Shiatzy Chen CEO Harry Wang
Taking Eastern Fashion Global
Harry Wang has led a team of Taiwanese designers, Chinese artisans, and French stylists to build Shiatzy Chen's brand image in China and the world. It has been anything but easy.
Taking Eastern Fashion GlobalBy Yueh-lin Ma
From CommonWealth Magazine (vol. 509 )
Shanghai's famous Bund has been a curse to international fashion brands trying to enter China's market.
After Giorgio Armani led the foreign invasion by moving into No. 3 (the old Union Building) on the Bund in 2004, followed by Cartier setting up shop at No. 18 (the old Chartered Bank Building), all top international luxury brands aspired to locate their flagship store on Shanghai's historic waterfront, determined to declare their pre-eminent status in the world's second largest luxury goods market behind only the United States.
But exorbitant rents and crowds of shoppers who tend to browse rather than buy have continuously reshuffled the brands' relative influence, much like during the era of foreign concessions in Shanghai when countries saw their power come and go.
The first and fourth floors at No. 4 on the Bund (the old Mercantile Bank of India, London, and China Building) are currently up for rent and the No. 5 building (the old Nissin Shipping Building) is being remodeled. But Taiwanese fashion brand Shiatzy Chen has withstood the constant upheaval, having occupied No. 9 on the Bund, the neo-renaissance three-story red brick China Merchants Banks Building, since 2005.
Shiatzy International Co., Ltd. signed a 20-year lease with the owners of this historic building, which was originally planned and built by prominent late Qing Dynasty statesman Li Hung-chang. Opening the flagship store's massive bronze door etched with the year "1901" reveals a world of the latest embroidered coats and jade-handle bags.
At night, the lights may burn brightly along the Bund on the bank of the Huangpu River, but the store's salespeople generally outnumber customers, a scene that also plays out a few doors to the south at the Giorgio Armani shop. The adjacent Armani Casa store closes its doors much earlier in the day.
Staying open at night despite the paucity of customers represents just one of the small prices Shiatzy Chen has paid to project itself as one the world's leading fashion brands. Another is holding runway shows at major international fashion events.
Most recently, Shiatzy Chen put on a runway show at Paris Fashion Week on Oct. 2. The company has showcased its brand at both the spring and fall versions of the prestigious fashion fest four years in a row and nine times in all.
The brand's show in Paris has exploded in scale, from the 100 to 200 buyers and international media workers it attracted in its first year to the 400 to 500 that attended in 2012. The caliber of the models, the showmanship, the runway atmosphere, have all improved dramatically.
Yet putting on an international fashion show at this level costs at least NT$20 million.
"And it really didn't generate any increase in overseas orders," says Shiatzy International CEO Harry Wang bluntly at the company's headquarters in Shanghai's Minhang district a few kilometers southwest of the Bund.
Wang, the son of Shiatzy Chen chairman Wang Yuan-hong, moved to Shanghai eight years ago along with design director Wang Chen Tsai-hsia, the creative force behind the company, to shoulder the responsibility of expanding the family business overseas.
At the time, Shiatzy Chen's China headquarters in Shanghai was still under construction. The four-story office building was built of old Shanghai bricks, old elm wood and local granite. The third floor was left as an open space to house the design department.
Today, five years after the building was completed, the third floor remains empty.
"We later decided not to bring any designers here and to keep the design team in Taiwan," Harry Wang says.
Wang realized that as soon as the company's designers arrived in China, other companies would be banging at their doors, trying to hire them away.
"So even if I find really good talent here, I put them to work in Taiwan or in France. I won't let them work in Shanghai," says the 34-year-old Wang.
Though still young, Wang has already shown good business instincts. He studied in Britain during his junior high school days and later graduated with a business degree from Boston University, before working with a venture capital company in Taiwan for over a year. He then went to Switzerland to get a master's in hotel management and joined the family business in 2001. After nearly 10 years learning the trade, he has found his footing in fashion circles.
As with many Taiwanese companies operating abroad, talent is Wang's biggest headache.
The Fight to Retain Talent
The rapid growth of China's fashion industry has meant that new employees rarely stay longer than two years before jumping at other opportunities, despite receiving wages that on average surpass those in Taiwan by at least 50 percent.
The day that CommonWealth Magazine visited Shiatzy Chen's Shanghai office, there were at least three people waiting in the meeting room to be interviewed. Wang himself handles interviews of senior salespeople.
Even the 150 skilled workers at the factory connected to the headquarters are valuable commodities. Shiatzy Chen pays them an average monthly salary of 4,500 renminbi (about NT$21,000) and covers their food and housing expenses. But even that compensation level, considered high for the area, has failed to pull the workers' turnover rate below 10 percent.
