick to embrace the Supreme product as something culturally valuable and worth a premium price. “Japanese kids respect underground movements and have a good eye for it,” says Bondaroff.

Supreme now has five stores scattered across Japan and just opened their first store in London, featuring installations from the artists Mark Gonzales and Ari Marcopolous, this past September. “We’ve always really been inspired by London youth,” says Jebbia. Evidence of his grimy South London influence can be seen in many of the Supreme staples, such as military jackets, beanies, and oversized Oxford shirts with a neat fit.

But there is also a business component to setting up shop across the pond. “For us, London is the real gateway to Europe,” Jebbia says. Now kids won’t have to fly from all over Europe to come to New York to get a piece of Supreme. “We hope it makes things easier for them, honestly. It can save them a plane ticket, you know what I mean? But, we’re keeping the shop with the same spirit, it will feel like New York.”

In the past, owning a piece of clothing with the red Supreme logo on it was like a more authentic “I Love NY” T-shirt, a tourist token that instantly made you feel a part of a certain downtown New York ethos. Jebbia is mindful of this, but he doesn’t seem worried about diluting the potency of his brand by going global: “We’re not going to open up stores everywhere, that’s just not us. I can’t even think of somewhere else I would like to open, really.”

Supreme has been able to grow, but Jebbia has always been able to keep his hand right on the faucet, letting out just enough but not too much. “Supreme represents fresh ideas done right,” says Kenneth Capello. “They’re always one step ahead and always limited, so people want it.”

Mr. Jebbia, however, is playfully cautious about the idea that his small production runs are part of an exploitative plan to skew supply and demand to fever-pitch levels. “The main reason behind the short runs is that we don’t want to get stuck with stuff that nobody wants,” he says. But admitting to a kind of customer trickery isn’t exactly the coolest thing to say, so you let him be. “Let me put it this way,” he adds tellingly. “We work really, really hard to make everything seem effortless.”

As the shop is on the horizon of its second decade in business, all that hard work has become the focal point for a type of New York aesthetic that is just now entering the canon of great American dressing. When it first opened, the shop was a reflection of the times: the raw energy of Larry Clark’s film Kids; the haphazard elegance of grunge; the polished grit of the East Coast hip-hop movement of the time. In Jebbia’s conversation with Glenn O’Brien from the piece in Interview he asked me to read, Jebbia spoke about the lasting influence of that era in his brand’s sensibility:

“There’s always, I think, a sense of the early-90s to it. That era is definitely a big influence running though everything we do – that was a really special time. And since we started back then, I think it’s fine for us to always look to that era and get a lot of influence from it. It’s not nostalgic – it’s more like it’s a part of us.”

It’s been almost 20 years since the birth of this aesthetic, and now, with most menswear designers aimlessly searching in tea-soaked history books for authenticity, it has never felt more right. If Polo reflects a sense of country club prep and A.P.C. a type of louche French rock ’n’ roll (two brands Jebbia says he greatly admires), Supreme has then its own unique form of authentic, time-encapsulated style in early-90s skate culture.

But now, the baggy pants are a little bit more fitted; the Oxford shirts come in a more sophisticated palette of colours; the imagery is more mature. And while other designers such as Rag & Bone, Tommy Hilfiger or J.Crew hark back to a phantom sense of American heritage, Supreme actually embodies a new garde of American classicism without dwelling in dusty clichés. The little skate-shop-that-could has unexpectedly grown to foster one of the strongest statements in men’s sportswear – the hallmark of American fashion – in quite some time.

“People think that because we are widely-known as a skate shop, our clientele must be idiots. But they want new things on a high level. All they care about is quality,” says Jebbia.

He is right, after all. Today, the globalized customer demands a certain tasteful efficiency, not the trappings of exclusivity. To date, Supreme has chosen to refine their signature products, not to forge themselves out in wild, unpredictable directions with their design process, but instead to forge themselves out in new directions in the world at large. “The product keeps getting better and better,” Bondaroff told me in a phone interview. “It’s so solid now, it crosses over to so many different types of people depending on how they want to wear it.”

Solid, in this case, means well-proportioned sportswear without a lot of frill; done with a discerning eye for what is wearable – take a long-sleeved double-ply flannel in yellow, brown, or green, for example. Therein lies Supreme’s striking paradox. Underneath its tough exterior, the brand has always traded on something of cool’s polar opposite: pragmatism and utility – with a keen sense of graphics and sharp design, no doubt.

The crucial thing to know about Supreme clothes is that they reflect everyday style for men. But more importantly, they assuage the fears many men who have come of age alongside the store have about wanting to look grown up – or, dare I say, appropriate – while still being true to their core aesthetic values that Jebbia speaks of. Almost two decades later, the Supreme project has become an updated take on that oh-so American sense of function and pragmatism. It’s a design philosophy that has mostly been missing in men’s fashion in recent years.

“Quality” is a word Jebbia stresses over and over again in conversations about his brand. You get a sense that he is growing impatient with just being known for on-the-nose artist collaborations or an effervescent downtown credibility. His brand’s true worth, and what his customers fetishize above anything else, is its casual matter-of-factness. Nothing looks sharper, but there is nothing snobby about that. There is something universal about it, really. If fashion and award shows have any teachable moments, it’s that cool doesn’t last on the fickle world stage. Quality does.

“It’s not really just a cool skateboard thing anymore. People resist that idea still. It frustrates me,” Jebbia says before taking a pause. “Oh well.”

This article was written by Alex Hawgood and was first published by 032c. Click here for a preview of the current issue of 032c.

