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Op-Ed | Why We Based Our Fashion Start-Up in Hong Kong

Hong Kong’s advantages in terms of costs, distribution, logistics and tax have helped fashion label Grana to scale fast, says founder Luke Grana.
Victoria Harbour, Hong Kong | Source: Wikimedia Commons
  • Luke Grana

HONG KONG, China — Name the world's fashion capitals. You probably thought of New York, Paris, London and Milan. But have you ever considered Hong Kong?

When I started Grana, an online-only fashion brand, in 2013, I wanted to make luxury-quality wardrobe essentials without the luxury price point. That meant rethinking the traditional fashion business model: online-only; cutting out middlemen; the lowest-possible shipping costs for next-day delivery.

It was clear that outstanding logistics — not design — would give our new fashion business what it needed to succeed and attract significant investment. That’s why we put down our roots in Hong Kong.

In today’s fashion world, customers don’t just pay for the garment they are buying, they pay for the entire supply chain and all of a business’ inefficiencies. Standard mark-ups are eight to ten times the actual cost of manufacturing garments and some brands mark up even more. Most fashion customers look for value — but, so far, product quality and speed of delivery to the end consumer haven’t met at an affordable price point.

Headquartering ourselves and our distribution centre in Hong Kong has allowed Grana to directly send products to customers worldwide at the lowest possible prices. Which begs the question: why aren’t more fashion companies doing the same?

Hong Kong is the world’s largest logistics hub. Grana has one central distribution centre, and, from here, thanks to Hong Kong’s outstanding logistical infrastructure, we beat even national shipping services in the countries we ship to on cost and delivery time.

As an online-only retailer, it's important that our customers get their purchases fast. For example, DHL operates five planes from Hong Kong to Australia, 16 to Europe and 12 to the US on a daily basis, meaning our customers receive Grana's wardrobe essentials — t-shirts, blouses, jeans, sweaters and so on — with an average two-day delivery time.  And because of DHL's scale, it's cheaper for us to ship from Hong Kong to Australia than with local post from Melbourne to Sydney.

We’re not just able to save money on shipping costs — we are also to do business in more places, globally. A number of US-based fashion start-ups still haven’t tackled the international market, limiting their growth potential. When we started up in October 2014, we shipped to eight countries right from the get-go and, one year later, we’ve added four more. Grana has grown on average 100 percent month-on-month since we launched. And we couldn‘t have done that anywhere but Hong Kong.

We also looked at Sydney, London, Singapore and San Francisco as potential locations for our headquarters. Sydney and London are brimming with creative talent; Singapore is another logistics hub; and, as the world’s technology incubator, San Francisco boasts skilled web developers at every turn.

However, Hong Kong’s tax-free port beat out the rest for cost savings, which we could pass on to our customers. We make our t-shirts in Peru, and we’re able to ship them first to our distribution centre in Hong Kong, and then back out to customers around the world, without paying any tax. That alone is a huge cost saving, which we can pass on to our customers by sticking to mark-ups of two times the garment price.

Finally, we're able to take advantage of Hong Kong's sourcing network. Over the last 30 years, garment production in Greater China has moved northwards to the mainland, while Hong Kong has emerged as the leading city for merchandising and sourcing. Many fabric mills have their head offices in Hong Kong, meaning we can meet them personally, bypassing distributors and other costly middlemen.

That’s also the case with talent. An impressive number of designers and merchandisers in this city have hands-on production experience across the entire supply chain. Centralising our operations and production in one place has been key to our business model, meaning we avoid the high costs many companies spend on managing inventory across different locations.

Dare to commit to the unknown. Simply opening a few additional warehouses in Hong Kong won’t suddenly create new efficiencies in your supply chain. Indeed, established companies may be too big to jump ship and centralise their existing headquarters in a new location, but apparel start-ups would do well to consider Hong Kong for their home base.

Cost efficiency in a global operation requires sacrifice. Growing our team to over 20 members within a year necessitated our move to a 5,000-square foot space in Wong Chuk Hang. And in the future, we’ll move again — this time to Tsing Yi, a stone’s throw away from Hong Kong International Airport, a location that will allow us to offer 24-hour delivery to Sydney, Shanghai, or San Francisco. While Tsing Yi is a 50-minute commute from where most of our team lives, they understand that these are the moves that save costs and allow faster delivery.

Our journey in Hong Kong over the last year is proof that to be a global fashion business these days is not only about solid design, but also about building an efficient and cost-effective logistics strategy. Whether you’re in the business of fast or slow fashion, speed is crucial — and being headquartered in the right place ensures that your business is global from day one.

For budding fashion entrepreneurs targeting the global fashion market, I encourage you to set up shop on this side of the world. The beaches are pretty good, too.

Luke Grana is the founder of fashion label Grana.

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