Yet despite these difficulties, Shiatzy Chen still has an advantage in China compared with other fashion brands.
Wang Zi, the factory's production manager who previously worked at the factory of a French fashion brand, joined Shiatzy Chen just over a year ago. A nine-year veteran of the industry, Wang pointed to a main difference between Shiatzy Chen's production line in China and that of his previous employer.
"Shiatzy Chen's styles almost never repeat themselves from one year to the next, unlike most foreign brands, which don't often change the items they produce in China," the production chief says.
Among its other strengths, the brand is known for precise workmanship and special materials. Roughly 80 percent of its fabric comes from Italy, half of which is specially developed each season by the Taipei design team and Italian fabric manufacturers to create unique looks.
The company's biggest factory remains in Taiwan, but the Shanghai factory, which can produce an average of 19,000 garments per season, is responsible for supplying Shiatzy Chen locations outside of Taiwan.
Overall, the 34-year-old company has annual revenues of NT$2 billion a year and manages 38 retail outlets in Taiwan alone, which account for 60 percent of its sales.
Though Harry Wang has spent eight years trying to expand Shiatzy Chen's presence in China, the brand still has only 16 retail stores there, from Dalian and Tianjin in the north to Shenzhen and Nanning in the south. It was only three years ago that the brand began turning a profit in China's market (not including its five stores in Hong Kong and Macau).
Standing for More than Money
Wang has a number of strict principles for doing business in China. All of Shiatzy Chen's stores must be directly operated by the company and are only opened at venues where other top international fashion brands have a presence. His rigorous insistence on these strategies has sparked arguments with his father more than once.
"We opened a store recently at the Mall in Taipei. If it had been up to me, I never would have put a store there because there are no other international luxury brands inside," says Wang directly, unafraid of upsetting his father.
Shiatzy Chen estimates it will have sales of NT$30 million to NT$40 million at the new location, but there are other things that are equally as important to Harry Wang as making money. "My father still feels that if there's business to be done, then why not do it?"
Loving the Clothes Is a Must
To accelerate the pace of its global expansion, the brand opened a store in Kuala Lumpur in January – its first location in Southeast Asia.
It was also the first time Shiatzy Chen had authorized another company to represent its products, signing a five-year contract with a major family-run Malaysia conglomerate to have the company represent it in Singapore, Malaysia and Indonesia. The plan is to open seven stores in those markets in the future.
"I was willing to give somebody representation rights because I'm very sure I've found the right partner. The partners asked to represent us because they love wearing Shiatzy Chen clothes and love the brand," Wang says.
The location the partner found for the first Shiatzy Chen store in Malaysia was next to a Fendi outlet at a luxury Kuala Lumpur retail mall – the Starhill Gallery – and it made Wang very happy.
Using the same strategy, Wang has found a representative for the brand in the United States. They plan to open the first Shiatzy Chen store in New York in the third quarter of 2013, when the company celebrates its 35th anniversary.
"I learned this from L'Occitane. I also requested that the representative spend 10 percent of operating revenue on marketing and promotion," Wang says.
Based on the experience gained by the family business in representing French fragrance product brand L'Occitane in Taiwan, Wang realized that he could form a joint venture with Shiatzy Chen's overseas representatives to regain management control of the brand in foreign markets in the future.
Attracting Younger White-collar Workers
Though the brand has had some success outside Taiwan, Shiatzy Chen's efforts to gain footholds in overseas markets, whether in France or in China, have not been as smooth as their runway shows.
"The biggest challenge facing Shiatzy Chen in China's market is how to get younger," says Xiao Xue, the editorial director of Elle China, the fashion magazine with the highest circulation (800,000) in China.
Xiao says that Shiatzy Chen's design, workmanship, materials, and tailoring are mature to the point of warding off any Chinese rival, but the company still has to contend with China's preponderantly young class of luxury brand consumers.
"A 30-year-old white-collar worker will wonder, 'Do I want to wear something with so much embroidery at such a young age?'" Xiao explains.
Just as satisfying the market has its challenges, the company's design strategy also faces a dilemma.
Design director Wang Chen Tsai-hsia has never compromised on showcasing traditional Chinese culture and crafts in the 600 styles Shiatzy Chen designs every year.
Over the past three years, however, the brand has clearly diversified its styles, introducing garments that are more simple, sexy, cute or close-fitting.
"The brand's spirit has to be integrated with generational change. It used to be that mothers loved Shiatzy Chen. Now we have to get their daughters to love it," says the 61-year-old Wang Chen.
As Shiatzy Chen's dresses get shorter to cater to younger consumers and the brand's retail network expands rapidly, perhaps it will also be the time when Taiwan's position in global fashion circles gradually comes into focus.
Translated from the Chinese by Luke Sabatier