Looks from Supreme NYC Fall/Winter 2011 Lookbook | Source: Weareyouneak.com

In a two part series, courtesy of our friends at 032c, BoF takes you inside notoriously press shy, New York-based streetwear brand Supreme. Today, in Part I, we examine how Supreme — the Chanel of downtown streetwear —became a global cult brand with its own myths, iconography and belief systems.

NEW YORK, United States — When the controversial young rapper Tyler, The Creator won the award for Best New Artist at the 2011 MTV Video Music Awards in August, he offered an enthusiastic, yet expletive-laden acceptance speech. “Yo, I’m excited as fuck right now, yo,” he said. “I wanted this shit since I was nine. I’m about to cry.” But with MTV’s censors on high alert, the speech was broadcast more like this: “Yo, I’m excited as - -— -- -, yo. I wanted -- -- -- – —- --. - -— - --.”

With the audio missing for about a minute straight to avoid any profanities and Federal Communications Commission (FCC) fines, viewers were left with no choice but to absorb Tyler’s image in mute. Clad in skinny dark jeans, an oversize tie-dye T-shirt with an image of a cat’s face on it, and a Supreme baseball hat with a leopard print brim, Tyler, who is 20 years old, was the only artist at the award show who could be said to actually embody how young people dress today. No outfit made from meat, no fancy three-piece suit with a cocked fedora, no oversize bling: Tyler looked exactly how certain young men at this very moment choose to wear their clothes on the streets all over the globe.

It’s no coincidence that the only logo the image-conscious Tyler wished to communicate was the one on his Supreme hat. After all, Tyler’s hodgepodge street aesthetic – a big chunk of skateboard culture and urban hip-hop with a dose of American sportswear prep and a winking, intelligent take on hipster irony – is the one Supreme has been cultivating for the past 17 years since opening its first shop on Lafayette Street in 1994.

The flashy sartorial sensibilities of, say, Russell Brand or Kanye West have mutated into their own category of sub-entertainment and, more often than not, their personal styles do not reflect the current vogue. So how then did the Supreme aesthetic finally become one of the most honest representations of how men choose to wear their clothes in the global mainstream today?

It’s easy to answer that question if one concedes that Supreme currently makes some of the best clothes for men in America right now. And for a brand routinely overlooked by fashion publications and menswear experts as “skate clothes” or, perhaps even worse, just a fad in a niche subculture, this may come as something of a surprise.

But can you blame the press for sleeping on it? For almost two decades, Supreme has existed in a cult-like bubble. Many of their short-run products have a blink-and-you’ll-miss-it shelf-life; you’ll pretty much never, ever receive an invite to some Supreme-sponsored open-bar fête (because they almost never happen); and unless you’ve been systematically tracking its product developments on the array of feverish blogs devoted to the brand, or know a mole on the inside who can text you when a new shipment has been delivered, you’ll miss out entirely.

Starting with its swagger-filled moniker, the label certainly has built a colossal and often intimidating public aura. “The most important thing I think is the name – Supreme,” says the art photographer Ari Marcopolous, a frequent collaborator whose images have helped define the brand’s visuals, including having his work silkscreened on an assortment of sneakers for the label’s partnership with Vans. “Really, you cannot do much better than that.”

Being sovereign – the supreme ruler of culture – is the brand’s unofficial mission statement; everything is appropriated, recontextualised and refitted in Supreme’s hands to be made better. (Not the least of which is the fire-truck red box logo ripped from the oeuvre of Barbara Kruger.) Chinos are constructed with military-grade reinforcement, hats are made with a sturdy square brim, and T-shirts are twice as thick. They’ve carefully chosen to cross-pollinate their homegrown image with unhip but timelessly macho brands like Hanes and The North Face, worked with blue-chip artists such as Jeff Koons and Christopher Wool for their art-deck series, and built ad campaigns around a motley crew of celebrities that have no direct connection to skateboarding, including Kermit the Frog, Mike Tyson and the pop star Lady Gaga.

In fact, the brand’s biggest appropriation of all is the very idea of what a skate shop is – or isn’t. “I don’t see Supreme as a skate shop at all,” says Steve Rodriquez, the owner of 5boro Skateboards and one of the founding members of the New York City Skateboarding Association. “It started a whole new genre of store. To some people, it became like a religion.”

Like most religions, James Jebbia, Supreme’s founder, is fiercely protective of his shop’s doctrine, its history, and of who is allowed to retell its myths. To him, most articles in the press about his brand get it all wrong. “All the magazines, if they’re being nice, just think we’re some cool little skate shop doing kick flips downtown,” Jebbia says. “They always write the same thing over and over.”

Because of this belief system, Jebbia and his team are notoriously press shy. Although Jebbia is soft-spoken and quite generous (by the end our conversation he offered me a checkered North Face for Supreme hat that was no longer on the shelf at the store but still in stock), he is cautious and skeptical about the media and those who write for it. “If you don’t understand us, then what’s the point?” he huffs, referring chiefly to the confusion on how to treat the brand (is it an X-games label like Quicksilver and Billabong, or a legitimate small fashion label more similar to agnès B or A.P.C.) and, more troublingly, the frequent pigeonholing of skateboard culture within the fashion industry as just a passing fad, no different from big shoulders or neon colours.

There are so few examples of stories about Supreme that Jebbia finds successful, he treats the chosen pieces like scripture that he is eager to share. The holy writ includes an interview with Glenn O’Brien from Interview magazine from 2009, a 1995 article from Vogue comparing the persnickety shopping habits of the uppity uptown women who peruse the racks at Chanel’s boutique on East 57th Street and the baggy-pants, bed-head boys who wait in line for hours at a time to shop at Supreme in SoHo; and of course, the 300-page retrospective of the brand released by Rizzoli last year (of which Mr. O’Brien wrote the introduction, and in which the Vogue article was reproduced in full.)

