You are working with many designers, and while I don't doubt that some brands will succeed, the majority of these brands probably will not be successful so easily. How do you guarantee the interests of these other designers, who do not succeed? Because the contract is perpetual, if I am not successful, then I am stuck. What can I do?
October 22, 2019
A:This is a good question. We do fully agree, that not every brand, will succeed. I trust that the ones who will really achieve great success, who become really famous brands, will not be the majority. But, please think about how we should view this “success”? From a business perspective, to go from an unknown brand, to become a brand that most consumers acknowledge and generally like, this is considered success. But from another perspective, even if some brands have not become really successful to the point of becoming famous brands, but if they can make money, this should also be considered a success as well. Why do we feel this way? The reason is:
Firstly, Chinese customers have long harboured a love and admiration for the fashion brands of Italy, and France, and Europe in general. I believe that most Europeans have witnessed with their own eyes, Chinese tourists coming to the continent and frantically buying luxury goods. This is proof, that the fashion brands in Europe have a very high level of market recognition in China.
In China, there are 167 cities with at least 1 million in population. Some of these cities have populations that exceed 10 million, for instance Beijing, Shanghai, Guangzhou and Shenzhen, and several other cities as well. This does not even include surrounding countries that have cities with population higher than 1 million. For instance, Tokyo, Osaka, Seoul, Singapore, Kuala Lumpur, Bangkok, just to name a few, and in total then, the number of cities with population over 1 million in our territory, is nearly 200. And so, if under the worst circumstances, a partner brand’s collection sells just 1 piece, of each style, every month in each one of these cities, the earnings would still be quite significant. What I mean is, if a collection has 30 styles, for instance, then let’s say if 1 piece of each style sells per month in one city, that’s a total of 30 pieces sold. In a year, that would be 360 pieces sold. In 200 cities, that would be 72,000 pieces sold per year. If based on the revenue share that we must pay to our partner brands as part of our agreement, then the brand’s profit, which is a net profit, is very promising indeed. I believe that our partner brands can calculate for themselves, what that could total. Is such a strong earning not big enough to be considered a success?
And these earnings, are without any financial investment made in operations from the part of the brand; it’s a pure profit for the brand, they don’t have to take the cost of sampling, sourcing, development, advertising and promotion, or inventory either. The only investment from the brand, is their ideas, and their time.
So again, does this count as “success”? We believe, the answer is a resounding “yes".
We trust that if the brand continuously adjusts their designs, and follows the trends and changes in China, and also puts forth their own design talent and vision, the sales amount still has a possibility to even increase. As a result, we feel that this is indeed, a very favorable cooperation opportunity, because China’s huge consumer market, and its fast-growing middle class, will provide these brands a chance to show themselves on this massive stage. At the same time, we also trust that if you have the passion, and you really embrace this market, in China, then no matter what, you will be able to find consumers that match with your taste, even if it is not the biggest slice of the market, it’s enough to make you successful. To continuously, pro-actively understand the market, this is the only way to get there, and if you enthusiastically embrace the market, and put forth your blood, sweat and tears, then I trust that the China market will definitely give you a meaningful return.
Again, we believe that the China market won’t let our partner brands down; unless, the brand lacks in their own passion and determination to start with.
FAQ #2 :
You and your company do not have any experience in fashion, how can you do such a big fashion project? Fashion is an industry that may look very simple, but is actually very complicated, and detailed. Is it possible that you have underestimated the complexity and expertise required to operate in this market?
October 22, 2019
A: This is also a very natural question to ask. Indeed, we are a new company, and in my personal background, as the founder of the company, I have amassed only knowledge in the law, and venture capital. But in this world, a lot of things are not necessarily such that you have to have experience, in order to succeed at it.
For instance, Jack Ma, who founded Alibaba.com, was not an expert at computers, but he created one of the biggest e-commerce companies in China, and in the world. Elon Musk, for example, he was not a specialist in aerospace engineering, but he created SpaceX, and it is nearing completion of a task that no one could do before him, reducing the cost of space exploration with the goal of colonising Mars. Steve Jobs, the founder of Apple, revolutionised how humans interact with one another completely with the advent of the iPhone more than a decade ago, was he didn’t write a line of code himself.
These are monumental achievements. Between all of these individuals, they shared genius-level abilities.
At the same time, though, behind each success story, there is, and must be, the strength of capital to support it.
