The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
HONG KONG, China — Most people are shocked to learn that the executive chairman of Shanghai Tang, the Hong Kong-based luxury lifestyle brand, is a Frenchman by the name of Raphael le Masne de Chermont. While the brand is still closely associated with its original founder Sir David Tang, since 2002, le Masne de Chermont, while not Chinese by blood, has played a pivotal role in establishing Shanghai Tang as China's first internationally recognised luxury label.
Shanghai Tang began with a small fashion boutique in the Pedder Building in Hong Kong's Central district. The brainchild of entrepreneur David Tang, it offered custom and ready-made garments inspired by Chinese fashion in the 1920s, including silk scarves, qi paos and, of course, their famous velvet jackets lined with colourful silk. By the late 1990s, the brand was a favourite with the city's wealthy Western expatriates and elite Brits like Kate Moss.
In 1998, Swiss luxury goods conglomerate Compagnie Financière Richemont SA took a controlling share in the company. Labelling itself the "global curator of modern Chinese aesthetics," Shanghai Tang expanded their offering to include accessories and homewares, while opening stores around the world. By 2005, global sales had grown 43 percent, according to market sources. And by 2008, Richemont completed their acquisition of the company.
It’s no secret that Shanghai Tang has dedicated the past decade to courting the Chinese market. Of its 45 stores, 30 are in Greater China, including its latest flagship, Cathay Mansion, in Shanghai, the city that inspired the brand's birth. To celebrate the store's official opening last week, the brand hosted a glittering event complete with a catwalk show staged by its new designer, Joseph Li, a graduate of London's Central Saint Martin’s.
Now, efforts are underway for expanding the brand in the West. Earlier this year Shanghai Tang entered into a 12-year worldwide licensing deal with Inter Parfums USA to create, produce and distribute perfumes and related products, with plans to launch its first fragrance in Spring 2014.
BoF spoke with Raphael le Masne de Chermont about Shanghai Tang's customer base, re-energising the company's ready-to-wear, global expansion plans, and whether Chinese consumers will ever truly embrace a luxury brand founded in the East.
BoF: Over the years, it's been unclear who exactly Shanghai Tang is targeting. Was the brand originally targeting a Chinese or Western clientele? And how has that changed?
RMC: When Shanghai Tang first opened it was a novel concept — it was very colourful and truly targeting Western people. At the time the mainland Chinese were not consuming luxury goods and they were hardly travelling to Hong Kong.
When I arrived on the scene in 2002, our job was to make the clothes relevant and wearable. It was very ethnic and party-oriented, so we had to twist it so it could survive beyond this romantic, 1930s Chinese aesthetic established by David [Tang].
We also had to stop going after Westerners exclusively. Many of the locals got offended because they felt it was an expensive Chinese emporium for gweilos [Westerners]. We had to work hard to rebalance the demographic, because at the end of the day, this is a brand that belongs to the East. Of course, Westerners have been very kind to us and were early adopters, but I always faced resistance from Hong Kong people and mainland Chinese who didn't understand it.
Today, mainland Chinese are our number one customers. They represent 20 percent of our business, while our second [largest customer] demographic lives in the US — 18 percent. All in all, Asians as a whole represent 51 percent of our customers versus, 49 percent for Westerners. Because of this balance we can say we are truly an international Chinese premium brand.
BoF: You were pioneers in that you were the first global brand to take inspiration from China. But now there are competitors taking a similar approach, like Shang Xia. What makes Shanghai Tang different?
RMC: I am so happy that we finally have some competition, but honestly these brands are still small. We are 20 years ahead of them. I am thrilled Hermès has put together Shang Xia. But it’s not easy. Hopefully, they will learn and lose a bit of their arrogance. One thing I’ve learnt about working in Asia is that you have to be humble.
Asia is also the most competitive real estate market in the world. My competition is not with these new brands, but big established brands with which I am vying for retail space. One brand I do admire however is Shiatzy Chen. She is genuine and has a style. She may have a shop in Paris, but not many people know her in the West.
What bothers me at the moment about the fashion world is that many people are super-opportunistic. Because China is the new hotspot, everyone is becoming Chinese. Just because they put dragons on something they think it will sell. We have tried to cut all the clichés about China from all our product. Everything is toned down. Even our fits are more contemporary.