The message is clear: Supreme is sacred, and it’s sacrilegious to get the story wrong.

“The fashion industry doesn’t understand Supreme,” says the stylist Andrew Richardson, who has helped facilitate several projects with the label, including a calendar with Larry Clark. “And that doesn’t bother James one bit. They want James out and about, paying for dinners and hosting parties. But he’s not. Fashion people want something that is uncomplicated and easy to digest – those are the opposite things James embraces. But really, at the end of the day, James doesn’t care. Why should he?”

Hearing Jebbia talk about the press, you don’t get the impression that he is paranoid about being criticised or that he is tyrannical over what is written about his beloved brand. Most articles simply do not live up to the gold standard he has set for his label and himself, or the one expected from his fastidious customer-base. The impression is that most writers and publications are not worthy.

“We always try to shoot for the very best and go for it,” he says. “Some people call that snobbery, I guess. But it’s not.”

Indeed, selectivity and exclusivity are an integral part of the brand’s DNA. When the shop opened in 1994, it immediately became an epicentre for what Aaron “A-Ron” Bondaroff, the label’s front man, has called “train-hopping, taxicab-jumping, runaway kids.” And dudes from all over the city followed in reverence, often lining up for hours to be the first to score the latest products to come in, like candy-collared baseball caps or spacious bomber jackets with the Supreme logo shown discreetly on an outside tag. And even if you made it inside, the really real cool kids knew to ask for the hidden, in-the-know merchandise in the back storage room.

Remembers Bondaroff: “The social club wasn’t so inviting, though, and had a lot of attitude. We made the rules and ran a business that was very successful. People were addicted to the clothes like a drug. We didn’t want to work so hard so we developed a sales style that worked in our favour. In the early days, it was like, come in, but don’t touch. You can look with your eyes, but not with your hands. It was a crazy way to sell garments but the customer learned the deal: don’t fuck with us and we won’t fuck with you.”

The store was so cool, it was, well, scary. “I remember being so nervous walking past it, I would walk across the street,” says Jen Brill, a freelance creative director and “friend” of the brand since it’s inception, “even though a lot of the guys that worked in there were my friends. It was effective, though, and set an impeccable aura around the shop.”

In an interview with the graffiti artist KAWS from the Supreme retrospective, Jebbia maintains that, even in his own tank, he too felt like a fish out of water: “There were 50 or 60 skaters who’d just hang out there. And right at that time, too, Larry Clark was filming Kids. For me, again, it wasn’t part of my world, but I knew it felt very rebellious. It felt right and I liked it.”

Hiding out in the back room and letting the kids rule the roost allowed Jebbia to observe the natural habits and tendencies of his clientele, not unlike the objectivity achieved from a behavioural psychologist studiously taking notes behind a two-way mirror. He didn’t have to be a skateboarder at all, he just had to know what this new generation of skate kids wanted and what they weren’t getting anywhere else.

Most importantly, Jebbia developed the cunning to anticipate what they needed next. If you’re too far in it, you can’t see outside. The distance from the lifestyle, conversely, gave Jebbia a sublime ability to understand how best to represent the lifestyle. “I think James is always thinking with a 25-year-old skateboarder somewhere in his mind with everything he does,” says Richardson.

Tomorrow, in Part II, we explore the creative and commercial philosophies that underpin Supreme’s lasting success.

This article was written by Alex Hawgood and was first published by 032c. Click here for a preview of the current issue of 032c.

Screenshot of BoF in 2007 | Source: BoF

LONDON, United Kingdom — This week marks a very special milestone in the history of The Business of Fashion: our 5th birthday!

Back in January 2007, I spent one hundred dollars for an annual Typepad subscription and, with the help of a friend, set up a blog at uberkid.typepad.com. I called it The Business of Fashion, cobbled together a clumsy looking header in Powerpoint and started jotting down ideas and observations about the fashion business.

There was no plan! Looking back, it’s a little cringeworthy to see how the blog shifted haphazardly from one subject to the next: reviewing the Milan menswear shows in one post, covering a Giles Deacon party in the next, analysing the luxury childrenswear market and reporting on senior executive shuffles at the Gap, all within the very first month and without any real editorial direction or strategy!

But we’ve come a long way since then and I’ve also learned a great deal about digital publishing. A few of the media properties that I most respect, including The Atlantic and The Guardian, have been buzzing about their “digital first” strategies. But BoF was born digital from day one, which has enabled us to take a particularly lean and responsive approach to publishing.

Indeed, one of the great strengths of digital – an inherently conversational medium – lies in the on-going dialogue it enables between content creators and the communities they attract. Rather than simply broadcasting to a passive audience, BoF has slowly but surely shaped an editorial voice that reflects the feedback and interests of our growing community of readers.

Through feedback from this community and generous advice from online fashion pioneers like Diane Pernet and Jason Campbell, I quickly learned that one of the most useful things I could offer the nascent fashion blogosphere was opinionated analysis and advice for professionals working in the global fashion business. Rather than simply reporting news, which was widely published elsewhere and rapidly becoming a commodity, I focused on trying to make sense of the news. As it turned out, the timing couldn’t have been better as the fashion industry would soon find itself navigating unprecedented change driven by the forces of economic crisis, rapid globalisation, and, of course, the digital revolution.

In April 2007, a few months after launching BoF, I was invited to the Harvard Business School Retail & Luxury Goods conference to speak on a panel alongside a group of highly respected luxury experts. At one point, the moderator, Milton Pedraza of the Luxury Institute, began asking the panel about social media, in particular a website called Facebook, which by then had attracted a user base of around 20 million people. “How will these new social platforms impact the fashion and luxury world?” Mr Pedraza asked.

