Shanghai Tang - Taking Chinese Fashion to the World

29Case Study© 2008 The Icfai University Press. All Rights Reserved.

Shanghai Tang:

Taking Chinese Fashion to the World

Case Study

Doris Rajakumari John*

* Research Associate, Icfai Research Center, Chennai, India. E-mail: [email protected]

Shanghai Tang is the best of 5000 years of Chinese tradition exploding

into the 21st century.

– David Tang1

The tag, ‘Made in China’ usually suggested mass-produced products, dubious quality and

cheap prices. One Chinese brand sought to change this perception and establish itself as

a truly Chinese brand in the global market. Shanghai Tang (Tang) ventured to be the first

Chinese luxury brand, positioning itself to be a fashion retailer offering a range that was

typically Chinese, but with a modern flavor. With ‘Made by Chinese’ as its tag line, Shanghai

Tang had been making inroads into the fashion capitals of the world such as London, Paris and

Milan, ever since it came into being in the 1990s and had established itself, with reasonable

success as a Chinese luxury brand. This success did not come easy to Tang, which suffered

a setback in the US market, where it had to close a store which was launched with much

fanfare. With a change in management from its parent Compagnie Financiere Richemont2

(Richemont)—the Swiss luxury goods major, which held a majority stake in Tang—a new

strategy was worked out and the brand had been revived. Sales reports showed that the brand

was able to make profits only in the Asian markets and was yet to make a mark outside Asia.

Responding to this trend, Tang decided to focus on the Asian markets, mainly China.

Analysts said that Tang would have to face a number of challenges in sustaining its success,

even in its home market. China, which ranked as the third largest consumer of luxury goods in

the world, had been tapped by major fashion labels such as Prada, Armani, Hugo Boss and

Gucci. These brands were already well-established in China and were preferred by most high

end Chinese customers. Surveys showed that customers in emerging economies like China

were more demanding than those in the established markets, although most customers were

not very experienced or knowledgeable about the various brands. Fashion critics also felt that

1 “Shanghai Tang”, http://store.asiastore.org

2 Richemont is one of the world’s leading luxury goods groups. Its luxury goods ranged from clothing , watches,

jewelry, to other accessories . Its portfolio included popular brands such as Mont Blanc, Chloe, Dunhill, Piaget

and Cartier.

The Icfai University Journal of International Business, Vol. III, No. 3, 200830

Tang’s offerings still lacked the truly international touch. While analysts wondered if Tang’s

success could be sustained, its Chairman, Raphael le Masne de Chermont (Chermont), was

positive about the brand, saying that it would establish itself as a world class label.

“We would like to be like Armani is for the Italians, to be the future ambassadors of Chinese

culture, as Shanghai Tang gains strength. The West needs to understand and respect China,

in a friendly way. China is not like the Western view of it, but rather is eager to learn and

share, and is fair in business”,3 he said. It was to be seen if Tang would achieve success as a

world class label, while continuing to establish itself in its home market. Analysts also wondered

what strategies Tang would adopt and how it would achieve its goals.

The Early Days

Tang was launched in 1994 by David Tang Wing-Cheung (David), son of a wealthy Chinese

businessman in Hong Kong, as a custom-tailoring business catering to high end customers.

The English translation of Shanghai Tang meant ‘The Bund’, the historic bank in Shanghai fabled

for its colonial structure. Shanghai itself was synonymous with elegance and charm, and was a

place where the western influences superimposed themselves on an entirely Chinese city. Shanghai

Tang utilized the talents of Shanghai tailors who had fled communist China in 1949. Tang’s

imperial tailors were the few remaining masters of traditional Shanghainese tailoring. They revived

the diminishing art of ‘Chinese haute couture’ (delicately crafted apparel) and ensured that their

creations captured and evoked Chinese culture. With the imperial tailors on their side, Tang

counted itself as one of the last few bastions of the esteemed classical craft. In 1996, anticipating

a market boom in goods sold to tourists attracted by the handover of Hong Kong from the British,

David ventured into the ready-to-wear segment (Annexure I shows the Logo of Shanghai Tang)

Tang offered a wide array of velvets,4 silk jacquards5 and printed cottons in brilliant textures and

colors. Apart from its clothing range, Tang also offered home furnishings, leather goods, silverware,

porcelain, and novelty gifts that featured Chinese inspired designs. Tang’s products were renowned

for their combination of traditional Chinese designs and motifs with lighthearted humor and

contemporary sensibility. The highlights of Tang included fusion of the old-China fashion with

bold-new-world styles and colors. Traditional women’s jackets and dresses were made available

in colors such as Neon pink, tart lime and confectionary blue, and always integrated the use of

Chinese patterns into their design. Also, material of highest quality and workmanship were used

in all their products.

