Shanghai Tang free essay sample

But the company was unable to establish its core customer outside its home market, Hong Kong,2 and it struggled to find a niche among successful, established global brands [see the Appendix for descriptions of a selection of successful global luxury brands]. In 2005, under new leadership and revised creative direction, Shanghai Tang expanded into several regional markets, with a particular focus on Asia. But was the company on track to become the first global Chinese luxury brand? Would David Tangis vision be realised? The Story I just thought to myself, that if you agree that China will eventually be the largest economy in the world, it was time to start a brand that was quintessentially Chinese. 3 David Tang, founder of Shanghai Tang David Tangis vision was to create a lifestyle brand that reintroduced traditional Chinese aesthetics to a new consumer audience. A self-described ibroker between East and Westi, Tang said that he constantly reconciled the various cultural influences he absorbed throughout his life. We will write a custom essay sample on Shanghai Tang or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Born into privileged Hong Kong society, Tangis grandfather made his fortune from the Kowloon Motor Bus Company. Tangis father owned racehorses, and his mother was a Hong Kong socialite. At the age of 14, Tang was sent to England to attend boarding school. Initially unable to speak English, Tang quickly adapted to the habits of well-bred British society and spent weekends visiting friendsi families at their country houses while attending the Pure School in Cambridge. He studied law and philosophy at Kingis College in London and then returned to China as a lecturer in philosophy at Peking University. 6 Tired of academia, Tang ventured into business, beginning with a job at Cluff Oil. He also became the exclusive importer of Cuban cigars to Asia and Canada and managed ia family investment fund, an oil-drilling business and a gold mine in Africai. 7 While he enjoyed success in these ventures, Tang felt a wave of opportunity flowing from China and set his sights on the creation of a life style brand that was quintessentially Chinese. He was determined to create a brand that embodied everything he loved about the beauty and mystery of China from days past. The idea was to reintroduce this aesthetic and the impeccable Chinese sartorial tradition to an entirely new audience in a way that was relevant to modern tastes. Tangis aesthetic was inspired by the Art Deco Shanghai of the 1930s, when the city was considered ithe pearl of the Orienti8. In August 1994, his vision was realised. The Shanghai Tang flagship, a 12,000-square-foot store on Hong Kongis Pedder Street, opened its doors to the public. Tang created Shanghai Tang as a lifestyle emporium where shoppers could purchase photo albums, watches, bedding, a sweater or a tailor-made qipao (a traditional Chinese dress) in one shop [see Exhibit 1 for product categories and price ranges]. He also sold communist era kitsch at upscale prices, like Mao Tse Tung watches and goods emblazoned with a red communist star, like the items sold in small side street shops in Hong Kong long popular with Western tourists. To elevate their country-of-origin status and mitigate Chinais reputation for making cheap, low-quality products, the items carried the label iMade by Chinesei. Wealthy tourists visiting Hong Kong, Shanghai Tangis core customer, often stopped at Shanghai Tangis flagship store to buy the signature Tang Jacket, a tunic with a mandarin collar in shockingly bright colours, or a silk handbag embroidered with cherry blossoms. In 1995, Swiss luxury conglomerate Compagnie Financiere Richemont SA (Richemont), the parent company of prominent luxury brands such as Cartier, Alfred Dunhill, Montblanc, Van Cleef Arpels and Chloe [see Exhibit 2 for brands by product category], became a major shareholder in Tangis company. The company paid Tang US$13. 1 million for a 40% stake and then bought out another partner to raise its stake to a controlling position. 9 The company owned brands under four major segments: jewellery, watches, writing instruments and leather goods and apparel. With a big luxury goods player like Richemont behind it, Tangis brand obtained something significant that no other Chinese fashion house had achieved: the financial and symbolic backing of a European luxury conglomerate. Tang dismissed speculation that, under Richemontis leadership, Shanghai Tang would showcase more mainstream fashions detached from Chinese influence. Our business is to always be quintessentially Chinese and to find our place within the mainstream. If we stop being Chinese, we will completely lose ourselves. 