Global Economics

China Chic Comes Full Circle


Shanghai Tang has wooed the foreign crowd with its mandarin collars and other China-based fashions, but faces hurdles selling them back to the mainland

Raphael le Masne de Chermont is on a mission to liberate men from the tyranny of the necktie. The executive chairman of Hong Kong-based Shanghai Tang, purveyors of "China chic" fashion, has launched the Mandarin Collar Society. The invitation-only "club" has its own manifesto, encouraging men to "just say no" to the ritual of the daily knot. "We are trying to re-invent an acceptable way of dressing that is comfortable and elegant," says le Masne.

Le Masne isn't trying to change the world overnight, so don't expect him to be organizing the male equivalent of bra burnings that symbolized the women's liberation movement of the 1960s. "It's a small revolution. We are not declaring war on the tie, just an alternative to Western elegance," he says, adding, "We are trying to sell as many mandarin collars as possible."

Indeed, mandarin collars have been synonymous with Shanghai Tang since it was launched by Hong Kong impresario David Tang in 1994. The company's flagship store in an historic building in the heart of Hong Kong's financial district quickly became a top destination for tourists and expatriates living in Hong Kong. They loved the retro, 1930s store interiors and the tailored qipaos for women (those high-collared, body-hugging silk dresses with the trademark slit on one thigh) and baggy tunics for men with screaming pink, lime green, and orange linings.

New York Setback

Tang quickly built on his success, expanding to New York in 1997 with a 12,500 sq.-ft. store on Madison Avenue,. In 1998 he sold a majority stake to Compagnie Financière Richemont, the Swiss luxury goods company that owns a stable of luxury brands such as Cartier, Dunhill, and Montblanc.

The New York store was an ill-timed expansion that nearly sank the company, says Le Masne, who joined the group in 2002. "If we hadn't relocated the store we would have gone bankrupt," he concedes. Even today, though Shanghai Tang occupies a more modest space—5,000 square feet. at Madison and 63rd—it has yet to turn a profit. Le Masne hopes that after yet another store relocation in Manhattan this year, the outlet will start to make money.

Happily for Le Masne, the group's other 23 stores are all profitable, including the one in Honolulu. Though he declined to provide figures for the privately held retailer, he says sales have been growing at double digits for the past five years. Shanghai Tang also has ambitious plans to double its global footprint of outlets to 50 by 2010. Planned store expansions include a boutique at the Four Seasons hotel (FS) in Macao next year, a retail outlet in the Forum shopping mall attached to Caesar's Palace in Las Vegas in early 2009, and yet another location somewhere on the West Coast of the U.S.

Focus On the Mainland

With one store each in London, Paris, and Zurich, le Masne is actively looking for partners to open other European outlets, specifically in Spain, Germany, and Italy. Its most recently opened store in Dubai has been such a success that le Masne plans to open two more there, as well as one in Kuwait—perhaps also in Qatar. All shops offer identical lines of clothing and accessories to assure global brand consistency, he says.

But the group's biggest growth will come from mainland China where it currently has five stores. It's doubling the size of its store to occupy 2,500 sq.-ft. premises in the trendy Xintiandi area of Shanghai (see BusinessWeek.com, 02/19/07, "Shanghai Rising"). Another shop at the Grand Hyatt in Beijing is set to open its doors in September, and the group is also looking at launching a Shanghai Tang café chain in China. Le Masne expects that China will be the group's largest market within three years.

In a sense, the push into China is bringing things full circle. When it was launched, Shanghai Tang was perceived as "a Chinese emporium for gweilos (the Cantonese expression for foreigners) that was overpriced," says le Masne. "When I joined five years ago I had to fight against two clichés—that we were a destination for white people and that we had failed in New York."

$80 T-Shirts

Selling the "made-in-China" label to the Chinese masses will be no mean feat. China's well-heeled shoppers have been flocking to Western luxury brands Giorgio Armani, Louis Vuitton, and Gucci, which have begun their own ambitious forays into the mainland. The fact that Shanghai Tang is not strictly a luxury brand—Shanghai Tang considers itself a premium brand that has "all the stigma of luxury principles"—gives it a distinct advantage, says le Masne. "For us it's a source of pride to be made in China, for others [luxury brands] it's an embarrassment."

Still, Shanghai Tang fashion offerings don't come cheap. A simple t-shirt retails for $80, a traditional man's shirt with mandarin collar will set you back $205 and a reversible silk and velvet two-tone Tang women's jacket with knot buttons runs about $785. Ironically, Shanghai Tang's products are 25% more expensive in China than in Hong Kong, where they are packaged and then re-imported into China. That's because the factories producing for the label aren't licensed to ship to domestic customers.

While Hong Kong's flagship store boasts wooden floors, and furnishings that evoke the glamorous era of Shanghai in the 1930s, selling nostalgia is not the way to win wallets in mainland China. The new stores there have a more contemporary sleek and streamlined look, with no period furniture, and chic black lacquer cabinetry lined with bright silk. "There is no nostalgia in those stores," says creative director Joanne Ooi. "This is one of the distinguishing marks of the new boutique concept."

Not Too Chinese, Please

In fact, Ooi started modernizing Shanghai Tang when le Masne brought her on board five years ago. She spearheaded the move to divide the brand into its original founding collection, now called "Authentics," and its ready-to-wear line, which is updated twice a year with spring and fall collections. U.S.-born Ooi, who heads a team of 10 Western and Asian designers, says that the Chinese element of her creations is more nuanced. "There has to be some Chinese-ness, but not the hit-you-over-the head Chinese-ness at the [label's] inception that almost rendered the product unwearable," she says.

Though women's fashion items still account for 70% of group sales, sales of men's apparel have been growing faster in the past two years since the group started modernizing its look. Fitted jackets look more Savile Row than Shanghai, and fabrics from France and Italy are being used alongside Shanghai Tang mainstays of silk and velvet.

But Ooi says there's no reason to tweak the brand to suit tastes on the mainland, which still looks to the outside to set the style in fashion. "The Chinese need to be convinced by success abroad to embrace any brand, whether homegrown or international," explains Ooi.

That's where the Mandarin Collar Society comes in, explains le Masne. He reasons that if Westerners and overseas Chinese abandon the necktie then the mainlanders will be more inclined to do so, too. If that sounds like a circuitous way to reach Chinese consumers, well, it is. Shanghai Tang's future prosperity, to some degree, depends on cracking the code that is the Chinese consumer.


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