Its first store, a 12,000 square feet flagship in the historic Pedder building on Pedder Street

in the shopping district in central Hong Kong, attracted a million visitors in its first year of

business (Annexure II shows Shanghai Tang’s store in Hong Kong). Spread over two full floors,

the store featured a blend of traditional and contemporary Chinese décor, featuring artifacts

from the private collection of the founder David Tang. The store was a great success and

continued to attract a number of visitors. “People come back because of the product, the

concept, the name and the brand, and also because of the experience”, a senior official at3 Lisa Movius (2005), “Luxury’s Chinese Puzzle: Overcoming Challenges to Tap Growing Demand”,

www.movius.us, June 15.4 Velvets are soft fabrics like silk, rayon or nylon, that have a smooth, dense pile and a plain underside.5 Jacquards are fabrics with elaborately woven patterns.

31Case Study

Shanghai Tang commented. Shanghai Tang’s success was reflected in its revenues of $18 mn in

its first year and profit margins of 60% in the consecutive years.

With the aim of taking the brand global, David launched Shanghai Tang in New York in

November, 1997. According to Vikki Wong (Wong), the Director of Marketing at its Hong

Kong store, “He really saw there was a niche in the market that was not yet filled by anyone.

Our ultimate goal is to become the first and foremost Chinese global brand”. Located on a

posh stretch of Madison Avenue,6 Shanghai Tang’s three-level store was a combination of

tradition and modernity, decorated with mosaic colored tiles, lavishly carved wooden fixtures,

plush chairs, beautiful wall paintings and fabric with typical Chinese designs. The cost of its

12,000 odd square feet store was estimated to be US $12 mn. The launch, which attracted

much media attention, featured an extravagant party with Chinese food, opera and dance.

A number of fashion celebrities from China and around the world were invited and the opening

was a grand success. Many expected the brand and the store to create a big impact on global

fashion. A business magazine reported, “New York’s Shanghai Tang will do for all things

Chinese what Ralph Lauren’s clothing and accessories did for Americans”. The store’s collection

of fashion included Kung Fu pants, Mao-style jackets and cheongsams,7 all in bold and

fluorescent colors with typical Chinese motifs and designs. “People have always associated

Mao with very boring colors. We’re trying to revert the idea that Chinese dress is traditionally

boring. Styles once worn by peasants and factory workers during China’s turbulent cultural

revolution, now retail for $200 to $900”, Wong said. To promote its brand, the store used

celebrity-driven marketing, with many top models and actors endorsing its brand by wearing

Shanghai Tang clothes to public events. Some of these celebrities included Lauren Hutton,

Kevin Costner, Mick Jagger, The Duchess of York, Sarah Ferguson and Whoopi Goldberg.

In 1998, Richemont, a Swiss-based world’s leading luxury brands company that owned

many world class labels like Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin,

Jaeger-LeCoultre, IWC, Alfred Dunhill, Montblanc and Chloe, bought a majority stake in

Shanghai Tang (Annexure III shows the number of outlets of various brands of Richemont).

This was part of many of the acquisitions that Richemont made during that time in order to

expand its range. In 1999, Shanghai Tang’s Madison Avenue store faced problems and was

closed down. The reasons that were attributed to this closure were mainly Tang’s miscalculation

of the American fashion market. Shanghai Tang’s fashion was considered very ‘costumery’ and

not relevant to modern lives. Also, fashion brands needed a constant supply of new designs to

keep customers coming back. According to a report, it was dismissed as an ‘overpriced,

mini Chinatown’. Fashion experts felt that Tang had not studied the market well and had been

hasty in opening his Madison Avenue store. The store also entailed huge rents which could not

be sustained with its low sales volume.

The store paid a rent of US $ 2 mn8 per year. Although retail experts speculated that Tang

was not put off by the rents because its Pedder Street outlet at Hong Kong also attracted

6 Madison Avenue is a fashion center, known for housing the best stores and designer boutiques in the world.

It is often frequented by movie stars and international celebrities from all over the world.

7 Cheongsams are long dresses with high collars and slit skirts, traditionally worn by Chinese women.

8 “Luxury’s Chinese Puzzle: Overcoming Challenges to Tap Growing Demand”, op. cit.


equally high rents, it was the sales-expenses mismatch that seemed to be the main reason for

the decision to close the shop. Settling for a sub-lease offer, the company decided to close the

store. “We have been presented with an attractive offer for our space and have decided to take

advantage of it to leave a very high-rent situation”, a spokeswoman for the company said.

Retail experts also speculated the impact that the brand had on the American consumer.