10 David Tang Riding the wave of self-created momentum (and with Richemontis deep pockets backing him), Tang once again dreamed big. Shanghai Tang began a rapid expansion, with plans to open stores in New York, London and several Asian cities. Tangis particular focus was the US. iI want to take New York. I want to pick it up and embrace it with a big squeeze and a sloppy wet kissi, Tang said. 11 In December of 1997, at a star-studded event that rivalled Hollywood premiers, Shanghai Tangis 12,500 square foot store opened. Sarah Ferguson appeared on the Oprah Winfrey show and gave Oprah a pair of Shanghai Tangis signature silk pyjamas. 12 To coincide with the store opening, high-profile Chinese actress Gong Li was featured in a print campaign, which included ads in The New York Times, Vanity Fair, Harperis Bazaar and W. 3 Situated on Madison Avenueoprime fashion real estateothe New York store was poised to be the western beacon to its sister stores in the east. As was typical, Tangis excitement and vision were bold, but the dream proved too big for reality. In July 1999, the high-profile New York flagship closed only 19 months after it had opened and relocated to a smaller space down the road from the original. 14 There were several reasons why sales did not meet expectations. First, the company overestimated American consumersi interest in upscale Chinoiserie. Kristina Stewart, editor- in-chief of Quest magazine in New York, was quoted in an article saying, ithey certainly courted the Upper East Side scene and threw lavish parties there, but at the end of the day those lime-green Nehru jackets made better wallpaper. You canit wear that stuffi. 15 Second, the Shanghai Tang style was confusing for customers. There was incongruity in presenting both pre-revolutionary and cultural revolution styles in the same store, and the tongue-in- cheek, post-modern take on Chinais heritage was ultimately lost on the wealthy American buyer. Third, it was difficult to justify the prices for high-end Chinese trinkets because cheaper alternatives were readily available in Chinatown at the Pearl River department store on Canal Street. Finally, the choice of retail space on Madison Avenue meant high rent (US$2. 7 million annually), which ultimately sales revenue could not cover. Itis tough to start a brand. In one sense fashion is easy, but the competition is intense. Retail is a tough business, and weive pumped a lot of money into the brand, and I guess we shouldnit be surprised if itis a struggle. You look at something like Ralph Lauren. It took them 30 years to become established as a global brand. 16 David Tang New Direction Despite missteps in the American retail market, the Shanghai Tang Hong Kong flagship continued to do steady business and the company maintained its relationship with Richemont. In 2001, Tang decided to devote his time and energy towards other business ventures but he maintained a position on the board and was the brandis largest shareholder after Richemont. Richemont executives assumed a more active role in the companyis direction. In 2001, CEO Raphael le Masne de Chermont was recruited from another Richemont brand, Piaget, to refocus and redirect the ailing Shanghai Tang brand. Le Masne had stark but complimentary contrast to Tangis flamboyant leadership style and quietly transformed the company into ia lifestyle brandi of more aesthetic subtlety during the first few years that would be relevant to the discerning taste of the global luxury customer. 7 But le Masne took from Tangis mistake the lesson that would guide the brand going forward: iwe need to be more moderni. 18 In step with the companyis evolution, top management embodied the cross-cultural blending that would become the brandis signature: David Tang from Hong Kong, le Masne from France, creative director Joanne Ooi from America and marketing director Camilla Hammar from Sweden. As le Masne noted, iWeire a melting pot of multicultural people who work on the same vision: a Ch inese lifestyle brand thatis relevanti. 19 Planned Growth Le Masne reported that worldwide sales for Shanghai Tang in 2005 grew 43% from the previous year, and American sales (at boutiques in Honolulu and New York) were up 50%. 