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WORLD

Designing a global brand

Clothing store sets out to change perceptions of Chinese goods

By Samantha Broun
For CNN

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Modeling Shanghai Tang during the Autumn/Winter fashion show, held at the historic Confucian Temple, October 2005 in Shanghai.

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HONG KONG, China (CNN) -- A chic, sleeveless, silk mini-dress featuring an acrobat girl print and sexy slide slits, topped with a traditional Mandarin collar, sits in the window display of Shanghai Tang's flagship store in the bustling downtown of this city.

The dress in the window of the 12-year-old retail chain -- which set out to put a modern, hip flair to traditional Chinese fashion -- underscores what its founder says is a movement to change global perception from 'Made in China' to 'Designed in China.'

Revitalizing the Chinese fashions from the 1920s and 30s is the foundation of Shanghai Tang's clothing, while design inspiration flows from Chinese art and history rather than following the fashion dictates of the catwalk.

The re-vamped Chinese fashion is worn by both Chinese and Western customers.

There are 19 Shanghai Tang stores, including four in Hong Kong and three in Shanghai. Another has joined the luxury fashion brand elite on Madison Avenue in New York, and there are also stores in Paris, London, Tokyo, Singapore and Hawaii. One more recently opened in Milan.

Parent company, Swiss-based Richemont, plans to have 30 stores open by 2007.

"Shanghai Tang is a Chinese label that set out to rejuvenate Chinese fashion which had effectively come to a stop in China," says founder David Tang. "Never describe it as 'East-meets-West' because it's not, it's Chinese," he says. "Many people make that mistake." (including the Shanghai Tang web site).

"We make traditional Chinese clothes and we modernize them," he says.

Tang says the success of Shanghai Tang is owed to finding a business market niche.

"I started this business 12 years ago and am surprised that there isn't more competition. We have had a head start of 10 years," says Tang. " It seems illogical. Everything Chinese has become so popular."

Most sales in Asia

Shanghai Tang's success is due in part to the strength of the Asian market, which is responsible of 80 percent of the brand's sales. Parent company Richemont's latest annual report states that overall sales in Asia, outside Japan, grew 20 percent.

A 2005 Ernst and Young report on luxury goods consumption estimates that China will grow 20 percent annually from 2005 to 2008. Sales of luxury goods on the Chinese mainland currently average some $2 billion annually, the report said.

Interest in China has been renewed since December 2004 when restrictions preventing foreign retailers from operating wholly-owned stores were eased. And while Shanghai Tang is growing offshore, the international market is looking to move into China.

With a population of 1.3 billion, China represents a market of opportunity for keen retailers.

But according to Tang, retailers should be aware that it won't be easy. Tang says: "It's difficult to break into the mainstream; if you are a Western label you are dead."

Joseph Wang, vice chairman of Ogilvy & Mather, believes that Asian-originated luxury brands wanting to break into the China market stand a greater chance of success if they first make their names internationally.

Wang says the Chinese government is very focused on creating home-grown innovation and protecting domestic business.

As for rising competition seeking to knock Shanghai Tang from its perch, Wang says "the reason for Shanghai Tang's success is that it's unique. It is all about the essence of being Chinese. Many young up and coming Chinese designers will be taking on a more global view and not limiting themselves to one theme. They will be looking forward in their designs, not back."

In a highly publicized hiccup in July 1999, Shanghai Tang was forced to close its high-profile Madison Avenue store due to dwindling sales and high rent.

Was it a cash flow problem, an example of overreaching, or were brand buyers turning their backs on Shanghai Tang's distinctive style?

"As Shanghai Tang continues to develop itself as a brand, it needs to have a vision," Wang says. "I believe that they will diversify their range. It may not just be Chinese traditional clothing. It may move to a more philosophical style and theme, it could be anything such as harmonious designs, billowing, flowing, the classical elegance of Shanghai."

Antony Pettifer, managing partner from Brandstorm, believes that Shanghai Tang's success will continue well into the future and believes it is truly established as global luxury brand.

He views Richemont's partnership with Shanghai Tang as proof that the brand has made it.

"Richemont understands very well the brand essence and what they can do with Shanghai Tang," he says. "Richemont has very powerful global management experience and is determined to push the brand while being aware of overexposure."

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