While many said that Shanghai Tang’s bright Chinese apparels did not appeal to the American

tastes, the company’s spokeswoman argued otherwise. According to her, “In the beginning it

was hard, but once we got going, we developed a core customer who loves us. We have a huge

entertainment and editorial following. The Chinese or Asian trend in fashion is continuing”,

she said. Commenting on the closure of its store at Madison Avenue, Johann Rupert, Richemont’s

South African Chairman said, “Learning is a skill much prized in the Richemont organization.

You can make a mistake, but you can’t make it twice”. In December 1999, a new store was

opened at another location on Madison Avenue—this time settling down for nearly half the

store size as well as the rent. Tang also decided to sell its merchandise online. Despite the

changes, Shanghai Tang was still struggling to grow. At its home market in Hong Kong,

the situation was no better with the onslaught of the Asian financial crisis.

The Turnaround

In September 2001, Raphael le Masne de Chermont (Chermont) was appointed as the Executive

Chairman of Shanghai Tang. He had a vast knowledge of Asia and had experience in the luxury

goods sector, having worked on the Piaget, Baume & Mercier, Officine Panerai, and Cartier

brands at Richemont. In 2002, when SARS (Severe Acute Respiratory Syndrome) hit Asia,

Tang’s sales were at an all-time low and Chermont had to revive the company. At this time,

he met Joanne Ooi (Ooi), a Chinese American entrepreneur raised in the US and living in

Hong Kong. Ooi was running a successful showroom selling luxury European brands and her

own, modern, Chinese-inspired designs. Previously, she was the Asian Sales and Marketing

Director for fashion brand, Stephane Kelian.9 Chermont asked Ooi to offer her comments on

Tang’s Hong Kong store. Her observations were quite critical. She remarked: “It’s an overpriced

Chinese emporium that has no credibility with local Chinese people, let alone with fashion

people. Its very narrow market was high-end tourists. It’s a once-in-a-lifetime destination

shopping experience, a kind of fashion Disneyland. Plus, it’s unwearable and eccentric”.

Realizing her talent and potential, Chermont made her an offer.

Ooi joined the company as the Marketing and Creative Director, and, along with Chermont,

began to work on a turnaround strategy for Tang. They decided to focus on women’s

ready-to-wear, since that was likely to be the highest-profile part of the line. The offerings had

to be modern, relevant and luxurious and not very ‘antique’ in nature. They launched a number

of collections that were definitely more modern than their previous collections. However, it

fell short of industry expectations, and Ooi conceded to this. “The brand had no depth, no

sincerity, no differentiation”, she said. She knew that the brand needed to have a unique

identity which was typically Chinese and also had to be contemporary. In search of this

unique identity, Ooi formulated a strategy. She decided that every collection would reflect a

China-related theme. “I decided it was really, really imperative to create cultural roots for

9 Stephane Kelian is a Paris-based high end shoemaker.

33Case Study

every single product”, she said. Based on this new-found concept, Ooi designed a collection

consisting of bold design statements that moved beyond the traditional Mao-style jackets and

combined Chinese cultural references and sleek, contemporary clothes featuring Chinese

calligraphy, in which the traditional characters from Mandarin and Cantonese were turned

into decorative patterns. The range included both an ‘authentics’ range and a more modern

range of ready-to-wear. Tang stocked Men’s mandarin suits and children’s wear with names

such as ‘Double Fish Tang’, ‘Velvet Tang’, ‘Happiness Tang’ and ‘Eight Ferries Silk’. The retail

prices of these ranged from $150 for women’s cotton jackets, $1,200 for cashmere coats, $150

for pants and $110 for short-sleeved silk tops with mandarin collars. The ‘authentics’ collection

included silk shirts which were priced at $275, a velvet jacket with a silk dragon-print lining

for $645, a Chinese-button cotton mandarin shirt for $105, a silk-lined Mongolian cashmere

sweater for $595, and woolen slacks for $250.

Ooi designed the Fall/winter 2003 collection, inspired by the traditional costumes of a

Chinese minority group called the Miao. The range was a success and sold better than the

previous two collections. Convinced by this plan, Ooi concentrated on collecting design elements

from Chinese history from antique markets, art galleries, museums and historic sites. She also

began to read Chinese history voraciously and stayed in tune with Chinese pop culture. She

based the collections on themes derived from her research on regional histories, rather than on

fashion magazines. Collaborating with designers such as Philip Treacy and Gabby Harris, Tang

introduced pop art-inspired housewares and gifts, baby Mao suits, and even customized Puma

sneakers which reflected an East-meets-West style. Ooi also continued to anchor her design on

authentic Chinese art and culture. She defined a theme for a season’s collection and sent a brief

on the concept by e-mail to the designers and consultants around the world. Once the brief was

distributed, Ooi gathered the sketches from designers at various centers and sent them out across

the network. “I allow the designers to pollinate themselves”, Ooi said. Finally, their ideas were

unified. Ooi also had a strict standard for the wearability of Tang’s range. According to her,

“Every item should transport the wearer mentally to someplace exotic in terms of time and

region. But it’s also important that every piece we make is able to be worn with a pair of jeans.