20 According to one source, yearly sales were somewhere between US$20n$30 million, with the majority of sales at the Hong Kong flagship. In 2005, new stores opened in Zurich, Shanghai, Tokyo and Bangkok, with stores in Beijing and Milan planned to open in 200621 [see Exhibit 3 for retail store locations]. The overall expansion included 11 new stores in the next two years bringing the total to 30. 2 The Asian market was iresponsible for 80% of the brandis sales. Richemontis latest annual report stated that overall sales in Asia (outside Japan) grew 20%, compared to 10% in Europe, 7% in the Americas and 3% in Japan, for the fiscal year that ended in March 2004i23 [see Exhibit 4]. Unlike Tang, le Masne was less concerned with dominance in America and set his sights on the rapidly growing wealthy class in China. This shi ft in regional focus, particularly for the luxury goods segment, appeared to be on track. A 2005 Ernst Young analysis of luxury goods consumption [estimated] that sales in China [would] grow 20% annually from 2005 to 2008. i24 According to the report, by 2015 China would overtake the US as the worldis second-largest consumer market of luxury goods after Japan. 25 However, the brand had to be relevant to both wealthy Chinese customers and wealthy non- Chinese customers, who had different points of reference for what was considered elegant Chinese style. Chinese consumers in the apparel market still seemed to belong to two extremes. Angelica Cheung, editor of Vogue China, said these two groups were ia very moneyed minority seduced by foreign luxury labels, and the overwhelming majority who are interested only in cheap, affordable clothing. Thereis not much for anyone in betweeni. 26 The companys three Shanghai stores sold 50% of their merchandise to local young, urban professionals. The other half was sold to westerners looking for Asian-inspired garments in rich fabrics and colours. Courting wealthy Chinese consumers appeared to be a good idea, but when attempting to build a luxury apparel brand translatable in several markets, it was easier said than done. Young Chinese women wish to be modern and chici, Cheung said. iWesterners might think that Chinese women look great in a cheongsam or similar Chinese clichEs but that sort of clothing reminds modern women of their grandmothers. Instead everyone today wants to look like Kate Mossi. 27 Consumer segments in Asian cities outside China also needed convincing, tho ugh of a different sort. For example, in Japan, the worldis largest luxury goods market, le Masne said customers wouldnit embrace a Chinese brand unless it had a certain cachet in France and Italy. 8 To stay relevant in the high-end fashion market, Shanghai Tang expanded its fashion horizons and collaborated with several top designers. The Shanghai Tang jewellery range, made by Sandra diAuriol, a French designer based in Hong Kong, sold well. Philip Treacy, famed accessories designer, made hats for winter 2005 and worked on another collection for spring 2006. A line of trendy, embellished T-shirts for spring 2005 came from Studd by Gabby Harris. And introduced exclusively to Shanghai Tang stores in May 2005 was a collection of special edition Puma shoes, the Shanghai Tang Peony. Le Masne expressed the intention to start lines of licensed products, such as eyewear and fragrances, that tended to significantly increase sales figures while at the same time introducing the brand to a wider audience who could afford the relatively cheaper products. The high-profile collaborations and possible line extensions, along with new stores, were intended to raise awareness of the brand. Rather than grand store openings and costly celebrity endorsements, Shanghai Tang focused on localised public relations and sponsored events relevant to each regional market. Also, prime retail locations remained central to its channel strategy of maintaining access to luxury consumers. In addition to its freestanding stores, Shanghai Tang opened shops in world- renowned hotels such as the Peninsula and the Four Seasons and, to court the wealthy traveller, it also opened shops in Hong Kong International Airport and Beijing Capital International Airport. Design Much of the credit for Shanghai Tangis sales turnaround went to creative director, Joanne Ooi, who was recruited by le Masne in 2001. As the brand outgrew its kitschy image, Ooi introduced design statements that icombined Chinese culture references and sleek, contemporary clothesi29 [see Exhibit 5 for a selection of products]. It was reported that Ooi was offered her directorship after submitting the following comments on the Shanghai Tang flagship to le Masne: Itis an overpriced Chinese emporium that has no credibility with local Chinese people, let alone with fashion people. Its very narrow market is high- end tourists. Itis a once-in-a-lifetime destination shopping experience, a kind of fashion Disneyland. Plus, itis unwearable and eccentric. 