Swimming against the tide…Chinese luxe in Europe

While the stampede of western firms to sell to the seemingly insatiable Chinese market continues, a relatively unknown (atleast in Western markets)  Chinese luxury goods manufacturer is trying to forge a market in Europe.  An interesting fact is that Bosideng is not a manufacturer of typical “Chinese luxury” products such as silk or tea but is aiming at creating a global brand that is culture agnostic and appeals to the generic consumer of luxury products. With over 7579 retail stores and a market share of 36% in China, the company now seeks to move up the value chain by selling high quality clothing (with brands like Bengen, Snow flying and Kangbo) that would appeal to all well-heeled customers irrespective of their location (similar to the demographics of consumers like Christian Dior or Hugo Boss – a broadly homogenous well-travelled, mobile and high spending category of the privileged)

Red by Bosideng

Though there are some oriental touches to their fashion line, like the use of red piping on suits for instance, it is far too subtle to be plugged as “oriental”. It would be interesting to see how such a company would plan and execute its supply chain strategy while trying to move up the value chain – would it use abundantly available low cost labour and manufacturing in China? Would procurement be local or global or glocal? What would be the inventory stocking models? Let us look at some initiatives of Bosideng in SCMluxe while it is in the process of opening of its very first store in Europe in London’s trendy South Molten Street:

v  Procurement (or source) for the high end fashion line is from suppliers in Italy, Turkey and Portugal

v  Production (or make) is entirely out of Europe with only 7% being manufactured in China

v  Designers are commissioned from leading western brands such as Nick Holland and Ash Gangotra from the label Pretty Green

v  The main collection is restricted to 50 pieces at a time, so that new products are refreshed in the store on a weekly basis. This calls for a high inventory turnover and low levels of obsolete (out of fashion?) stock. Weekly refreshment of the collection will mean tighter controls over inventory and very short lead times. With manufacturing being local, logistics will be faster and simpler but demand forecasting will need to be very robust. Bosideng will have to err on the side of lower inventories risking stock outs. However in the luxury goods industry, stock outs may be a good for the brand?

South Molten Street, London

v  An all-out splurge on the retail store. With an estimated £6 million ($9 million) spent on its new property on South Molten Street, Bosideng is using a high cost sales channel instead of the cheaper option of using department stores (store in store).  This is because getting premium space for a newcomer is difficult in department stores  along with the problem of limited branding freedom

v  Alternative E-Commerce sales channel to be launched with a dedicated website for Europe. This move is to counter the twin challenges of a standalone retail store – (i) High Cost (ii) Low accessibility. The web sales model helps customers who cannot travel to the retail store locations as well as provide a cheaper option for sales

Obviously the above model of SCMluxe calls for deep pockets and staying power since the return on investments will take time. Will this high cost contra-indicative strategy of wading into a troubled market like Europe while the rest are heading East make profits? Or is it a well thought out strategy to establish a Chinese brand in the luxury market where these high costs may well be thought of as a part of the branding budget? Another interesting thought allied to this will be how the Chinese markets will be serviced with the above SCMluxe strategy? Currently Bosideng claims that for its high end suits, tweed is procured from European suppliers and shipped to China for tailoring before it comes back to Europe for the final finishing touches. Will this work for the Chinese market and will consumers want to purchase a local product at western prices? Bosideng may well provide us with an example of how the great leap East will play out…