If it can’t be, we’re not succeeding. That’s the nature of modern dressing”.

Shanghai Tang’s range also had a made-to-measure business, where customers could create

their own wedding gowns and evening gowns for $1,500 to $5,000. The price depended upon

the choice of fabric, which included hand-brocaded silk, lace and beaded fabrics, which cost

$40 to $80 a yard. The most popular bridal gown style was the traditional cheongsam with

custom-made buttons. Tang’s jewelry range, made by Sandra d’Auriol, a French designer based

in Hong Kong, was being expanded and Chermont wanted to include licensed products such

as eyewear and fragrance. As part of growing its brand, Chermont wanted to increase Tang’s

store in the US and other major cities of the world. “We want to have another five or six

boutiques in major cities in the US within two years”, he said. The sites were expected to

include Las Vegas, Los Angeles, San Francisco, Miami and Chicago. It planned to seek partners

in each of these cities to operate. Earlier that year, Tang had opened a worldwide boutique in

Paris and its first store in Shanghai. The Paris store was designed as a ‘Chinese culture shop’,

which, apart from the range of clothes, included home accessories, a tea house, an exhibition

center for Chinese art, and a travel agency that organized trips to China. Chermont said that he

planned stores in the US on similar lines, but would tailor them to suit the local needs.


A majority of Shanghai Tang’s customers in China were tourists. To publicize the brand,

Shanghai Tang held a number of promotional events. This included fashion photographer

Glenn Luchford’s10 shoot at Beijing’s ‘Forbidden City’ and the ‘Temple of Heaven’ in Mainland

China, apart from conducting fashion shows to attract tourists. Chermont however, did not

want to restrict his brand’s clientele to any particular segment, but wanted to broad-base it.

“I dislike the idea of core customers, as if people below or above a certain age shouldn’t wear

Shanghai Tang. That said, I would define them as sophisticated working and traveling people,

sophisticated personalities, with standards”, he said. Despite the lack of star designers, Tang

had been favored by celebrities of both the East and the West. Its customers included Prince

Charles, the late Princess Diana, Margaret Thatcher, Hillary Clinton and Hollywood star Nicolas

Cage. Commenting on its success, Joseph Wang, the Vice-Chairman of Ogilvy & Mather,

said, “The reason for Shanghai Tang’s success is that it’s unique. It is all about the essence of

being Chinese”.11

Although privately held, Richemont did not divulge the exact sales figures; Chermont said

that the Madison Avenue store’s revenue was up by 50% in 2005 ($5 mn in annual revenue),

and overall, Tang had grown 40%, mostly in Asia, where 70% of its stores were located.

He also added that the Asian stores had contributed 80% of the brand’s sales and had registered

profits, though the stores in the US were yet to show significant results. By 2005, Tang had

established 19 stores worldwide. It had five stores in Hong Kong and four on the Mainland,12

plus 10 in places such as Paris, London and Bangkok. Based on the market trends, Chermont

had decided to focus on Asian markets, especially China, than on other markets.

Tang planned to have 30 stores open by 2007. With an international team at the helm—

David Tang, the founder, was British-educated and was from Hong Kong, the most westernized

of Chinese cities; Joanne Ooi (Ooi), the Creative Director of Tang was American; its Marketing

Director, Camilla Hammar, was Swedish; and its Chairman, Raphael le Masne de Chermont

(Chermont), was French—Tang was hopeful of achieving its goals. Its range was also innovative.

The theme of the fall/winter 2005 collection was Beijng’s ‘Forbidden City’, the former imperial

seat. Design motifs included elements such as symbols from the emperors’ robes—the sun,

the moon, the five-clawed dragon, the color yellow significant of the royal robes, brocade,

jade, lapis and fur. Another set of clothes was inspired by the garments and jewelry worn by

ethnic tribes in China’s Hunan province, and yet another collection was based on the fur-lined

clothing worn by Mongolian and Tibetan nomads. The spring 2006 collection consisted mainly

of miniskirted versions of the qipao—a traditional Mandarin-collared dress—rendered in bright

hues and decorated with patterns based on paintings by artists in Beijing. The fall/winter 2006

collection, ‘Shanghai Redux’, was inspired by colonial Shanghai in the 1930s, with design

elements reflecting Chinese art deco, jazz and flappers13 (Annexure IV illustrates some new

designs of Tang).

