Phillip Lim | Photo: But Sou Lai

NEW YORK, United States — “I always believed in making clothes with affordable prices,” said Phillip Lim, one of the many young designers to have emerged in New York over the past few years. But unlike his peers, when Lim launched his label back in the autumn of 2005, he made a conscious decision not to compete in the high-end designer category. Instead, Lim’s vision was to offer his customers beautifully made, well-designed clothing at a contemporary price point.

Lim’s fashion journey began with Development, a Los Angeles-based line he started with partners in 2000. But four years later, after relationships turned thorny, Lim walked away from the label. Soon after, a friend he had met in Paris convinced Lim to come to New York, just to ‘hang out’ for the week. That friend was Wen Zhou, who would soon become chief executive of Lim’s new brand and his new business partner in an entrepreneurial venture that is on track to turn over more than $60 million this year — not bad for seven years of hard work.

When the two connected in New York, Zhou had already been courting Lim for some time and had even offered to buy out his partners at Development, a deal that fell through. But Zhou was relentless, she never gave up. Lim arrived in New York on a Thursday. “By Saturday night, she said to me, ‘I have a plan; let’s start a company,’” said Lim. “I couldn’t say no, because she wouldn’t let me,” he continued, smiling. “She was a bulldog.”

Lim and Zhou are a formidable duo; a potent mix of creative talent and business acumen. “I am in charge of anything creative and she operates,” said Lim about their partnership. “I have to give her something to operate with and she gives me resources to create with.” While this kind of partnership isn’t unique in fashion — Yves Saint Laurent and Pierre Bergé, and Marc Jacobs and Robert Duffy, are amongst the most well-known examples — Lim maintains that theirs is different. “It’s just two kids who had a lot of love for clothes.”

But Lim and Zhou launched their business with a simple yet powerful idea: to offer irresistibly cool clothing that was also accessible and practical. “This was intentional from the beginning,” said Lim. “It wasn’t because we lived our lives in an ivory tower that we wanted to create clothes for people down there — we are those people!” he explained. “It was more like: I want an amazing trench, but at the same time, I’m on a budget. I’m a young professional and I have bills.”

Although many young designers may contemplate creating more affordable clothing, most lack the necessary connections with manufacturers — such as those in China, where Lim manufacturers his goods — that are able to produce a high quality product at low cost. “How do you keep the type of margins that make everyone happy and deliver goods that look impeccable with a certain type of quality?” Lim asked, rhetorically. “We were lucky because Wen had those relationships with the factories.”

But alongside partner, price point and production, there is a critical fourth “P” that has made the 3.1 Phillip Lim business successful: positioning. Indeed, by creating directional pieces alongside more practical clothes and showing his collections amongst luxury-level brands at New York Fashion Week, the designer has been able to cultivate a brand image that makes his fans feel like they are getting high-end fashion, only at a more affordable price. “You need the foundation, which are the basics, to work with the eccentricities,” said Lim. “So in every collection, there’s always the classic pieces [and] a sense of madness.”

The approach has proven highly successful. “It’s incredible, right away we were an international company and the first season we were in 20 countries,” said Lim. 3.1 Phillip Lim has also expanded from its beginnings in womenswear into menswear, childrenswear, swimwear, accessories and lingerie.

Although Lim has a robust wholesale business and has shop-in-shops in Hong Kong and Japan, he is a strong believer in opening his own retail stores. 3.1 Phillip Lim now operates directly-owned stores in New York, Los Angeles, Tokyo, Seoul and Singapore. The brand has yet to launch e-commerce, but Lim anticipates that over time, more and more of the company’s revenues will come from direct to consumer channels, citing better control over brand experience and more favourable margins.

“As a young company, when you are working with wholesalers, a lot of times you can be victimised,” he said. “[Direct to consumer retail] is a way we ensure that the family we have built can move on tomorrow,” he continued, using an endearing term for his employees.

Asked if he has any advice for would-be fashion entrepreneurs, Lim offers a few words of caution. “I jumped into it and thank god it worked for me,” he said. “But if you have something to say, make sure you say it at the right time. Anna Wintour said to me: ‘Phillip, it’s always about timing. If it’s too soon, no one understands. If it’s too late, everyone’s forgotten.’”

In today’s shaky economy, where fashion consumers are seeking value like never before, it couldn’t be a better moment for a brand that’s carefully and sagely positioned at the top end of the contemporary market. Indeed, timing is everything.

Robert Cordero is a contributing editor at The Business of Fashion.

Sparkle Roll Luxury World | Photo: Timothy Coghlan

BEIJING, China — With Chinese luxury consumption projected to account for 20 percent, or US$27 billion, of global luxury sales by 2015, it’s no secret that big international fashion brands are racing to establish and expand their retail operations in the country. But as competition for prime real estate surges, it’s clear that not all brands are treated equally. While some find it relatively easy to secure retail space, others have to fight tooth and nail, or create strategic partnerships, to have any hope of opening stores.

