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Can the Family Behind Ferrari Make Chinese Luxury Stick?

Exor, the investment fund of Italy’s Agnelli family, has tapped LVMH Prize finalist Yang Li to lend a fashion edge to its recent Shang Xia acquisition. Almost two years in, the company’s first luxury venture is starting to take shape.
Yang Li shared preview polaroids of bubble flats and a laser-cut trench-coat from his Shang Xia collection set to be revealed Thursday morning.
Yang Li shared preview polaroids of bubble flats and a laser-cut trench-coat from his Shang Xia collection set to be revealed during Paris Fashion Week Thursday.

It’s been almost 2 years since Italy’s Agnelli family (the founders of Fiat, whose Exor investment fund controls Ferrari, The Economist and Juventus) first dipped their toes into fashion, investing 80 million euros in the Chinese luxury label Shang Xia in exchange for a 90 percent stake.

Since then, Exor has continued to make periodic headlines in the fashion space. The fund acquired 24 percent of shoemaker Christian Louboutin at a 2.3 billion euro valuation, relaunched Ferrari’s apparel line with a runway show crafted by a former Armani designer, and — most notably — reportedly entered talks to acquire Armani, although no deal occurred.

Shang Xia, meanwhile, has mostly flown under the radar, with the exception of designer Yang Li’s debut show last September, which also served as the Paris Fashion Week crowd’s first peek at the Agnelli family. A formidable business dynasty sometimes referred to as the “Kennedys of Italy,” the Agnelli’s representatives (including Exor chairman John Elkann) sat next to executives from Hermès, which had helped to found the brand a decade earlier in partnership with designer Jiang Qiong Er.

Li, who was shortlisted for the LVMH prize in 2014 and spent 10 years building a following of musicians and fashion cool-girls for his namesake line, revealed a collection that showed he has his finger on the pulse of what contemporary city women need for day-to-night dressing: relaxed, menswear-inspired coats and overshirts were mixed with crisp suiting, easy jersey dresses and oversized, office-ready turtlenecks and camp shirts, with the straightforward silhouettes getting a futuristic lift from a gleaming palette of highlighter hues.

The show lasted only a couple minutes, but the audience could feel that something was happening as both the brand — whose apparel was previously best-known for ultra-understated, minimalistic cashmere and silk pieces — as well its new owners dipped their toes into the fashion fray for the first time.

Something was certainly happening — but will it stick? Shang Xia’s designer and owners say yes. This year, the brand opened 2 new stores, in Shanghai and Taiwan, bringing its store count to 20, while other locations in the pipeline include Shenzhen and Hainan.

The brand is currently enjoying “strong double digit growth,” the company said, though it declined to disclose the label’s revenues or profit.

“It takes time to establish these brands,” said Suzanne Heywood, managing director at Exor. “We are long-term shareholders. We’re patient, but active in the governance.”

Since appointing Li, the brand has also named a new creative director for homeware, Leon Sun (China’s former Elle Decor editor) as well as promoting from within a new CEO, Sophia Wu, to succeed the brand’s co-founder Jiang Qiong Er. Former Hermès CEO Patrick Thomas serves on the brand’s board.

“We were quite taken with the original rationale of the brand, of combining Chinese heritage and craftsmanship with modernity at the top end of quality,” she added. “Now our ambition is to grow it.”

Chinese singer-songwriter Bibi Zhou sports bubble sandals and a suit from Shang Xia by Yang Li.

Li is getting ready to show another collection for the brand Thursday at Paris Fashion Week. His futuristic bubble-soled sandals and boots — the most saleable items in his debut collection — are back, along with a line-up of mod, thigh-length dresses: some bearing intarsia leather bunnies in honour of China’s coming Year of the Rabbit, others with oblong motifs resembling jade pebbles, or charcoal smudges inspired by the country’s watercolour tradition.

Shang Xia was founded on a principal of reviving Chinese craft traditions, many of which were diminished during the Communist Party’s Cultural Revolution, and to work closely with local suppliers to make luxury items crafted from enamel, stone, silk and bamboo.

The label is still working closely with those suppliers for many items, but has moved most production for its ready-to-wear, shoes and bags to Italy as it seeks to boost the fashion quotient in its collections.

“The strategy now is to make it where it’s made best,” said Li.

To be sure, the concept needed a revamp: while Shang Xia had won respect and curiosity thanks to its Hermès-inspired take on inside-out branding — putting painstaking effort into establishing its supply chain —the lack of a more directional apparel offer had doomed the brand to selling lacquered boxes and tea sets to an ageing audience.

Awareness of the brand never took off broadly in China, and among the small pool of consumers who knew, appreciated and could afford the brand, most were just as happy to take their dollars to more established or more fashion-driven concepts elsewhere.

Shang Xia has been “cultivated the Hermès way, so it’s a really solid foundation. It’s amazing to have those resources, but half of it is how you use them,” Li said.

“The core mission is to reinvent and expand to a younger audience of Chinese urban nomads,” Li said. “It’s interesting to think about how you can take that ancient craft spirit but make it new, combining technique and an international perspective to attract a younger audience.”

The business is still tiny, and will require hefty, not just long-term, investments if it wants to make a splash in the competitive luxury market. But with China becoming more inward-facing since the coronavirus pandemic — which scuppered many opportunities for the country’s elite and rising middle class to go abroad — and amid a country-wide push for more national pride, interest and curiosity in a brand that engages with its Chinese roots could be greater than when Shang Xia was launched.

Exor would not disclose targets for the brand’s growth and eventual profitability, but Heywood said the fund firmly believes in the brand’s potential.

Whether or not the project does ever scale, Exor is already gaining valuable industry insight and contacts in luxury manufacturing, marketing, design, and real estate — experience that will serve the company well should it ever make a fashion acquisition with higher financial stakes.

Exor has no further luxury acquisitions currently in the pipeline, Heywood said, but remains interested in the sector alongside targeting investments in healthcare and technology.

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