Having spent several months immersed in the world of blogging, I ventured that I saw some real, long-term potential for the fashion and luxury sector in social media. After all, if consumers were spending more time on these platforms, it was only logical that brands looking to reach them would need to do the same.

But suffice it to say that my fellow panelists did not see it that way. In fact, my ideas were at best politely dismissed, at worst publicly ridiculed. But when the panel had ended, Mr. Pedraza leaned over and whispered some encouraging words in my ear: “I think you’re onto something,” he said. “Stick with it.”

And so I did. It was one of many helpful pushes I have had along this journey. But, in particular, Mr. Pedraza’s gentle push helped me to realise that by exploring the exciting potential of fashion’s digital future, BoF had an opportunity to add something genuinely distinctive to the fashion dialogue. I had no budget for marketing or PR, so all I could do was create good content and hope our audience would keep coming back and spread the word about BoF to their friends and colleagues.

A year or so later, I realised that for BoF to reach its potential, I had to build a team. In the summer of 2008, Tokyo-based W. David Marx became our first correspondent and New York-based writer Robert Cordero began curating the BoF Daily Digest, a hand-picked selection of the most interesting and important fashion news stories of the day, something we started doing so that the members of our community wouldn’t have to sift through the mountains of daily fashion news themselves.

As for our original articles, we made a special effort to create content that wasn’t available anywhere else. First, BoF became known for a series on the basics of setting up a fashion business. Soon after, I launched Fashion 2.0, our popular on-going inquiry into of the powerful digital currents that are reshaping the business of fashion, and we were often the first in the fashion press to examine new platforms like Tumblr and new trends like social curation.

Next came CEO Talk, our signature series of in-depth interviews with the industry’s top business leaders. We spotted young designers early, as well, and were amongst the first to introduce Camilla Skovgaard, Thomas Tait, and Huishan Zhang to the world. And finally, our live interview series Fashion Pioneers has attracted industry insiders and consumer audiences alike, both virtually and in-person, to hear from inspiring fashion luminaries like Natalie Massenet, Jefferson Hack and Nick Knight.

So, what have we learned from all of this? In today’s environment of media abundance, the power of opinion channeled through analytical editorial, curated news and live events has made BoF a daily destination for a growing number of fashion professionals. We cut through the clutter. Compared to other websites with similar stature and audience, we produced less content, but ensured the highest quality possible, working with a small but highly agile and global network of editors and contributors, who generously contributed their time to the BoF cause.

I first met Vikram Kansara virtually, reading his intelligent feedback on BoF articles in our lively comments section. After we met for tea in London, Vikram started writing for BoF as a contributing editor focused on Fashion 2.0 and is now our managing editor. Several other individuals from the BoF community have also come on board since then, including fashion legend Colin McDowell, leading international expert in the finance of fashion Pierre Mallevays, and Divia Harilela and Timothy Coghlan, our on the ground experts in the enormously important Chinese market, building depth and breadth into our editorial voice. Many, many others have contributed articles from time to time and I am immensely grateful for the time and energy that all of these talented individuals have dedicated to BoF over the years.

But none of this would have been possible without our single greatest asset: the global BoF community. Everywhere I have traveled over the past five years, from Tokyo to Jakarta, Vancouver to Mumbai, Buenos Aires to Tel Aviv, and more than 25 other countries in between, I have been warmly welcomed and hosted by this community. Generous individuals and organisations have opened my eyes to a global industry that is filled with inspiring stories of creativity, innovation and entrepreneurship and shared the best and brightest of their local fashion industry with me, so that I could share it with all of you.

Over the recent holidays, this community revealed its wonderful diversity in a rather spontaneous way. When I sent out a short holiday greeting to our followers on Twitter, Sharon Caufield was one of the first to respond with a note that said she was writing from Craigavon, Northern Ireland. It made me wonder: who else was following our tweets on Boxing Day and where were they from? So I asked the community and within minutes, hundreds of tweets had poured in, representing every inhabited continent and more than 80 countries.

With this truly global community in mind, I am very pleased to announced that, alongside Twitter, Facebook, Tumblr and Instagram, BoF has just launched a Weibo presence. Chinese-language readers can now stay up to date on the latest news and analysis from BoF at weibo.com/businessoffashion.

As I look ahead to 2012, the future of BoF looks brighter than ever. We aim to bring you the best analysis, the most inspiring stories and the first insight into the players, platforms and business models that are reshaping the business of fashion as we know it.

Happy New Year! And I hope you’ll stick with us, as it seems this is only the beginning of our journey.

Imran Amed,
Founder and Editor-in-Chief

Gilt Groupe warehouse | Source: Fantabulously Frugal

Today, BoF takes an in-depth look at the past, present and future of Gilt Groupe’s business model and speaks with Gilt Groupe CEO Kevin Ryan on his plans to continue the company’s ascendance.

NEW YORK, United States — Back in November of 2007, BoF was amongst the very first media outlets to write about Gilt Groupe, the New York-based start-up that went on to dramatically reshape the online retail market for fashion, building a community of high value consumers around limited-time, members-only “flash sales” for designer apparel at steeply discounted prices.

The timing of Gilt’s launch couldn’t have been better. In the months that followed, fashion and apparel brands began to feel the impact of a global recession that would ultimately give rise to one of the most challenging macroeconomic environments in the history of modern retailing. Seemingly overnight, wholesale inventories became unmovable as retailers drastically reduced product assortments and orders.

As a consequence, many fashion brands were forced to liquidate excess inventory positions, causing a sudden and significant supply glut for “cut out” goods. Prior to the Great Recession, brands would have sold this excess inventory through off-price channels like Loehmann’s, T.J. Maxx and Century 21. But as the economy sank, these retailers were asking for discounts as high as 90 percent, while merchandising clothes in a haphazard fashion which did nothing to protect the high-end image brands had spent years cultivating.