30 Joanne Ooi, creative director, Shanghai Tang At the creative helm of the brand she once found risible, Ooi was clear on Shanghai Tangis international image, saying, ithe goal is to be the ambassador of modern Chinese stylei. 31 To achieve this, Ooi conducted her research for collections in art museums and read books on regional history. To serve as inspiration for the autumn 2005 collection, Ooi commissioned artwork iby established Chinese contemporary artists and young art studentsi. 2 For one collection, Ooi focused on Chinese calligraphy by turning traditional Chinese characters into decorative patterns. 33 iEthnic tribes in Chinais Hunan provincei inspired another collection of clothes, as did the ifur-lined clothing worn by Mongolian and Tibetan nomadsi. 34 Ooi preferred these design sources to fashion magazines and of-the-moment trends. More important, however, was that this established the credibility of the brandis intention to become an ambassador of Chinais national aesthetic. On this point, Ooi said, iI try to stay away from a pastiche of what Westerners think of as Chinese culturei. 5 Branding Chinese culture could be an effective point upon which to differentiate from European and American luxury brands. However, as the company expanded, the cultural branding angle became complicated and ran the risk of alienating potential customers in Asia. In short, exoticised images of Asia were less appealing to Asian consumers. While popular with a portion of Hong Kongis wealthy class, Shanghai Tang had not yet proved popular among Chinese consumers unconvinced as to why they should pay top-dollar for Shanghai Tangis reinvented Chinese style. Chinais First Global Luxury Brand? Since China had both economic and cultural cachet, Shanghai Tang and other Chinese brands were poised to enter a new era of heightened global interest in all things Chinese. 36 Would Shanghai Tang follow in the tradition of established global luxury brands associated with a national aesthetic? As le Masne said, iIf Hermes is a representation of French lifestyle-chic, or [Ralph] Lauren is [a representation] for the Americans, and Armani is for the Italians, why not Shanghai Tang for the Chinese? 37 Was the company on track to become the first global Chinese luxury brand? LVMH Moet Hennessy Louis Vuitton LVMH was the worldis largest luxury goods company with more than 1,500 retail outlets (including 280-plus Louis Vuitton stores), around 150 DFS Group duty-free shops, Le Bon Marche department stores and hundreds of designer boutiques worldwide. In 1854, Woodworker Louis Vuitton started with a store in Paris to sell his handcrafted luggage. Vuitton int roduced the LV monogram in 1896 and opened stores in the US and England by 1900. In 1977 Henry Recamier, who was a former executive and married into the Vuitton family, entered the business and transformed the business from little-known status symbols to designer must-haves. Within ten years, sales soared from US$20 million to nearly US$2. 5 billion. In 1987 Recamier merged Louis Vuitton with Moet Hennessy (maker of wines, spirits and fragrances) and all were under the name LVMH Moet Hennessy Louis Vuitton. When Bernard Arnault became chairman in 1989, LVMH increased its fashion holdings by buying Givenchy, Christian Lacroix and Kenzo. Arnault is credited for transforming the LVMH Group from a small producer of clothing and champagne to a global luxury conglomerate made up of the worldis most powerful luxury brands. LVMH owns such fashion brands as Berluti, Celine, Christian Dior, Donna Karan, Emilio Pucci, Fendi, Marc Jacobs and Thomas Pink. Central to the groupis strategy is management of its istar brandsi paired with product quality and a culture of innovation. According to Arnault, a star brand is a brand that is itimeless, modern, fast-growing, and highly profitablei. 8 The majority of LVMH brands have a long history of craftsmanship and were originated in Europe. The LVMH management strategy was to build a work environment that supported creativity while at the same time enforcing strict business discipline. Worldwide revenue in 2005 totalled US$ 16. 