• Kate Chang

FAQ #8

FREQUENTLY ASKED QUESTION

#8 - Q: If we sign the contract, when can we actually start? Do we have to wait until all other partner brands have finished the trademark registration, in order to sell? What if I had submitted my registration much earlier, do I still have to wait for others to finish before we can begin?

A: Recently, we have received almost daily inquiries from existing partner brands, and those who are still interested to join us, regarding this question. First, as I have also explained previously on the site as well, registering the trademark in the territory and having it approved, is very important. As a result, prior to each brand's trademark having been approved, we do not feel that it would be the right decision to enter the market. I have also explained previously on this site as well, but there are a lot of important reasons for this precaution.

Without the proper protection of the trademarks in place; in China, it's actually a type of business that some will operate, to pre-emptively register other people's brand names as trademarks, since China works on a first-come, first-serve basis. When brands then try to promote or sell in the China market, these "trademark trolls", then jump on this opportunity, and sue these brands for trademark infringement. This can create a lot more legal problems down the line, just like the case of MUJI, which I shared with you and all other partner designers in an earlier post. Their drawn-out trademark legal battle ended against their favor, and they had to pay a penalty to this local company, which was basically like a paper company in China, who used their name, and they even had to pay for an ad, to apologize publicly to this company, in a newspaper:

Muji follows Apple and Starbucks into China trademark storm

If you are sued in the future for infringement of trademark, not only would you have to pay a penalty, but you would be put on a list of entities that are intellectual property infringers - and this would greatly impact your standing and ability to even enter the market. Please understand, that our company’s strategy for promoting our partner brands is not simply to hang a few garments on the rack, place them in a few shops, and watch what happens. A big part of our strategy is to dig up that brand recognition, by using a variety of means via online and offline media, social networks, and offline events, and also with increased interaction between real consumers and also with influencers and opinion leaders. It’s not just to passively place garments in channels, but pro-actively take action to increase recognition. If today, we were simply stocking the products of our brands, and not doing much else, we would not necessarily need to register the trademarks because if some customers discover the product and like it, they will buy it. If no one discovers it, then no one will buy it. It would stop there, and as a result, the brand’s recognition would never really increase significantly in profile, the brand’s products would simply be taking up space in a stockist’s shelves. No one will know, who the designer is, what the brand story is, or be able to take part interactively with the designer of the brand, in understanding their story and fashion principles; they will not know, what the principles behind the brand might be, or where that brand’s creative director is based, what town, in what part of Europe. At the same time, there would be no media or influencers, runway shows, that would be there to highlight that brand, so under these circumstances, this brand would not be as much of a favored target of a dishonest third-party, that was seeking brands to pre-emptively register, because the brand doesn’t have any real value.

This is why those dishonest individuals and companies, they would choose to pre-emptively register the trademark of a company like MUJI, for instance, and not a brand that no one has yet to hear of. So, when a lot of brands ask us, whether or not they can go and sell in China even now, without the brand registration, our answer is, yes, they can, but we cannot do any promotion, because if we invest resources and start to really promote each brand, and the brand profile and recognition starts to increase, under those circumstances, that brand will inevitably and naturally go from being an unfavorable target, to a very suitable target for pre-emptive trademark registration; just like a sniper suddenly having a target in its range. When a brand’s recognition has increased, that brand’s value will also increase, and therefore, that brand will become like a desired prey, for those seeking to make pre-emptive strikes. So if we do a lot of promotion, and there isn’t a registration of the trademark to protect the brand, then our promotion would just become fuel for these dishonest third parties, instead of serving as fuel for our partner designers’ brands own growth, or for the creation of our shared profit. This is why, even today, we have not yet started to sell and promote for some of our partner brands who have signed with us even one year ago; we have to wait for this process to finish.

Even if a brand has already submitted the trademark, and it's in the process of being evaluated by the bureau, there is still risk. If they start to sell and promote while the application is pending, some of these third parties will buy 1-2 pieces from the collection and make widespread copies, and then sell those pieces on taobao.com, or offline, or at various hypermarkets or flea-markets, using of course a much lower quality production and low price. This will cause our promotion, if we were to launch the brand, to be placed in a very ironic situation, because we are doing so much storytelling about the quality of the design and concept, quality of materials used and the quality of the production, yet, when the consumers see these cheaply-made products from the other parties, they will feel insulted, that the way we are presenting these brands is in fact, not a truthful representation. Under these circumstances, the brand will suffer greatly, even if after we obtain the official registration approval, these third parties would be forced to stop their behavior, but the brand image would have already been greatly damaged by then. For us to try to remedy this, and make up for it in the minds of the consumers, would be incredibly difficult and even impossible. The brand designer’s own personal reputation would also suffer irreparable harm as well, and a lot of consumers will inevitably think that this designer’s works, are all unreliable in the sense that what they present, and what the reality is, are in fact very different. These losses, will cause a devastating blow to the future development of the brand. And also, we need to be aware, that we cannot make many legal actions against infringers during the process of trademark approval, so they are going to get away with it. As long as they stop before the final approvals, they haven’t violated your rights. This is why of the several hundred designers that have already submitted their applications, we have had held back; in a way, like an army ready for battle but lying in wait.

So again, it is not advisable to start selling into this market, before a brand's registration has been completed.