What’s more, the extreme market conditions of the Great Recession created an acute financial imperative for retailers — off-price, as well as full-price — to convert their own excessively large inventory positions into cash, leaving many brands almost without any viable sales channel, let alone one that would protect brand equity.

Gilt charged onto the scene like a knight on a white horse, providing a novel, efficient and brand-sensitive way to liquidate excess inventory and enjoying explosive growth in the process. Based on this momentum, Gilt Groupe raised $138 million last May in a new round of financing, valuing the four-year-old company at $1 billion.

But fast-forward to the end of 2011 and flash sales are facing significant challenges. Here, BoF examines the rise, stumble and future of Gilt Groupe’s business model.

Although impeccable timing was critical to Gilt Groupe’s meteoric rise, there were other important factors behind the company’s success. Firstly, Gilt’s member base is largely comprised of one of the most desirable demographics in retail: urban sophisticates. The typical Gilt customer has a bachelor’s degree, is in his or her mid-thirties and “significantly over-indexes in higher household income buckets, when compared to the general online population,” according to a spokesperson for Gilt Groupe.

To build this quality customer base, Gilt leveraged online network effects to great success, starting with friends of the founders and early employees. “This is a business that has grown predominantly through word-of-mouth marketing,” one of Gilt’s founders, Alexis Maybank, told The Wall Street Journal last year. “75 percent of our membership has come from the suggestion of a friend, using our on-site ‘Invite Friends’ feature. That’s how we launched. We sent invites to a list of about 15,000 people — friends, former colleagues and classmates, dating back to grade school!”

Second, Gilt’s business model succeeded in driving consumer demand in a novel way: offering designer product at significant discounts, distributed directly to email inboxes, with timing and supply constraints to compel immediate action. Fifty percent of Gilt’s deal revenue is generated in the first hour after a sale starts.

Gilt’s email demand generation strategy also went hand in hand with a strong product assortment. From 2007 to 2009, the company’s core team had powerful relationships with fashion and apparel brands that, in conjunction with Gilt’s high value customer base, enabled them to secure highly desirable product, delivering a unique value proposition to their members.

And finally, Gilt managed to liquidate inventory in a way that protected the image of participating brands. Generally, brands are careful to close out their inventory in a manner that both optimises cash flow and ensures that their target audience doesn’t see it. But, amazingly, the quality of Gilt’s product offering and customer base enabled brands to sell excess inventory at a discount, while still maintaining a positive image.

How did Gilt start to stumble?

Ironically, it was Gilt’s massive success and the demands this placed on securing greater and greater volumes of desirable product that began to undermine the company’s ability to deliver on its core value proposition: great product at a great price.

From 2009 to 2010, Gilt’s revenue rose from $170 million to $425 million, according to estimates published by Internet Retailer. This significant growth created the need for more and more quality product to feed the Gilt machine, something that was difficult to fulfil in ever-increasing volumes.

While Gilt Groupe itself was inspired by the French private sales behemoth Vente-Privée (which recently launched its own a US-focused flash sales venture with American Express) Gilt’s success also spurred hundreds of other competitors to enter the flash sales market, from start-ups like Ideeli and Rue La La to strategic players like Amazon’s MyHabit and Nordstrom’s Hautelook.

With a flood of new Gilt-like clones actively looking for supply, the glut of excess inventory from the mid-2000’s economic boom dried up even faster. Additionally, in response to the global recession, many brands began producing at volumes that were lower than in the heady days of 2007. As a result, brands who were once price takers became price setters, increasing the cost of securing inventory.

An anecdotal comparison of the brands and products available on Gilt today versus those available in the company’s first couple of years shows that, over time, quality level has gone down. Back in 2009, it was possible to find prestige brands like Ralph Lauren Purple Label and Porsche Design on Gilt, in stark contrast to the many unknown brands that populate the site today. This meant that each time a subscriber opened an email and the product did not communicate the excitement-to-value ratio that had originally made Gilt so successful, their inclination to open subsequent emails from Gilt, and the brand’s position as a curator of style, suffered.

To be fair, these are challenges that have impacted all flash sale players and are not unique to Gilt. But they nonetheless present a significant threat to the company’s core business model.

What is Gilt doing to address the issue?

“Today because we are bigger and more well known, we get inventory that we didn’t get before,” Gilt Groupe CEO Kevin Ryan told BoF. This may simply be a matter of showing strength in the face of adversity as market sources suggest that inventory is indeed a major issue for flash sales players.

That said, Mr. Ryan did go on to explain a number of initiatives he has put into place to try and ensure Gilt’s continued ascendance. “We do some things that we didn’t do before,” he said. “We do more cuttings and we are increasing private label,” he continued. “We do pack and hold. At the beginning of a season, brands will go out and get orders from Neiman and Saks — and then we’ll order it as well. You can’t always count on this, but let’s say they end up with 15,000 orders and the minimum from their Chinese producer is 20,000. They’ll come to us and say, we’ll produce 2,000 for you, but you have to hold it until the end of the season.”

Leveraging its database of more than 5 million members, Gilt has also built a number of new businesses, launching Jetsetter, a travel deals site; Gilt Taste, a business unit focused on gourmet food deals; Gilt City, a Groupon-like local deals site; Gilt Home, a deals site for furnishings, home décor and gifts; and Park & Bond, a full-priced menswear business.

“What I do is try and sell more things to my existing customers,” explained Mr. Ryan. “We have new categories: hotels, restaurants, home, which have unlimited inventory,” he continued. “Within our overall business, two years ago, 95 percent of what we did was end of the season men’s and women’s. Today, that’s probably 35 percent of what we do. We’re in most of the big categories I want to be in right now, but we’ll add one or two over time.”