In our case, we will hire a substantial team of people who have industry-specific experience, including those experts in production and sourcing, stylists and visual merchandisers, and brand managers, and we will in Italy, France and other countries in Europe, hire fashion editors and writers, to cooperate with our editors in China and the rest of the Far East, to put forth a very professional and experienced team that will help our partner brands with their promotion and sales, and work with our partner brands to pinpoint the strategy of their brand.
Of course, there are other methods that we will use, meant to make up for the fact that we do not have that specific experience in the fashion market. I want to share with each person here, that on Wall Street I have heard this saying often: "Capital is the smartest entity in the world". Since we have decided to invest into the fashion industry, even though we lack experience in fashion, in my background, I have more than 10 years in venture capital in different countries including China, Hong Kong, Taiwan, Japan and Silicon Valley; and of course we have considered our weaknesses and strengths. We cannot make investments blindly, because as mentioned, capital is the smartest entity in the world.
Before I jumped into this industry, after I graduated from UC Berkeley, I spent a brief time assisting an emerging designer in New York City, his name is Eddie Borgo, and it allowed me to have some insight into the operations and structures that emerging brands on the cusp of growth need to face.
The rest of my professional experience hasn’t been in fashion, but rather in investment and in financing, and how to attract capital to a project, and gain its financial support for the project’s growth. In this, I have more than 10 years of experience. In the investment field, I have very close and direct relationships with successful investment companies, and billionaires, even. I have maintained a very good communication with these companies and individuals. As a result, for me, and for any good project that I come across, whether it is my own, or someone else’s project, not having enough financial strength is never going to be a problem.
Perhaps you may be concerned that due to the sheer size of the project, that finance could become a problem through the growth of the project and that it might hinder the success of the project. My reply is yes, in any project, in the course of its grow, of course it needs the support of capital, as I mentioned above. And although at the moment, our project does not have any pressure financially, we do understand that as the business the grows in size, there will come a day where we need the support of capital, to me, financing is my specialty, and in this regard, we do not face obstacles. For this, and the more than 10 years I have under my belt in this investment industry, I am full of confidence.
With my conviction, any good project, will never lack in financing.
How can I be sure that you are being truthful about how much you are producing and selling, and not hiding the real amounts in order to pay me less than what I have earned? I do not understand China, and I do not have the ability to check up on how much you have really produced or sold. Under these circumstances, how can I not be worried, and how can I protect my interests as a brand?
October 22, 2019
A: We fully understand these concerns; and if the roles were reversed, we would have the same concerns as well.
Firstly, I want to explain that all of the products sold, the styles and quantities and the prices, will be available for you to see through our management platform, after you have logged in with your password you will be able to see all of the information regarding your sales and production. So you never have to wait for a sell-through report at the end of the season, you can see immediately and at any time how the brand is doing. We aim to be fully transparent.
But despite this, you may worry that we may take your designs and secretly produce more pieces or sell them without your knowledge, without posting it on the platform, and I think that these are very valid points. We could potentially do this, the truth is, there is no surefire way for you to know, whether or not we may be doing so.
However, the truth is that we have collaborations in place with several hundred designers. If we were to just do this even once, violate the trust of one brand, do you think, when this has been discovered, that our business would still survive? Certainly not, because no other brand would ever trust us again. All of our effort, time, money, and investments in building this project, in hiring our staff, our management, it would all be wasted, because we would lose the trust of our brands; they would stop working with us, and the lifeblood of our business would be cut off. We would lose everything and have to shut down. Do you believe that I, or anyone, would do anything that would risk such an investment, over something with so little potential gain in relative terms? Would I try to avoid paying any one brand, their agreed upon profits, with the risk of losing the entire reputation of our business and its future?
If you were us, would you do so? I do not think so, and I do not think anyone in the world would do this, because it is against human nature to risk everything you have, in order to gain something that by comparison, is very small. Our goal in investing in each brand is to grow with them, to build globally recognized brands together over time, and that is something that requires a very strong foundation of trust and communication. If we break it, it is the end for our business, so it is not worth it for us.
As a result, unless we are completely crazy, we would not do something so foolish, that would harm our own interests, and destroy our own business and reputation. What we would gain, compared to what we might lose, is completely disproportionate in this case, and because of this, we are very clear that we will not engage in such behavior.
I am just one of the many, many brands you will select; I feel like a drop of water in a vast ocean. How will you have the time and energy to focus on me, won’t your resources be too diluted? This seems like a big obstacle to my success.
