Based in Hong Kong yet perpetually traveling, Veronica Chou represents the new young breed of executives running fashion companies in China. As President of Iconix China Ltd. she is responsible for bringing over 20 international brands such as Badgley Mischka, London Fog, Ed Hardy and Rocawear into Mainland China.
She is also involved with her family’s textiles and fashion related companies which have impressive records of success globally and were instrumental in building brands such as Tommy Hilfiger and Pepe Jeans. Their latest family achievement was the unprecedented IPO success of Michael Kors.
Despite these successes Veronica is no stranger to hard work and juggles her time between two blackberries, Hong Kong, Beijing and Shanghai plus a host of other Chinese and global cities. Recently Maosuit managed to catch up with Veronica in her Hong Kong headquarters to speak about Iconix China’s business and the fashion industry in China.
How did Iconix get started in the China market?
We entered China around the time of the 2008 Beijing Olympics. So far we have launched seven brands into the market. Already we have 140 London Fog, 110 Candies, 30 Rocawear, 10 Badgley Mischka, 20 Ed Hardy and one Royal Velvet stores in China. We are now planning the launches of Joe Boxer and Material Girl with Madonna.
What is the business model for Iconix China?
For me the business model is kind of a private equity way of doing fashion. The essential element being that we own the perpetual trademark rights for all Iconix brands in China. This means that in the future we have the option of taking the brands IPO. Iconix China doesn’t directly operate any stores, instead we find partners that already have their own brands with nationwide distribution and are able to go public in the future.
The company structure allows me to have people based all around China, so this helps a lot rather than just having people based in Hong Kong or Shanghai. We also have Chinese staff in our American headquarters so we can handle communication and get all the marketing, product etc out to the partners as efficiently as possible.
What process do you go through to find the right partners?
I travel to far-flung places across China like Fujian, Ningbo and Hangzhou to meet partners. It’s tough but lots of fun. A lot of our partners have already created brands that are completely Chinese designed and made, but have invented foreign sounding names. Proper American built brands give great legitimacy to these Chinese companies and so it’s becoming very popular to add foreign brands to their portfolios. Foreign brands are also more than attractive to young Chinese in second and third tier cities.
What role does Hong Kong play as a gateway to the China fashion market?
The first wave of brands to enter China from Hong Kong were mass-market ones like Giordano, Bossini and Baleno. When the Chinese guys did their own thing at that price point the Hong Kong guys suffered. Yes, Hong Kong retailers have been successful, but can this last?
These days, malls in second tier cities in Mainland China are looking to the malls in Beijing and Shanghai (not Hong Kong) on how to do business. And real estate prices in Hong Kong are ridiculous, so for the same investment in Hong Kong any brand can get more for their dollar in China,
Honestly, for Iconix brands, Hong Kong is becoming less and less important. For our brands like Michael Kors Hong Kong is still important because they are high-end brands that need representation in Hong Kong.
What about in terms of the ‘cool factor’ and setting trends? Does Hong Kong still influence China?
I don’t see it so much anymore. Even Hong Kong has a limited style, and outside of Central district many people dress the same. It is leading trends? No, because Hong Kong copies Japan and Korea anyway.
Ten years ago Mainland China had no celebrity culture so they looked to Hong Kong and Taiwan. Now Hong Kong celebrities aren’t even known in the Mainland, so how can they transmit pop culture and fashion to China which is such a different market? Now Hong Kong celebrities are all trying to learn Mandarin and get into China.
Will Hong Kong based companies continue to invest into and take ownerships stakes in international brands?
This will definitely be a continuing trend. Mainland companies are looking to own brands as well, and they would prefer to own instead of license. The challenge with this is that many European fashion brands are family businesses with long histories. Therefore they are hard to purchase, take over and deal with. Personally I’m happy to look at more brands, and make investments if I find the right one.
What are the biggest challenges of doing fashion business in China?
One big issue is getting the right store location as this is the best advertising for brands, especially those that are new to China. Another thing is getting the brand name out there and becoming known in the market. Then also getting the product line right.
The China fashion brand market is dominated by entrepreneurs aged 40 something who have been in the business for 10-15 years and have become very successful by building their own brands. As many of these entrepreneurs get older and hit 50 they want to become Chairman and find a CEO and a management team to run their business. In China one of the hardest things is finding professional and experienced brand management teams, whereas in America they are everywhere and every company has their own team.
What is driving the fashion boom in China?
China is still growing and the population is curious. Of course the Net makes everything easier and more open, but the majority of people still haven’t been abroad.
I think, in a way, Chinese people always wanted to learn from the foreign world about what’s out there. When Giordano came in it was the biggest name and now it’s Louis Vuitton. Things progress!
In the end, fashion is fun, it’s something you do everyday and so why not enjoy it? Chinese still don’t know what’s appropriate to wear on certain occasions, but it’s a learning process that creates this amazing opportunity for me to bring in all these brands.
What’s your take on E-Commerce in China?
E-Commerce will be very important in China and globally, but how it merges best with retail stores is something no one has figured out yet. I think (physical) shopping will always be important; it’s a hobby like playing sports or going to the amusement park. Even if you take in 20-30 products online its not the same feeling as in the store where you can see the entire collection, how it is merchandised, how it integrates and the different lines within the brand. Especially in China stores will continue to be vital. In the US people will look at style and design before buying, but in China consumers still want to touch the products.
Now in China almost everything being sold online is discounted merchandise and low priced products. It’s all tech guys starting these companies and so many new websites. Every week I get a call from new website wanting to cooperate through e-commerce, and none of these sites have any solid foundations or real connections with luxury brands.
Most brands already established in China have their own operations and logistics systems that aren’t easy to incorporate together with new e-commerce services. One advantage for new brands entering the market including ours is that it’s a clean slate to work with and so its more viable to launch early online.
Our brand Rampage is almost exclusively sold online. Even for Badgley Mischka which is very high-end we are having a diffusion line selling on Taobao and T-Mall. E Commerce is it important and something we can’t overlook, we could place more emphasis on it but we don’t know how, does anyone know how? Not really!
Given that prime retail space is very competitive, does it make sense for a brand to launch their e-commerce in China before they open a physical store?
It depends on the brand and business model. For Tommy Hilfiger we are doing a brand re-launch in China that will include a flagship online site for China.
What activity is Iconix doing with digital and social media in China?
We are doing some and would like to do even more, yet no one has cracked the code on how to do it. We have a Weibo (Chinese microblog) blog for Iconix, and individual blogs for Badgley Mischka, Candies, Ed Hardy and Rocawear. Iconix from the USA produces some content for Youtube we translate this into Chinese and put on the Chinese equivalent sites. We also have interactive events on our blogs to attract more fans.
Thanks to Veronica for taking the time to speak with Maosuit.