Performance of their new vertical product extensions is mixed, according to annual gross revenue estimates provided by Mr. Ryan. Compared to the size of the original men’s and women’s business (over $300 million), Jetsetter and Gilt Home (each close to $100 million in sales) have been successful. Currently less successful, though only 15 and 7 months old, respectively, are Gilt City (in the $50 million to $100 million range) and Gilt Taste ($10 million to $20 million). But Gilt clearly recognises the need to capture a larger share of their customers’ disposable income and seize adjacent revenue opportunities.

Gilt is on track in a number of other areas, as well. The company recently launched global e-commerce, shipping to over 90 countries, and understands social marketing in a way that many retailers do not, actively engaging with its large audience of fans and followers. Gilt has also seized the opportunity in mobile and tablet, deriving between 17 and 30 percent of revenue, depending on the day of the week, from mobile platforms, according to Chris Maliwat, a former vice president of strategy at Gilt Groupe.

But the negative impacts of reductions in supply, upward pricing pressures and growing deal fatigue are here to stay and will continue to create an increasingly challenging environment for Gilt and its flash sales peers.

What should Gilt do now?

First of all, Gilt could reinvigorate its vendor value proposition and focus on building new relationships with brands. Here, the most valuable asset for the company is the demand source of their customer data, a fact with which Mr. Ryan concurs.

“[Customer data] is a hugely valuable part of our business. I think we have the best personalisation of anyone, maybe second to Amazon,” he said. “For example, when you get an email in the morning, that’s one of 2,000 versions that goes out. The data is run every night, based on the sales, based on what we think [individual customers] are going to buy. When you open up the [website] you get a different page than I do; I actually get different sales than you do.”

But Gilt is not making the most of this data or sharing its full value with vendor partners. For example, Gilt could better quantify and harness the total value of their relationship with customers by doing things like delivering email analytics and driving social media for brands.

Taking a page from fast fashion, Gilt Groupe would also do well to further its focus on analytics, transforming itself from a data-rich, but insight-poor platform to a vertically aligned organisation driven by actionable information derived from its wealth of data. Retailers like H&M and Zara have upended the traditional seasonal approach to retail through intensive use of analytics coupled to a modern, vertically integrated manufacturing machine. Indeed, it’s their ability to transform analytic insights into demand-responsive product compositions that is their core strategic value proposition.

“Store managers communicate directly with Zara designers and feed them data on what sells well and what doesn’t,” reported The Wall Street Journal in September. “If managers say a polka-dotted-black dress is flying off the racks, it is able to turn around quickly and churn out polka-dotted dresses in other colours and have them in stores in a matter of weeks.”

But Gilt has a significant competitive advantage over fast fashion retailers in the structured nature of the demand signals (clicks, views and purchases) the company can read, meaning that it’s possible for Gilt to automate the identification of trends, while retailers like Zara must rely on store managers to proactively surface these insights.

As this game-changing start-up looks ahead to 2012, Mr. Ryan remains confident that the initiatives he has put in place will support a potential IPO and move the business into profitability. “The overall company is not profitable yet,” he said. “Sometime next year we’ll cross over. The zone where we might go public, and I think we probably will go public, is between fourth quarter next year and fourth quarter the year after,” Mr. Ryan told BoF.

Matthew A. Carroll currently runs outdoor brand Cloven Footwear and sits on the board of three tech start-ups in San Francisco, California.

Editor’s Note: This article was revised on 19 December, 2011. An earlier version of this article misstated that Gilt Groupe was not targeting sales to specific consumers based on their shoe size. It is. The article also misstated Chris Maliwat’s affiliation with Gilt Groupe. Having previously served as vice president of strategy, Mr. Maliwat left the company in November 2011. The article also neglected to mention that new business lines Gilt City and Gilt Taste are 15 and 7 months old, respectively, at the time of writing.

Elin Kling | Source: GQ

In this instalment of The Business of Blogging, we speak to Elin Kling, the Swedish blogger behind Style by Kling.

NEW YORK, United States — “For me, it was a business from day one; I did it as a job,” said the ambitious Swedish style blogger Elin Kling, recalling how she first began blogging professionally for Stockholm-based media site Stureplan, back in 2007. “In Sweden, every third girl is running a blog,” said Kling. Indeed, in a country ranked first in the world by the World Economic Forum in its use of computing and communications technology, a staggering 39 percent of young women (aged 16-25) write or have written a blog, according to an annual report by Sweden’s World Internet Institute. “If you do it, you need to do it 100 percent,” explained Kling. “And to do that, I had to make a business of it.”

Kling began chronicling her outfit choices, fashion inspiration and other aspects of her daily life, and success came swiftly. “It became Sweden’s largest fashion blog in two days,” she said, attributing these results to Stureplan’s existing traffic and the popularity of a weekly column, also called Style By Kling, that she had been writing for the site before she began blogging in earnest.

Kling got her start in fashion working at Swedish lifestyle magazine Solo, contributed to Stureplan, and worked her way to head of the fashion desk at Expressen, Sweden’s second-largest daily newspaper, when national broadcaster TV4, the country’s largest television network, started hosting her personal blog on their website, earning Kling local fame.

In fact, Kling’s blog has almost always been hosted by commercial media companies. “I never had my blog just on my own platform. It’s always been hosted by different TV stations or the newspaper I was working for,” explained Kling. “I felt like I needed to reach out to more people than only the crowd that reads fashion blogs. That’s why I started to work with TV and daily newspapers to promote myself and my blog.”