For its 2006 collection, Tang partnered with Beijing’s Central Academy of Fine Arts (CAFA),

one of China’s most prestigious fine arts educational institutions. Shanghai Tang was supporting

10 Glen Luchford is a British fashion photographer and film director.

11 Broun Samantha (2006), “Designing a Global Brand”, http://www.cnn.com/2006/WORLD/asiapcf/03/15/

eyeonchina.brands/index.html, April 6.

12 Mainland refers to all of the People’s Republic of China, excluding Hong Kong and Macau.

13 Joyce Hu, “Doing the Shanghai Tang: The Leader in Asian Luxury Apparel Brands”, www.nhamagazine.com

35Case Study

CAFA’s first graduation project for the newly-established Fashion Design Division, which was

considered as an innovative educational initiative for China. Ooi planned to exhibit pieces

from the inaugural graduating class of 2006 in Shanghai Tang’s flagship stores around the

world. Commenting on branding in China, Ooi said, “You must be prestigious, since that’s

what people respond to. You must be expensive, prestigious and international to seduce the

Chinese consumer”. With that in mind, “we are producing styles that are more ‘Western’, or

merely inflected with Chinese design, but not heavy-handed chinoiserie14. It must be beautiful,

precious, unique”,15 she said. Although Tang seemed to have turned around and established

itself as a Chinese luxury brand, it faced a number of challenges, mainly in its home market.

The Road Ahead

Tang faced competition from international players who had a major presence in the Chinese

market, where it planned to concentrate. The luxury goods’ market potential in China had

been tapped by fashion majors such as Prada, Armani, Hugo Boss and Gucci, ever since

December 2004, when regulation for foreign retailers was eased in China (Annexure V lists a

profile of Shanghai Tang’s competitors). These international players posed a major challenge

to Tang, both at home and abroad. The German fashion giant, Hugo Boss, was the luxury

market leader in China with 65 stores in 37 cities as of 2006. It had been in the Chinese

market for 12 years. With over 5,000 retail outlets in 102 countries, Hugo Boss considered

China as one of the key driving forces behind its international business. The company had

planned to open 10 stores every year in China. Italian fashion major, Armani, planned to open

about 50 new retail outlets in addition to the 35 stores it had in 12 Chinese cities. By the end

of 2006, the company expected to have 40 stores. It also had 28 sale points in large department

stores in the country. Armani also looked at setting up joint ventures with Chinese business

partners. It was the sixth largest international fashion company operating in China. Ermenegildo

Zegna, another Italian group, also had about 60 stores in China. The group considered China

its fifth largest market. Burberry, the British fashion house, had some 28 retail outlets in the

country. Other fashion majors that were present in China included Ralph Lauren and Ferragamo.

The Asian markets were also difficult to satisfy, compared to the more mature Western

markets. According to a Ernst and Young report, Chinese consumers were constantly looking

for new products and established brands. They were more conspicuous customers who took

pride in sporting international labels, which they considered a sign of success and wealth.

Joseph Wang, the Vice-Chairman of Ogilvy & Mather, observed that luxury brands of Asian

origin that wanted to break into the mainland Chinese market, stood a greater chance of

success if they could first make their names internationally. However, market analysts felt that

Tang had not been able to make a mark internationally, not even in the US. They felt that its

store and its offering still lacked that truly international flavor. According to a report, “Shanghai

Tang has not gained enough brand recognition in the US for most consumers to tell the

difference between their pieces and a $30 cheongsam from Chinatown. The company’s artfully

14 Chinoiserie refers to an artistic style that reflects the Chinese influence, and is characterized through the use of

elaborate decoration and intricate patterns.

15 “Luxury’s Chinese Puzzle: Overcoming Challenges to Tap Growing Demand”, op. cit.


produced catalogs are graced by Asia’s top models wearing featured pieces. This attracts a

more modern, image-conscious buyer, rather than the older tourist consumer. But that new

customer drawn in by the catalog might be very confused if they visited the Madison Avenue

store, which resembles a cigar lounge and is merchandised like a sample sale”.16 Another

lesser-known, Hong Kong-based brand, Blanc de Chine, founded in 1989, also offered a fusion

of eastern and western designs and was gaining acceptability in the US markets. They had a

range of products similar to Shanghai Tang at a lower price. Blanc de Chine had three boutiques

located in Hong Kong, New York and Beijing, and planned to open a Hong Kong store in late

2006. In a survey conducted by TNS,17 as part of KPMG’s report on ‘Luxury Brands in China’,

in 2006, a majority of luxury goods users ‘appreciated the superior quality of the brand’.