October 22, 2019
A: To answer this question, firstly, I hope that we can first make clear that our market is China, and the rest of the Far East. It is not Europe. The sheer scale of this market, makes it impossible that just one brand could take the whole market for themselves.
In China, our main market, there are various stages of development in the country and it is not a homogenous society. China has 56 different ethnic minorities, they speak different languages, there are different religions and in fact, the country is in different stages of economic development. There is huge variation.
Because the economic development in the country is unbalanced, the level of consumers is also different; at the same time, their pursuits, their tastes and preferences, are also going to be naturally quite different.
In short, this market has various needs at different levels, and different tastes and preferences, and even different spending power; we have identified brands that we believe can satisfy the needs at each of these different levels and tastes and preferences, and different levels of spending power. For each of the brands that we are cooperating with, we are very certain that they each can find their place and carve out market share in this massive market, and gain the respect and love of the consumers toward their designs.
In truth, we strongly believe that no one brand who joins us, could diminish the talent or value of the other, or let the other lose its shine. No inclusion of another brand, could cause one brand to fade into the dark, or go unnoticed by the market. This is not a zero-sum game. The market is just too big, and each brand will have to follow a separate and distinct approach, and the strategy will be different, naturally.
If the brands are full of confidence in their own unique point of view, and full of passion and enthusiasm, and they are willing to put forth effort in communicating their brand vision, then we fully believe, that brightness will shine through in this market.
The fact of the matter is, based on common sense, no one brand can win the love of all the people. I would encourage each brand, or reader, not to think with a purely European perspective, because that could lead to errors in judgment. Please try to envisage this from the perspective of our market - it’s truly very, very big and varied.
Please imagine, also, if we cooperate with just a few brands, this would cause trouble for the overall strategy and customer acquisition, for each of these brands. Only with a big amount of brands, will the consumers actually visit, and even linger, with each individual brand.
So then, how do we let the consumers want to listen to the story of these small brands, you might ask this, when there are so many of them in the same space?
In fact, herein lies a key part of the strategy. These large numbers of other brands, will help each individual brand stand out, and be noticed.
This is the same concept as when one goes shopping. Would most people prefer to go to a shop on a street with nothing else, but that one shop, or would most people prefer to go to a bustling shopping district, where there are streets lined with various different shops? I think the answer is quite obvious.
It doesn't matter if we speak about fashion, or restaurants, or other kinds of consumer experiences, this impulse is universal, even when it comes to e-commerce as well. Every restaurant wants to open next to areas where there are a lot of other restaurants, despite the competition, because that is the location that people will think to go, when they are hungry. This causes the exposure of that restaurant to go up very quickly; some customers may not choose to go inside that restaurant today, but they might choose to, tomorrow.
Similarly, when it comes to e-commerce, and virtual shops, no one would be interested in seeing a website with just 20 brands; they want to come to a site with many choices, so they can make their selection. This even further proves the points I want to make, which is, the power to attract consumers lies fully in how many options and choices one can provide to the consumer, such that they can have a broad-ranging experience. In any industry, this concept is the same.
This is why we created supermarkets, why we created Amazon, and Alibaba. Any brand, they will because of the fact that they are featured on Amazon or Alibaba, experience a big increase in their sales. They would not, because there are too many other options on these platforms, have a negative impact on their growth.
If we cooperate with just 20 brands, for example, in a market with nearly 2 billion people in the region, who would really care or pay attention, to our 20 brands?
The brands that we cooperate with, their histories are not long, and they do not have the legacy established yet, and the story built up over time that more established brands have, so it is very difficult to create that kind of unshakeable standing as a recognised brand in a short amount of time.
Similarly, what I would like to ask, is for a journalist with a world-famous industry publication like Vogue, would they be willing to go to a platform with many, many brands, to seek out the next fashion stars, or would they prefer to stick to sifting through social media and other avenues, to find brands that may not yet be widely known? It is quite clear, that they would appreciate and would come to a platform that has many brands, and observe the reaction of the consumers, and how they perform, together in this platform. And from there, they can think how to feature each of these brands in their publication.
Please imagine, if in the future, when we launch our own fashion events and shows for this region, if we have just 20 brands, versus, if we have several hundred brands to show this massive market, would people want to come to our event for just 20 brands, or for the promise of several hundred potentialities that could pique their interest, vying for their attention? I trust, the answer is also very obvious.