The income Kling derived directly from blogging came in the form of a regular pay check from the media sites where her blog was hosted, with a bonus for generating strong traffic. “I was paid a certain amount of money every month — and then depending on how many visitors I had, I got more,” explained Kling.

In 2009, on the back of her growing celebrity, Kling became the head stylist for reality TV programme “Swedish Idol.” In 2010, she appeared on “Let’s Dance,” a Swedish show based on the BBC series “Strictly Come Dancing.” Then last year, Kling joined forces with Sweden’s largest publisher, Bonnier Tidskrifter, to launch a new fashion magazine called StyleBy, where she is now the fashion editor and creative director. “I’ve been a long admirer [sic] of how Elin works with her brand and has been able to create interest in what she does, both here in Sweden and internationally. Plus she has great contact with her readers,” said Jonna Bergh, editor-in-chief of StyleBy, in a statement that coincided with the magazine’s launch.

“I have a strategy for everything,” revealed Kling. “The way I write [on my blog] has to be professional, but at the same time it’s very important for me to make the readers feel like it’s very personal,” she said. “That’s what Bonnier wanted to bring to the magazine,” she continued. “Because of blogs, readers are so used to knowing the person who says ‘I love this top.’ They don’t want a magazine to tell them that, they want a person to tell them that,” she added. “That’s what we’re trying to get from the blog industry into the magazine: you can feel like a friend of the magazine; my magazine is your friend.”

In February of this year, Kling launched her first line of clothing: Elin Kling for H&M. “It was like a dream,” recalled Kling. “I’m originally from a farm, a really small city; I’ve always been interested in making budget pieces.”

While the line was only distributed in Sweden, Elin Kling for H&M was the retailer’s first ever collection designed in collaboration with a fashion blogger. “For one year I worked with H&M, two days a week,” said Kling. “I made a percentage of the sales and, of course, money to work with them for a year as a consultant.”

But at the centre of Kling’s growing business activities is Fashion Networks, a digital media company she co-founded in 2009 with business partner Christian Remröd. “I’ve been running [Fashion Networks] for a long time, but I’ve never been the face of that until we decided to do this in the States,” she revealed.

In March of this year, Kling moved her blog yet again, this time to Fashion Networks property NowManifest, a website that packages Style by Kling, Bryanboy, Rumi Neely’s Fashiontoast, and Industrie magazine’s blog together to create a kind of one-stop shop for fashion blogs.

The site pays its bloggers a regular monthly paycheck, which, for the bloggers, is perhaps the most appealing part. “I get paid every month, and I get my 20 percent bonus,” said Kling, referring to additional pay earned for generating strong traffic numbers. Of course, the bloggers who participate also hope to benefit from the cross-traffic NowManifest helps them generate for each other.

“Rumi has more traffic than me and that’s great for me, because I get the cross-traffic,” said Kling. “But she also gets new readers from my blog,” she continued, adding that 20 percent of NowManifest’s overall traffic comes from cross-linking. According to Fashion Networks, NowManifest has approximately 950,000 monthly unique visitors.

But which bloggers are benefiting most from this arrangement remains unclear, as Fashion Networks declined to share traffic numbers for individual blogs. Market sources suggest that the lion’s share of NowManifest’s traffic comes from Fashiontoast, which has been reported to have had around 1 million monthly unique visitors even prior to the NowManifest consolidation.

NowManifest takes this traffic and offers a variety advertising packages to luxury and fashion advertisers. “NowManifest takes care of all the advertising, so the bloggers can focus on their content,” said Kling, pointing to a roster of advertising clients including Marc Jacobs, Balenciaga, Kurt Geiger and Net-a-Porter. “They don’t know where to advertise,” she continued. “They have Style.com and Vogue.com, but we’re bigger in terms of unique visitors.”

At press time, there were no ads visible on the NowManifest site. But traditional display advertising may not be the only answer. NowManifest also offers a number of “premium advertorial” options that allow advertisers to integrate their brands directly into the site’s content flow.

In June, Marc Jacobs ran a targeted advertorial campaign on NowManifest in which Kling was photographed in Marc by Marc Jacobs clothing and published the images on her blog, alongside links to MarcJacobs.com. “We wanted to explore new ways to attract people to our site instead of relying on the usual boring banner ads we’ve all conditioned ourselves to ignore,” said Daniel Plenge, web and social media manager at Marc Jacobs.

The campaign performed well. “The day of the launch, we served over 94,000 impressions, drove over 2,000 unique visitors to MarcJacobs.com, and for the two week duration [of the campaign] we saw a two percent click-through rate,” continued Plenge, citing a figure that is many times higher than average display advertising click-through rates and underscoring the potential of this model. “We definitely feel that advertorials are more effective.”

But the benefit to the reader is less clear and the site’s concept of grouping bloggers together under a magazine-like umbrella has been met with mixed reviews. “The concept for the site is awfully precious,” said one reader, and “I love Elin…though her blog used to be a lot more actual outfit of the day posts and so on… now its mostly promoting Styleby and the Nowmanifest deal,” commented another on a Fashionista post announcing the site’s launch.

Fashion Networks has ambitions well beyond NowManifest, illustrating how Kling has leveraged her success as a blogger to work on a number of other businesses. “In Sweden, we have a website where you can show your outfits (Minoutfit), we have the blog website (Freshnet), and we have a website where you can actually sell your outfit (Seconds),” she explained.

Now, Kling and Remröd are planning a big US expansion. Indeed, both have relocated to New York in recent months to run the operation. Up their sleeve is a “stylist community” called Style of Today, a global version of Freshnet and Seconds USA.