The ‘big five’ brands — Louis Vuitton, Gucci, Chanel, Hermès and Cartier — have no shortage of options in cities all across China and can be highly selective in choosing their locations. In most cases, Chinese mall operators and real estate developers will bend over backwards to entice these five brands, offering lucrative leasing terms, long rent-free periods and large subsidies to build and outfit stores. For the smaller brands that belong to large luxury conglomerates, the easiest way to secure store space is to leverage the group’s power by insisting on multi-brand deals. In this way, the dominant brand of the group (Vuitton for LVMH, Gucci for PPR, Cartier for Richemont) will enter a mall only on the provision that the selected smaller brands in the group are also given desirable spaces.

In this context, even brands such as Burberry, Lanvin and Tod’s are at a disadvantage. So how do fashion brands, without the backing of large luxury groups, stand a chance of securing retail locations that will allow them to get a foothold in the country and tap the booming Chinese market?

“Each brand’s situation is unique and everyone can use different vehicles to enter,” said Wen Zhou, president and chief executive of 3.1 Phillip Lim. “As long as you recognise your strengths and weaknesses, and identify a strategy early on and follow through, I think the rest will come.”

For smaller and independent luxury brands entering the country, one strategy is to work with a partner or distributor in the early years of the China business. Although most luxury brands would prefer to directly operate all of their China stores, the market is simply too big and complex for most smaller brands to comprehend. But selecting the right partner is critical. “Crucial to your success in China is finding a partner that shares the same vision as you for the brand and product,” continued Zhou. “Everyone involved should be on the same page.”

Earlier this year in a high profile case, even megabrand Burberry partnered with a distributor, Sparkle Roll, to secure its Beijing flagship location. Unable to expand its existing store in Shin King Place (Beijing’s top luxury mall), the brand tapped Sparkle Roll, and their high level connections in Beijing, to obtain the prime piece of real estate upon which they built the Sparkle Roll Luxury World complex. Sparkle Roll filled half of the space with their own luxury brands including DeWitt, Richard Mille and Boucheron, while the other half was allotted to Burberry in a win-win deal. By partnering with Sparkle Roll and creating a de facto group, Burberry secured a store location they couldn’t have secured on their own and Sparkle Roll was able to piggyback on Burberry’s popularity and brand recognition to garner attention and draw customers for their own brands.

It’s also important to remember that business in China still relies heavily on a system of relationships and favours. Each city has its own key ‘heavyweights’ who can get things done and acquire the right retail locations, despite seemingly insurmountable odds. In some cases this may be a large distributor. Or it may be an individual who has the right government, military or other special connections. Indeed, finding the right connections in China is not always easy.

“In China the high quality distributors and connected people prefer to keep a low profile,” said Nicole Chen, founder and chief executive of NC Style, a fashion marketing, PR and distribution company based in Beijing. “They don’t always have websites and they certainly don’t show up in Google searches for ‘fashion distributors in China,’” she continued. “You need to be patient and build the right relationships that will then get you into the right circles.”

But emerging brands do have one advantage. As the big fashion players like Burberry, Dior and Zegna continue their expansion in China, luxury shopping malls are at increasing risk of becoming generic. With this in mind, brands new to the China market can appeal to mall operators who wish to differentiate their offerings and bring something unique to their retail mix. “Landlords are very smart,” said Zhou. “Just being [one of] the ‘big’ names, or the already established ones is not enough of a draw anymore, or even enough to differentiate yourself from the next retail location to really make a splash,” she added. “What [landlords] want is a mix of big, young, cool and commercial brands — it’s all about a securing a great balance.”

But to open a conversation and establish a solid negotiating position with landlords, emerging brands must first build brand equity and recognition in China through local PR and marketing. While brands are often reluctant to invest in PR activities prior to opening a store, Ms. Chen believes that it’s vital to begin brand promotion as early as one year before a retail launch. “Many European and US brands have never been heard of in China, so how can they convince landlords to give them prime spaces?” she said. “You must promote yourself heavily, show the brand’s background and give gifts,” she continued. “Through this you can educate the developers about your brand and convince them to include you in their mall plans.”

Though competition for retail space is already fierce, the situation will likely get worse in the coming years. But even with a predicted 76 million consumers and 36 cities entering the Chinese luxury market in the next few years, the fight for suitable real estate should not dissuade emerging fashion brands from striking out in the country. Indeed, all luxury fashion brands, regardless of size, need to have a China strategy. With well-timed investments in building brand equity, the ability to find the right partners, and a little panache, even emerging fashion brands have a chance at securing successful retail space in China’s booming market.