BoF: Shanghai Tang is known for its homewares, but you recently re-hired designer Joseph Li to re-energise the ready-to-wear side of the business. Is this part of a new strategy to reposition the house?
RMC: First of all, we have a balanced revenue: 50 percent apparel and 50 percent hard goods, including accessories and home. People think we do a lot of business with home, but its only 15 percent of our total business. We are a fashion business — 85 percent of our revenue comes from sales of apparel, accessories, bags, scarves and jewellery. Jewellery is a segment I am very excited about.
What many people don't realise is that our apparel changed a while ago, but the way we were communicating the message was not right. The move towards being more fashionable started when Joseph came onboard the first time in 2007. I think he is super-talented and deserves to be pushed, so now that he's back and we did this show. Last year, I also hired Raffaele Borriello, who formerly headed up Tom Ford's apparel division and is creative director at Leonard, as our creative consigliere. He oversees brand imagery and design coordination.
There has been some talk about doing a fashion show at one of the international fashion weeks and eventually it will happen. But in a way, I would be ashamed of doing it, simply because I don’t want to do what others are doing and we have always done things differently. But at the same time it’s a shortcut that works in the same way brand endorsements work in China. It costs a fortune and there’s very little authenticity behind it, but it's exposure.
BoF: It’s no secret that the luxury business in China is slowing down. Has this affected your business strategy?
RMC: We have noticed it. The organic growth has slowed down, but it’s still growing just not as much as before. We are recapturing this lost revenue in Hong Kong and Macau. Hong Kong and Macau will still be shopping meccas for the Chinese for a while longer. And although the new Politburo is showing signs of discipline in China, the Chinese will continue spending overseas I think.
BoF: What are the biggest challenges of selling a Chinese-inspired product to the Chinese? Do you think the Chinese will ever truly embrace a luxury brand founded in the East?
RMC: Because we were the first to pioneer Chinese luxury, we had to convince Chinese that we are truly international, but also relevant to them. When we entered [the market] it was challenging, but now the new generation has no problem. They like to mix and match; they travel. The head-to-toe looks of 10 years ago have gone. People are so smart in China. They are very savvy in the way they dress and they have an incredible sense of aesthetic.
My belief is that we are going to see a serious drop in the monogram business, because the formula is passé. Brands need to readdress that. Now, they are all working on authenticity and heritage. But I wouldn’t do it too much as it sounds fake sometimes. The Chinese will be branding China more, in more categories. They are not going to be the factory of the world for much longer, so they are going to become a consumer business.
What’s important is that Shanghai Tang has always been faithful to China and has always taken its source of inspiration from the country. We are offering a spectrum of products that are inspired by the Chinese culture.
BoF: You have a strong retail network in Asia, but only 10 stores elsewhere. What are your global plans moving forward?
RMC: We have three main hubs: Hong Kong, Singapore and Shanghai. We are still looking for a flagship in Beijing, but once we have completed our hubs in Asia, I want to go to Paris and rebuild our shop in London. After that, I want to start wholesaling in Europe.
The US, meanwhile, we need to tackle in a different way. It’s always been a fantastic backer of Shanghai Tang, but we made a few mistakes. Next time we must go down the lifestyle route. I want to build a true lifestyle [brand] there, similar to what we’ve done in Hong Kong, where we have good fashion, homewares and a restaurant under one roof.
The Internet is also huge for us. Our Internet business has grown by 45 percent. We’ve been selling online seriously for five years and have a team of seven working on e-commerce. We can deliver anywhere in the world within three days, except for Africa because there is a huge of issue of fraud. We have a warehouse in Hong Kong and hubs in New York and London.
BoF: Do you think the West will ever really embrace a brand whose DNA is rooted in China?
RMC: If you look at our history, the proof is there that they already do. The most difficult part, initially, was to convince the Chinese. The West endorsed us right from the beginning. They like that we are different. They are attracted to the colours and that touch of Orientalism. The fact that Chinese culture is now better known also helps. People are fed up of seeing the same old formulas.
We need to have fun growing it in the Western world. China will always be our number one market, because it is where we will have most of our shops, but we need to bring it to a bigger audience. Technically this is the hardest part of the world to conquer, so that’s a good sign for us.
This interview has been edited and condensed.