The survey also revealed that a majority bought luxury goods to reward themselves, while

those in second-tier cities, which were considered potential markets, attributed their motivation

to buy in order to ‘demonstrate success and social status’ (Some salient findings of the survey

are given in Annexure VI).

Despite the challenges, Chermont was optimistic of the potential of the Chinese market.

With a population of 1.3 billion, Tang’s home market, China, ranked as the third largest

consumer of luxury goods in the world. In 2004, the country’s luxury goods’ sales exceeded

US $ 6 bn,18 about 12% of the world’s total. According to Yang Qingshan, Secretary-General

of the China Brand Association, China’s top-brand consumers accounted for 13% of the total

population—about 169 million19 people, and were estimated to reach 250 million by 2010.

According to a 2005 Ernst and Young analysis of luxury goods consumption, the annual sales

of luxury goods on the Chinese Mainland averaged around $2 bn,20 and it was estimated that

sales in China would grow 20% annually from 2005 to 2008. China was also predicted to

overtake Japan as the world’s top consumer of luxury goods21 by 2015. The number of millionaires

in China was also on the rise. Although there were no millionaires in China even a quarter of

a century back, their number grew by more than 236,000 by the end of 2004. As per Patrizio

Bertelli, CEO of the Prada Group, by 2010, Chinese consumers would have a total of $500 bn

to spend on luxury goods. He also predicted that China could overtake the US as a market for

luxury goods22 by 2020.

According to marketing experts, Shanghai Tang had the advantage of being a ‘Made in

China’ brand. In his book, Billions: Selling to the New Chinese Consumer, Tom Doctoroff,

Greater China CEO of advertising giant JWT Worldwide, remarked, “Western luxury apparel

brands have failed to understand the psychology of China’s consumers. Chinese are torn

between Confucian values of humility and the pursuit of status as a tool for upward mobility.

16 “Doing the Shanghai Tang”, op. cit.

17 One of the world’s leading market research companies.

18 “China to be Top Consumer of Luxury Brands: Goldman Sachs”, www.china-embassy.org,

December 12, 2005.

19 Ibid.

20 “Designing a Global Brand”, op. cit.

21 “China to be Top Consumer of Luxury Brands: Goldman Sachs”, op. cit.

22 “Shanghai Tang Comes on Strong”, www.globalprovince.com, March 01, 2006.

37Case Study

Transplanted from the West onto China’s billboards, glitzy ads featuring Caucasian models

loudly flaunting their luxury wears have little relevance to the Chinese consumer mentality”.

Tang’s founder David Tang took pride in his brand being typically Chinese. “Shanghai Tang is

a Chinese label that set out to rejuvenate Chinese fashion which had effectively come to a stop

in China. Never describe it as ‘East-meets-West’ because it’s not, it’s Chinese. We make

traditional Chinese clothes and we modernize them”, he stated. According to him, Tang

aimed to “create the first global Chinese lifestyle brand by revitalizing Chinese designs—

interweaving traditional Chinese culture with the dynamism of the 21st century”.23 Tang also

had the advantage of being located in the low-cost manufacturing center of the world. The

Chinese government also encouraged home-grown brands and protected domestic business.

Although Tang’s strong presence in China was considered a key advantage, the Chinese

markets had their own problems. There was no one clear strategy for tapping into the Chinese

consumers’ growing spending power, given the vast disparities in wealth levels between urban

and provincial areas. There was also the problem of counterfeit. It was possible for

Tang-inspired pieces to be replicated for a fraction of the price in neighboring Vietnam, or to

find an exact duplicate in Shenzhen, the fake Gucci capital of the world. Ooi was however

defensive about Tang’s clientele. “They are genuine individualists who enjoy wearing their

cosmopolitanism and cultivation on their sleeve, as a badge of honor. Definitely, our customers

are not followers. In fact, they enjoy looking different from the crowd”,24 she said. Purchasers

of luxury goods were mostly working professionals between the age of 20 and 40, and the

number of consumers in this age group in China was 11 times that of Japan.

Richemont’s partnership with Tang was also considered a major strength for Tang. According

to Antony Pettifer, Managing Partner from Brandstorm,25 “Richemont ... understands very well

the brand essence and what they can do with Shanghai Tang. Richemont has very powerful

global management experiences and is determined to push the brand while being aware of

overexposure”.26 Looking towards the future, a number of questions arise: Would Tang be able

to sustain its success as a brand in its Asian markets, especially in China? Could it grow into

a global luxury brand and still remain essentially Chinese? To achieve this, analysts feel that

Tang’s brand has to evolve over the years. According to Joseph Wang, “As Shanghai Tang

continues to develop itself as a brand it needs to have a vision. 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”.