8 billion, up 11% from 2004. Ralph Lauren Polo Ralph Lauren Corporation originated the concept of the lifestyle brand. Ralph Lauren, born Ralph Lifschitz, ground ed his brand in a quintessentially American image of wealth and status and consistently carried this aesthetic throughout his retail stores and product lines. He began his career as a sales representative for Rivetz, a Boston tie maker, and in 1967 he began designing ties for Beau Brummel of New York. He named his own style division iPoloi because of the upper class image it evoked. In the early 1970s, Lauren partnered with Peter Strom to form Polo Fashions and focused on tailored menswear. In 1971 Lauren introduced his signature polo logo and his womenis line. In the same year, the first licensed Polo store on Rodeo Drive in Beverly Hills and his first in-store boutique at Bloomingdaleis in New York City were opened. In 1980, Polo Ralph Lauren expanded further into licensed products, including home furnishings, jeans, fragrance and eyewear. In 1997 Polo went public and, following a large restructuring, bought back its European licensee to reclaim greater control of the Polo brand. The companys brands were: Polo by Ralph Lauren, Ralph Lauren, Ralph Lauren Purple Label, Black Label, Blue Label, Lauren by Ralph Lauren, Polo Jeans Co. , Rugby, Chaps, RRL, RLX, RL Childrenswear, and Club Monaco. Net revenue for fiscal year 2005 was US$3. 3 billion. Giorgio Armani Giorgio Armani was the sole shareholder of his US$ 1. 7 billion lifestyle business. The company licensed its name for perfume, watches and accessories, but continued to earn more than half of its revenues from apparel. 39 In 2003, 53% of his total sales were generated by garments, from sporty AX/Armani Exchange to the luxurious Giorgio Armani brand. Armani had stores in more than 35 countries. The companyis brands included: Giorgio Armani, Armani Exchange, Emporio Armani, Armani Jeans, Armani Collezioni, Armani Junior, Armani Casa and a Giorgio Armani Accessories store. To control the integrity of the brand, Armani owned Simint, the Italian holder of the Armani jeans license, and had several joint ventures with Italian manufacturing companies to bring its apparel production in-house while allowing for a controlled expansion of product lines. Armani studied medicine and was in the Italian army before starting working as a window dresser for La Rinascente department stores, where he later became a menswear buyer. His first design position was at Nino Cerruti. In 1975 Armani partnered with Sergio Galeotti and established Giorgio Armani S. p. A. The Armani label became known for its unstructured tailored suits. The business went global in the 1980s and gained greater recognition when the designer dressed actor Richard Gere in the film American Gigolo. Armani was successful in creating a true lifestyle brand, extending his design aesthetic into multiple product categories, even expanding beyond fashion and home furnishing. In 2004, Armani announced his intent to develop a series of Armani-branded and styled hotels. Hermes Hermes International sold a wide range of luxury goods, including scarves, ties, leather goods, watches, stationery and menis and womenis apparel. There were approximately 215 Hermes stores worldwide and around 40 retail outlets that sold Hermes products. The company did not grant licenses and made most of the products it sold. Famous for its leather goods, Hermes was founded in 1837 in France by harness-maker Thierry Hermes. Hermes won acclaim for its unique carriage design and its saddle stitch became a trademark. Thierryis son, Emile-Maurice, expanded the product range to include travel-related leather goods, including saddlebags, luggage, wallets, handbags and even jewelry. Emile also chose the well-known logo, the horse-drawn carriage. Clothing was introduced in the 1920s when Emileis son-in- law, Robert Dumas, took over the company. Dumas introduced the first Hermes scarf in 1937, which became one of the design houseis signature pieces. Dumasi son, Jean-Louis, took control of the company in 1978 when his father passed away. He brought in young designers to reinvigorate the brandis image. When the company went public in 1993, the family retained more than 80% of the share holdings. Hermes also owned crystal-maker Les Cristalleries de Saint-Louis, silversmith LiOrfevrerie Puiforcat, shoemaker John Lobb, 35% of Jean-Paul Gaultieris fashion business and 32% of German camera maker, Leica. In 2002, the company expanded its leather-working business and, through public campaigns, promoted the craftsmen and women behind its products. In 2005, net profit totaled US$298. 3 million, up 15% from 2004. As of 2005, descendants of founder Thierry Hermes owned 75% of the company.