Timothy Coghlan works for an international consulting company, helping fashion and luxury brands source store locations in China, and is the founder of The Maosuit.

Wen Zhou, CEO of 3.1 Phillip Lim. Photo: Akira Yamada

NEW YORK, United States — Mention the name Wen Zhou to the average fashion fanatic on the street, or even ‘important’ fashion editors, and they may shrug their sh0ulders, not recognising the name. But, mention her name to fashion industry insiders, especially retailers and independent fashion brands, and invariably the words “dynamo”, “amazing” and “genius” will be volleyed right back at you.

As CEO of 3.1 Phillip Lim, Wen has earned the respect of the industry for her entrepreneurial mindset and can-do attitude, propelling the 3.1 Phillip Lim business from fledgling start-up to international fashion business—with retail stores in Tokyo, New York and Los Angeles and annual revenues exceeding $42 million—in just over four years.

Wen’s special skills in fabric sourcing, production management combined with sound business judgment have enabled the 3.1 Phillip Lim business to stake out a positioning in the market that is not easily replicated by others, combining a strong design point-of-view from Phillip Lim with high-quality, made-in-China production and accessible price points enabled by Wen’s strong relationships in China. Together, Wen and Phillip make a formidable team.

I recently caught up with Wen in the 3.1 Phillip Lim studio in New York and over lunch in Paris to talk about how she is coping with the economic downturn and the ideas she has up her sleeve for Phillip Lim in the year to come.

BoF: First, how is the business performing overall? Are there particular regions which are still showing signs of strength?

While we cannot ignore the current market conditions, I am happy to say that our Spring/Summer 2009 collection, in stores now, is doing fantastic, in both our wholesale and retail channels. This has certainly given us even more wind in our sails…or sales!? Our price points, design, and approach to the market work together and are helping us to continue growing, even under this economic climate. Our growth, at the moment, is coming primarily from Asia and Europe.

BoF: And, how has market week for Autumn/Winter 2009 been for you?

We were incredibly busy, and I am extremely happy with the reaction we received. Everyone kept commenting on how the Fall 2009 collection from Phillip is one to remember. He showed himself to be a designer who is running on all cylinders, creatively speaking. I could not have asked for much more than what he has created…it is a dream collection.

BoF: So, while many other independent businesses are struggling—especially other Contemporary brands—3.1 Phillip Lim continues to thrive. What’s the secret to your success?

Aside from an amazing designer, Phillip, our entire team is the secret to our success. Everyone, from sales, press, to design to production, to interns…this is what gets the job done, day in and day out. My team goes above and beyond, for the greater good and success of the company. It’s as simple as that.

BoF: After opening stores in New York, L.A. and Tokyo, retail expansion is still on your agenda, despite the uncertain economic climate. What are your plans?

We believe in continuing to expand on our own retail stores. These are the only places where we have full control over our merchandising strategy, visual merchandising, and marketing. This is very important for a young brand like ours.

We are set to open flagship stores in both Seoul, Korea and Hong Kong this August. And, we have a slew of shop-in-shop locations in the works, and 3.1 stand alone stores planned for China, as well as Japan.

To execute on this, we have selected our retail partners carefully, with Sazaby-league in Japan, Joyce in China and Hong Kong, and Shinsegae in Korea. Each of these partners has the know-how of the luxury market in their territories, as well as rich histories and strong retail real estate relationships.

BoF: Leather goods. Kidswear. Accessories. All of these are part of your growing business. What can we expect next?

Accessories will play an even larger role for 3.1 Phillip Lim, going forward. We are launching our first line of shoes, for both men and women, exclusively in our own retail stores, starting this Fall. Also, we are really going to expand on our small leather goods category…they will be quirky, fun, at an amazing price point…just like our ready to wear.

After that, who knows? We like to always try new things, this is what makes our company fun…we love to experiment. The result is a product that is fun to look at, and even more fun to wear!

BoF: What advice do you have to new fashion businesses that are just starting out, in the context of this economic hurricane?

My advice would be…take one bite at a time. Take small steps, especially now, but make sure that your product has heart and soul. It really shows on a hanger.

CEO Talk is an ongoing series of discussions with fashion entrepreneurs and business leaders as they combat the economic downturn. Previous interviews are listed below:

• Natalie Massenet, Chairman and Founder, Net-a-Porter
• Camilla Skovgaard, Shoe designer and Entrepreneur
• Susan Lyne, Chief Executive Officer, Gilt Groupe
• Priya Kishore, Founder and Creative Director, Bombay Electric
• Alex Bolen, Chief Executive Officer, Oscar de la Renta
• Jeffrey Kapelman, Chief Executive Officer, Hilldun Corporation
• Bonnie Takhar, Chief Executive Officer and President, Halston
• Sara Ferrero, Chief Executive Officer, Joseph Group