23 Abram D Sauer (2001), “Shanghai Tang: Firmly Tongue in Chic”, www.brandchannel.com, November 5.

24 “Doing the Shanghai Tang”, op. cit.

25 Brandstorm Asia is a group of independent specialists with proven track records in brand strategy,

brand management, research, management training, advertizing and integrated communications.

26 “Designing a Global Brand”, op. cit.

�


Annexure I

Logo of Shanghai Tang

Source: www.womensforum.com.hk

Annexure II

Shanghai Tang’s Store in Hong Kong

Source: http://merlin.capcollege.bc.ca

39Case Study

Annexure

III

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Annexure IV

Some New designs of Tang

Source: www.nhamagazine.com

Annexure V

Profile of Shanghai Tang’s Competitors

Prada Prada SpA is an Italian fashion company (also referred to as a ‘label’ or ‘house’)

with retail outlets worldwide. Originally known in Italian as ‘Fratelli Prada’

(‘Prada Brothers’), the company was founded in 1915 by Mario Prada. Its

product range included clothing, handbags and other accessories.

Armani Giorgio Armani SpA was started by the Italian fashion designer Giorgio Armani,

in 1974, with his partner Sergio Galeotti. It was established as a menswear

label, followed by the womenswear line in 1975. Its various labels include

Giorgio Armani, Empirio Armani, Armani Collezioni, Armani Exchange, Armani

Jeans, Armani Casa and Armani Junior. Its product range also included

perfumes, watches, shoes and eyewear.

Hugo Boss Hugo Boss A G was established by Hugo Boss in 1923 in Metzingen, Germany.

Its major brands include BOSS, HUGO and BALDESSARINI. Other brands

include BOSS Black, BOSS Selection, BOSS Orange and BOSS Green. The

group’s product range included menswear, womenswear, perfumes and other

accessories.

Gucci Gucci is an Italian fashion and leather goods label. It was founded by Guccio

Gucci in Florence in 1921. Gucci Group NV is currently one of the world’s

leading multi-brand luxury goods companies. Its brands include Gucci, Yves

Saint Laurent, Bottega Veneta, YSL Beauté, Boucheron, Sergio Rossi, Bédat &

Co., Roger & Gallet, Alexander McQueen, Stella McCartney and Balenciaga.

The group’s product range included ready-to-wear, handbags, luggage, small

leather goods, shoes, watches, jewelry, ties and scarves, eyewear, perfumes,

cosmetics and skincare products.

Company Profile

(Contd...)

41Case Study

Annexure V

Profile of Shanghai Tang’s Competitors

Ermenegildo Zegna Founded in 1910 in Trivero, Italy, by tailor and entrepreneur Ermenegildo

Zegna, the high-fashion clothing company is popular for its suits. Its product

range also includes perfumes, eyewear and other accessories.

Burberry Burberry is a UK-based manufacturer of clothing and other apparel, often in

a distinctive check pattern. It was founded in 1856. Its product range consists

of menswear and womenswear and other accessories.

Company Profile

(...contd)

Sources: Compiled by the IBS Research Centre, Chennai.

Annexure VI

Salient Findings from KPMG’s Report on ‘Luxury Brands in China’

Figure 1: Attitudes to Luxury Brands

Percent

0 10 20 30 40 50 60 70 80Owning luxury goods demonstrates my success and

social statusI appreciate the superior quality of luxurious brands, not

simply the pursuit of famous brand namesI long for luxury goods but I can’t afford them right now

I own luxury goods because of work necessities

I own luxury goods to reward myself

Luxury goods give me confidence

I own luxury goods because they are popular in my social

circle

I don’t like to show off, so I would not buy any

luxury goodsI am practical and not willing to pay the premium

claimed by luxury goods

Negati

ve

Po

siti

ve

Strongly Agree Agree

(Contd...)

Figure 2: Attitudes Towards People Who Own Luxury Brands

Percent

0 10 20 30 40 50 60 70 80

They are successful

Negati

ve

Po

siti

ve

Average

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121212

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123123

1212Shanghai Beijing Guangzhou Tier- II Cities

They have good taste

They are fashionable

They are showing off, flashy

Nouveau riche

They are wasting money

They are superficial


Annexure VI(...contd)

Figure 4: Attitudes Positive in Second Tier Cities

Percent

0 10 20 30 40 50 60 70

Owing luxury goods demonstrates my

success and social status

123456789012345678901234567890121234567890123412345678901234567890123456789012123456789012341234567890123456789012345678901212345678901234

123456789012345612345678901234561234567890123456

123123123Shanghai Beijing Guangzhou Tier-II Cities

I own luxury goods because they are

popular in my social circle

Figure 5: Intention to Purchase Luxury Products in the Next 12 Months

Perc

en

t

60

50

40

30

20

10

0

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123123123123123123123123123123123123123123

ClothesBags and

FootwearWatches Pens Cosmetics and

Perfume

Jewellery

Average

123123123

1212Shanghai Beijing Guangzhou Tier-II Cities

(Contd...)

