FREQUENTLY ASKED QUESTION
#6 - Q: Are all of the partner factories going to be Chinese factories?
A: Throughout the course of our communication with designers, many of them have asked if our partner factories are going to be all in China. In fact, many of our potential partner factories, at this point, are actually based not in China, but in Europe - in countries like Italy, Portugal, and elsewhere. In the last 2 weeks or so, in particular, during our trip to Milan, we have met with several dozens more of those factories from Italy, Portugal and other parts of Europe, to further discuss the possibility of cooperating as production partners for our several hundred partner brands; and after explaining our mode of working I believe that we have reached a strong mutual understanding and mutual agreement, that our business does not occupy only a small space, but is unfolding to be a big player in this market, and as a result any factory who works with us has to accommodate us as a big player, in order to be selected for our cooperation, and the cooperation conditions have to fulfill our requests. At the same time, many of these potential factory partners have also expressed agreement with the fact that the fashion industry and the right strategy for how to build a brand, and how to market a brand, is actually in a moment of change and "revolution", even; and they have also expressed excited disbelief at the speed with which the China fashion market is now growing, a lightning pace. Many of them expressed their dream to enter this market in China with their production, and many of these factories that we met with have expressed agreement with our mode of cooperation, and our principles as well. So we do feel that in the future, we will be able to work with even more European factories who agree with and share these same principles. Among these European factories there are those who produce with very high quality, for luxury brands like Louis Vuitton, Gucci, Fendi, Hermes, and others. This has also increased our confidence in producing in Europe, and we also feel that if we partner with these facilities, they will be able to provide the highest quality, at very reasonable manufacturing cost, to help all of these several hundred brands we are partnered with, moving in line with our business strategy and principles - that is, to offer unique, and high quality designs, fabric and production, at a price that emergent class of white-collar professionals in China can accept - achieve a winning position and compete in the China and surrounding Asian market.
Just as we have shared repeatedly, in the current fashion market, there is the market of luxury, and of fast fashion. But increasingly, we feel that in this moment, more and more consumers are actually hoping to purchase those items that have personality, high quality, including the high quality of the materials and production, at prices that they feel they can afford. Especially in China, this is a country that is quickly moving towards an olive-shaped society; in the population of 1.4 billion, there are smaller and smaller numbers of ultra-wealthy at the top, and smaller and smaller numbers of those living in extreme poverty. Those in extreme poverty are now moving upwards into the belly section of the olive-shaped market, which is means they are entering the white-collar professional class. The explosive growth of this class of the population and their broader and broader demands for fashion in the market are very real; they do not have the consumption power of the small population of the ultra wealthy, but they tend to look down on fast fashion, and want a suitable alternative. After our discussion with each potential production partner, many have expressed that this is a segment of the market they have been working hard to try to serve, they want to put in the effort to try to win these consumers. In these last 2 weeks, these kinds of discussions have given us even more confidence in opening up talks even further with more potential European production partners including garment manufacturers, leather accessories, handbags and shoes manufacturers, as well. At the same time, they also have agreed to offer the same prices to our partner brands, for their own production orders, and even their sample orders, if they want to order the same production for their own markets to distribute in Europe, America, or elsewhere in the world. We trust that this will bring our partner brands a lot of benefits, and they will be able to take benefit from a very favorable price, that normally may be out of their reach, despite being a smaller brand. Our partner brands are global brands - although we partner with them only for our territory, the reach of their brand name is worldwide, and we believe they can benefit from access to these prices. We will continue to deepen these discussions and cooperations with these potential partners, and we will put forth all of our effort to find our partner brands production facilities that can provide the best quality, at cost very reasonable, so reasonable that they will be surprised that it would ever be possible to have such quality, at such price. We have also a lot of factories lined up in China, of course, and they are medium-sized facilities, who complete orders for the same big luxury brands. No matter if we aim to produce in China, or in Europe, quality will consistently remain one of the most important selection criteria. This is our goal in selecting production partners, and we will continue our efforts in this direction.