Right now, all of the partner designers we have, are in various stages of having their trademarks registered. Our current plans are, that once the first group of partner brands have their trademarks finally approved, we will start a 6-month trial operation and testing period, and the customers who are the target of this testing run, will be customers who are members of our platform, we know them well, we know who they are. The goal of this trial period, is to “break in” or smooth out, the relationship between the brand and consumers, between the brand and partner factories, and also the online and offline systems. In these 6 months, it is also the trial testing to break in the entire operational platform - from the logistics, to the business operations and environment. This is part of the professional work that needs to be done for each brand in the process of launching them in the market. Only through going through this can we work out all the kinks, and can each brand operate smoothly, in a perfect and fully efficient manner to enter the market. This is a necessary step. At the same time, we will also have those brands who have not yet been approved but have submitted their registrations from 9 months and longer, to also join the testing period. Again, because the consumers that will be in this testing period are those who we know well, so we are not worried that those who have not yet received the final approvals of their trademark, will be copied during this period. Even if someone wanted to copy, in this period, the approval periods have only 1-2 months left, so these potential copycats would not have enough time to really mobilize and profit from those actions, so they would be deterred against doing so. But those brands who have submitted for a short period of time, between 3 to 5 months, for instance, I do apologize but they have to wait longer.

This is why we asked each partner brand to immediately start the trademark registration process upon signing of cooperation agreement; otherwise, the longer that each brand waits to get this done, the longer it will be, before they can really go into the market. At the present moment, nearly 99% of our partner brands have completed the submission of their trademark application, the rest, are those whom we have signed with more recently, and even those more recent brand partners, have started to inquire into this process. We believe that as long as we have the right brand strategy, we can avoid suffering these kinds of damage to the brands when we enter the market. We will also do everything we can, to allow each partner brand to show their fashion to the world, in a smooth and calm environment, and not have any interference from these legal matters.

In this first group of partner brands whom we have signed with, there were 2 brand partners in particular, who after signing the agreement, asked us, what exactly have we done to support them already, and they would only agree to register after knowing exactly what kinds of work we had done. For these brands, since we had only just signed the agreement with them, and had not yet invested too much in their preparatory work, including on the strategy, positioning, and seeking out potential factories for them, and preparing the right media channels for promotion, etc., under these circumstances, we pro-actively requested that we cancel our cooperation. Because their insistence that we enter the market and start promoting them, without having a trademark registration in place, was a very risky and stupid suggestion. We will not work with those brands who are rushing us to enter the market without caring whether their brands will be copied, because these types of brands, do not seem to care about what is best for themselves. It gives us the feeling that the brand themselves do not believe in their own value in the market.

If a brand does not even care about their own brand’s value, and does not care whether or not they will be copied, or whether they will be at risk, and if that brand’s designer also does not seem to care about their own personal reputation, and whether or not that reputation would be put at risk due to the unlawful behavior of these potential third-party copycats, then, we do apologize, but we can only choose to cancel this type of cooperation, because we are not just an outlet, we are brand operators. We will push sales by increasing the value of each brand, and through that increased brand value, and constantly maintaining that brand value, we will increase the consumers attention, and the media coverage and generate widespread word of mouth promotion, which is what will lead to the highest “stickiness” between the brand and consumers. This kind of commercial strategy, even though it takes longer to get ready for, is worthwhile in our view; because once it does succeed, it can really birth a new fashion “star”. At the very least, it will create real buzz, and impact, and social discourse regarding the brand, and plant the seed of real brand recognition.

We are just like all of our partner brands - we hope to enter the market sooner rather than later. Right now, not only in China, but in Europe, including in Italy, Portugal, Poland, in Bulgaria and Romania as well, we have nearly 100 good quality factories who are ready and eager to join us. Some are very dominant in their industries, and have even huge networks of several dozens of factories under them. They produce for the leading brands in Europe, including Louis Vuitton, Armani, Hermes, Gucci, and the list does continue on. This includes garments but also leather goods, and shoes as well. These factories agree to our principles, and our mission, and they want to join forces with us to open up and compete together in the Eastern markets.


They are willing to lower their production costs, and their own margins, and are willing to develop samples for us, and respond quickly and efficiently.

A lot of these companies have also expressed that they are willing to change the way they used to do things - and to adapt to the model of offering unique and high quality items, at quick execution speeds; they are willing apply some aggressive changes to the existing business culture of Made in Europe, to supply and respond to the fast-paced market reactions of the Far East. Right now, we have another 100 or so factories with which we are undergoing discussions, and this is only the European portion of factories. From among these, we will select those factories which most fit our requirements, and have the strongest passion, and have the ability to support the explosion of volume of bestselling pieces in the China and Far East market in the future, to formally join our project.

As a result, we believe that as long as we are patient, and our preparations are thorough, and we have determination and a strong commercial strategy, as long as we understand the appetite of our Far East consumers, and combine that with a strong knowledge of the relationship between our quality, price, design, logistics and promotional operations, and we insist on this, then in the not so distant future, we will definitely usher in the “spring” of our success.

As long as we maintain our patience, our passion, and also maintain the fashion principles of each of our partner brands, then we can overcome any and all difficulties and push to success.

We originally planned to start from May of this year, to have some brands start to communicate with potential factory partners and get familiar with and adjust to one another, because that is when we believed our first group of partner designers should be finished with their trademark registrations and receiving approvals. However, with the virus that has broken out, a lot of this work has stopped. We believe that after the virus is more contained, and travel restrictions are lifted, we can then jump back into this process and restart this step. In addition, we will also be finally holding the second group of development meetings with our partner designers, that were originally planned for March. All has been delayed due to the virus outbreak, but we monitor the situation to see when we can pick things back up, and will notify our partner designers accordingly.

Best,

Kate Chang

CEO

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