Figure 3: I Own Luxury Goods to Reward Myself (By Income)

0 20 40 60 80Month

ly I

ncom

e L

evel

Strongly Agree Agree

Above RMB 10,000

RMB 7,000 - 9,999

RMB 3,000 - 6,999

Percent

43Case Study


(Contd...)

Figure 6: Choice of Retail Format for Luxury Purchases

Perc

en

t

60

50

40

30

20

10

0Clothes

Bags and

FootwearWatches Pens Cosmetics and

PerfumeJewellery

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Shopping Mall121212

1212Department Store Out Store/Discount Store Online PurchaseBranded Store

China’s Unique Characteristics

• Brand Awareness

The arrival of international retailers over the last decade has signalled a dramatic change in the

psyche of the Chinese. China indeed, has huge potential as a luxury market, given its massive

urban population and the younger generation’s affinity for designer goods. However, while the

Chinese are very fast to take to luxury products, they still have trouble differentiating within the

sector and distinguishing between the various strata of the luxury market; the country’s big

spenders are often only aware of the most popular luxury labels.

• Perception of Beauty

While beauty in the west is often transformational and edgy, with consumers less afraid to stand

out from the crowd, studies suggest that Chinese women seek a more accessible, inclusive form

of beauty. Features that stick out are generally not perceived as attainable or attractive. As such,

in advertising, Chinese prefer to see Chinese faces, although a truly iconic foreign celebrity will

also work because Chinese admire expertise, power and status.

• Counterfeit Goods

Most of the newly wealthy Chinese still want authentic products, but as a rule, the Chinese are far

more price-conscious, for example, than the Japanese, and the younger consumers have shown

a willingness to mix cheap fakes with genuine products. Studies suggest that people in Hong

Kong are becoming more discerning when it comes to buying genuine clothing brands, accessories

and electrical goods, despite the ready availability of fake goods. Luxury brands will be hoping

that a similar change in attitudes occurs, overtime, on the Mainland.

• Shopping for Pleasure

‘Mall culture’ has arrived in China and shopping is increasingly being adopted as a leisure

activity. Retail Asia magazine predicts that by 2020, China will be home to seven of the world’s

ten largest malls. This growing popularity of malls should help to increase the market size for

luxury products, by strengthening brand awareness and aspiration.



• Travel

Chinese nationals have shown a strong preference for purchasing luxury products overseas,

for two reasons. First, shopping at the designer boutiques in Europe guarantees that the goods

they buy are not counterfeit, something they cannot be sure of when shopping in some malls in

China. Second, higher taxes and duties mean that Mainland prices can be 30% more than

elsewhere. Chinese citizens are traveling more and spending more abroad as travel restrictions

continue to be lifted, and Chinese tourists have become some of the main buyers of the prestigious

brands from Europe. The French Tourist Board has found that Chinese travellers to France

spend more than people arriving from the US or other European countries. The Economist

Intelligence Unit predicts that by 2008, the number of Chinese overseas tourists will rise to

49 million. The World Trade Organization further forecasts that about 100 million Chinese

people will tour abroad in 2020.

• Motivations: Aspiration and Self-Reward

The reasons why Chinese consumers purchase luxury brands, bear similarities to those in other

countries. But the research of TNS (Taylor Nelson Sofres) found that status and self-reward are

two particularly strong motivations in China. Among those surveyed, attitudes towards brands

were overwhelmingly positive. For example:

• More than 70% saw luxury brands as a way to demonstrate their status and success.

• Less than 30% objected to paying a premium for a luxury brand.

• Just over 60% of the respondents bought luxury goods as a way of rewarding themselves for

their hard work and success.

Therefore, in China, the consumption of luxury goods is very much item-driven, which means

that consumers search for the latest collection or products. At present, in China, consumption

tends to concentrate on personal accessories such as cosmetics, perfumes and watches—smaller

items that can be justified as rewards. This is different in more developed markets, where consumers

tend to seek experiences or products catering more to their personal tastes.

Source: KPMG’s Report on ‘Luxury Brands in China’.

Reference # 48J-2008-08-03-02

Documents

Shanghai Tang - Taking Chinese Fashion to the World