But will what worked in Sweden work in the much larger and more diverse US market? “You really need to learn the market in different countries,” Kling acknowledged. In fact, she also has her sights set on China. “Me and Christian are going to Shanghai this fall,” she said. “I’m very into Asia.”

In October, the duo are also launching a new brand called Nowhere. “I’m putting out a clothing line this fall with Christian, but I’m not the designer,” said Kling. “The designer worked with Acne – I’m more about how will we make this sell, because I learned so much from H&M.”

With so many growing business interests, does Kling still consider herself to be a blogger? Or a businesswoman? “I’m not scared of being commercial, but I’m totally a blogger, it’s such an important part of what I’m doing,” she said. “I guess on my business card it will just say Elin Kling.”

Vikram Alexei Kansara is Managing Editor of The Business of Fashion

The Business of Blogging is a series on the rarely discussed business side of fashion blogging. Previous articles are listed below:

Miu Miu Event in Shanghai, China | Source: Miu Miu

BEIJING, China — According to Bain & Company, a consulting firm, China is currently the world’s second largest consumer of luxury goods, ahead of Japan and second only to the United States. McKinsey forecasts that by 2015, China will account for around 20 per cent, or 180 billion renminbi (US$27 billion) of global luxury sales.

With numbers like these, it’s no surprise that a major land grab is underway amongst fashion brands eager to open new stores in China. But rapid retail expansion is only one part of a comprehensive strategy for seizing the opportunity in China. Equally important are a focused approach to local PR and product strategy.

Local PR and Marketing

Currently, the most popular way for brands to build local awareness is to host large-scale, buzz-friendly events like Miu Miu’s recent 1940s-themed fashion show at Shanghai’s Park Hyatt Hotel. But while grand events like this certainly make a statement about a house’s spending power, some experts question their long-term impact. “It’s burning money — you feed a lot of people who are not your clients, then there’s another party and people forget,” said former Richemont Asia Pacific CEO and luxury consultant Francis Gouten. “It’s better to tailor make events to hit the potential clients [on a more personal level] such as VIP dinners.”

Also effective are educational activities, Gouten continued, like the kind of historical or archival exhibitions that have been used by brands like Comme des Garçons and Hermès. “We do lots of levels of education,” said Paul Cadman, CEO of Ferragamo Asia Pacific. “We’ve done several events where we imported part of our museum from Florence or brought artisans over,” he continued. “Consumers are hungry for information and we need to let them know why our product is luxurious or has a certain value. If you see what the brand is about, it’s likely you will have an emotional connection.”

“I believe the goal is to get the consumer to understand the concept of the brand,” added Nicole Chen, founder of NC Style, a consultancy that helps brands launch in China and counts Y-3 among its clients. “It’s not just about the name — you need to give people a reason to want to buy it,” she continued. “I believe Chanel became a bigger success in China because of the two films released about Coco Chanel. People in China really respect the stories and the history.”

In particular, stories that focus on craftsmanship or savoir faire resonate with Chinese consumers, said semiology expert and consultant Laurence Lim. “Certain products such as perfumes and diamonds have prestige because the Chinese still do not have the craftsmanship to make these products,” he said. “So it’s important that luxury brands communicate about their craftsmanship and differentiate themselves from other brands. There’s an appeal in how these products are made. This strategy is working like crazy.”

Tailored Product and Merchandising Strategies

When it comes to product strategies, a number of brands have experimented with China-inspired items, from Zegna’s mandarin-collared shirts to Ralph Lauren’s cheongsams. But experts advise that it is best to avoid these clichés.

“You cannot change your product completely,” said Gouten. “It’s like Shanghai Tang having a mandarin collar — it’s just a gimmick,” he continued. “[The Chinese] want to buy the name, the product and the quality. You have to be yourself, come with your DNA and be as strong as you are in your own country. Don’t try to change your identity and don’t try to be special for China.”

“They don’t want China-inspired products,” agreed Lim. “But you cannot generalise, it’s a balance,” he continued. “Brands can do unique products, but you need to keep the Western perception of luxury.” There are less blatant ways to connect product to Chinese culture, advised Chen, pointing to artistic collaborations like those recently used by Diane Von Furstenberg and Dior. “Try to bring the Chinese culture into your brand, but not through obvious ways such as Chinese design,” she underscored.

Instead, brands should focus on promoting their most unique and defining products: Chanel’s 2.55 handbag, Burberry’s trench coat, Cartier’s tank watch or Ferragamo’s Varina ballet flats, for example, that are an iconic part of the company’s history.

Some firms, like shoe designer Rupert Sanderson and sunglasses manufacturer Luxottica, are making localized products in a way that’s less about design and more about fit. “I think right now it is a smart way,” said Chen. “Many Western brands have certain cuts and styles that don’t suit the Chinese consumer.”

In terms of merchandising, there are certain product categories that offer significant opportunities in China. In a culture where gifting is prevalent, small leather goods are extremely important, while status-oriented items like expensive watches and monogram products (logos still rule the roost) also resonate strongly. Thanks to the Little Emperor Syndrome, a by-product of China’s one-child policy, childrenswear is also an important product category. Indeed, Burberry’s new Beijing flagship houses the brand’s biggest ever childrenswear department. Luggage is also a key focus. “We know people are travelling more than they did, especially in China, so the luggage business is a category that has developed dramatically,” said Cadman.

But overall, it’s important to note that the China market is evolving extremely fast. “Historically, Chinese men didn’t like to wear suede shoes but now they do,” noted Cadman. In this context of rapid change, it’s critical that brands keep a sharp eye on evolving client tastes, closely monitor their sales figures and be prepared to adapt their strategies and execute accordingly.

Divia Harilela is an editor and writer based in Hong Kong. She is founder of The D’Vine, a blog focused on the luxury and fashion market in Asia.