I would ask each brand to also ask themselves, that in the case above, would their own exposure be increased, or reduced with the participation of more partner brands? At these events, do consider, how many people would come, if just 20 brands are being shown, versus several hundred?
Does each brand’s exposure potentially increase or decrease, with these larger numbers of brands on board then?
We have confidence in the brands that we selected, because we understand what this market’s needs are. And so, we believe that in China, and the rest of the Far East, there are those people who will like what each brand presents. Through our interactions with each of these brands, over the course of a long communication, we have the confidence that these brands can be successful, together with our efforts.
Please also understand, that if our partner brands are not able to be successful, the first ones to lose would be us.
We will not ask any of our partner brands for fees or money, not today, and not ever; the costs of operation fall on our shoulders, from the sampling, sourcing, development, production, promotion and selling costs and more. So it follows that we care even more so than each brand, that they reach their success sooner rather than later, in this market of ours. We take each partner brand with the same level of seriousness and enthusiasm - and we will dedicate time to each for planning, and strategizing; if we don't do this, we are just taking actions that would eventually harm ourselves.
We deeply understand how important it is, to communicate with the brand, and to reach a mutual understanding via that communication, and how crucial that is to promoting the brand strategy. As a result, we will provide as much assistance and advice as we can, and work closely with each, in helping them to attract the attention of these potential consumers. Using various methods, we will let each of their fans feel the fashion principles and the pulse of that brand they have come to admire. This is in our interest, and the brand’s interest, this is our mutual best interest.
I trust, that anyone reading this, and any brand we have come in contact with, will hopefully even more so understand our approach with these explanations. We also hope, that they can understand why, cooperating with other brands, would not detract from our focus, and would not cause us to neglect any one partner brand. Because for us, what we want to do, is for each flower in this garden, to give them the chance to bloom freely, to try and move their audience with their beauty, aesthetics and their impact. This is our goal, and it’s again where our interest lies. Therefore it is not the addition of more brands that would harm the chances of any one brand; but rather, the brand’s own loss of confidence, or passion, that would cause it to falter.
We know that not every brand will immediately reach success. There will be many brands who will run into difficulties and low points. We can completely foresee this. But we also feel, that as long as we remain convicted, that the fashion principles of the brands we have partnered with have the ability to invoke an emotional reaction, to somehow move these consumers in our region, then we can remain firm in our enthusiasm for the brand, and continuously work with the brand, exchanging information and communicating, to keep on improving, presenting and spreading their message to their audience. Under those circumstances, we trust that ultimately, we can gradually bring closer the distance between the consumers and the brand, and turn them into fans, and even create a kind of fervent admiration toward the brand. This is a very complicated, and meticulous work. We have a passion for this work, and we feel excited to have the opportunity even, to be doing this kind of work. As a result, we are full of enthusiasm, and we will forever keep this energy. This is one important foundation upon which, while constantly adjusting and adapting to the market, our partner brands can achieve success in our region.
So we feel that the more brands that we feel have good potential to be loved in our market that we have on board, the greater our exposure will be in this market. Because consumers of different levels, and different regions, will be willing to visit our offline, and our online shops, and as a result, for each of the brands we partner with, their exposure is going to increase as well.
And because of this increase in exposure, there is an undeniable positive impact in helping each brand to increase its value in the market. At the same time, we trust that because of the massive scale of the market itself, it can undoubtedly absorb, and take on, the presence of these several hundred brands in the market. These brands each play different roles in this market, and as a result, we are strongly convicted that the more brands who match our market’s various needs who join us, would be a plus, and not a negative, for the brands we are already partnered with. At the same time, because of the addition of a lot of brands, naturally, there will be learning and competition amongst everyone. This will stimulate the “soul” of each brand, to really dig deep, and create even more spectacular fashion, to be even more loved. We strongly believe that this will spur the improvement and growth of each brand.
Of course, we will not continue to add more brands without end; just as I had written in a prior update, when we feel that there are too many brands representing one segment or aesthetic, we will stop adding more in that category. We will re-evaluate in 3 to 5 years time, and once more seek out potential brands, because at that time, the fashion perspective, trends and even principles may have shifted, and new concepts will appear. I hope that this explanation can very thoroughly answer any potential question in this regard. At the same time, if any brand has a different opinion, I am also very willing to have a detailed discussion in private or via phone.