Smart market insights put the ‘cash’ in cashmere on the Mainland
In this week’s episode of China Paradigm, Daxue Consulting CEO Matthieu David interviews Vivian Chang, founder of apparel brand Crush Collection, to learn first-hand what it takes to build a successful apparel brand in China. Mrs Chang studied fashion design at FIDM (Fashion Institute of Design and Merchandising) in Los Angeles before moving to China twenty years ago. She established Crush, a speciality cashmere garment brand, in 2009.
In this podcast, Vivian Chang shares her experiences in setting up and running a successful apparel brand in China. Listen and learn from her directly successful strategies and the pitfalls to avoid in setting up shop in the Mainland, including selecting the right business model, the sourcing of factories, distribution channel, relationships with retailers and suppliers, and effective client communication. By the end you will have some idea how to start a successful apparel brand in China yourself.
Matthieu David: Hello everyone, today I am interviewing Vivian Chang, the founder and CEO of Crush Collection, a fashion brand based in China but that sells all over the world, with locations in Sweden, several in China and more.
I am very happy to welcome you here Vivian because I think a lot of people are asking the same question on how to start a successful apparel brand in China and I think they can learn a lot from you. They do not know how to start, they do not know how to talk to factories, they do not know how to talk with distributors, how to find the right distribution etc.You have been successful in doing all of that so I think this could be very interesting for us to learn more about it. That was not your first experience. You had past experience in other companies as I read online so it would be interesting as well to understand how you switched from for working outside of China to then starting your own brand.
First of all, as I begin with most interviews, I would like to try to understand the size of your business and if you can give us some matrix, revenues, number of peoples working with you, number of clients…etc.
Vivian Chang started a successful apparel brand in China with Crush Collection. Source: International Woolmark Prize
Vivian Chang: It is a pleasure to be here. It’s my first time doing an interview, so I am a little bit nervous. But I can tell you the size of my business. We have two seasons a year and last season we had about 18 million RMB in retail revenue.
Matthieu David: So, when you said 18million RMB, this is the revenue you gets from distributors or is it of total revenues?
Vivian Chang: In retail first.
Matthieu David: Retail first, ok so when you say one season, you have two seasons per year, right? So that means it’s roughly two times that, right? For one year?
Vivian Chang: The other season is much smaller maybe just a quarter [of revenues], because I focus more on cashmere. So winter is my big season.
Matthieu David: This is very nice. What is the size of your team now?
Vivian Chang: We have eight people including me.
Matthieu David: And the 18 million RMB you do with them through offline right, so offline retail I saw you are at Lane Crawford and other very good locations.
Vivian Chang: Yes everything is offline. We do not have online presence for the moment
What was behind the idea to start a successful apparel brand in China?
Matthieu David: Ok, so let go back to the beginning, how did you start?
Vivian Chang: I started in 2009. I always had a big passion for garments, for clothing, and I did not want to just have a clothing brand because they are so many out there already. So I was thinking, it was ten years ago during summer and I saw that-shirts became really popular -everyone had white t-shirts that cost like hundred dollars. So t-shirt became not a sloppy clothes item, but t-shirt became like, you know, a cool item to have, like ten years ago.
So I was thinking how why not wear a t-shirt in the winter as well. So then I started to research what can be worn in winter directly on your skin that I do not have to wear anything else because a lot of sweaters are quite itchy.
Matthieu David: It was in Frankfurt, it was in Germany, that you had this idea to start a successful apparel brand in China?
Vivian Chang: Yes, I was just sitting by the street in a coffee shop and drinking coffee. I was trying to figure out what kind of clothing would be essential for people so I can create something that makes sense.I can create something that people want to have, not just another clothing brand.
Matthieu David: You see from the customer’s point of view and you try to solve it? So how did you come to cashmere, how do you connect the need of garment to the material of cashmere?
Vivian Chang: When I started to research, I found out that China has a quite of a lot of cashmere and raw material. China was the biggest cashmere producing country. So cashmere is easier to have access to in China. I then realised that cashmere is actually the best material to wear directly on skin. It is very soft and it keeps you warm, especially when you use super fine cashmere that are as thin as t-shirts, you can really just wear it in the winter like a t-shirt.
“China was the biggest cashmere producing country. So cashmere is easier to have access to in China.”
Matthieu David: Are you currently wearing your own?
Vivian Chang: I am, but I am not wearing my t-shirt style.
Matthieu David: I understand. So you came up with idea because you observed people in the street and you are thinking that they use t-shirts during the summer but they have nothing during the winter to feel comfortable, to be light and to wear during the winter right? And then you came up with your idea by being in China to use cashmere and you are only using cashmere, right?
Vivian Chang: In the first five years yes, only cashmere and also we have companies making cashmere garments clothing up there so what I have been trying to do is I have to make cashmere different than traditional cashmere.
Matthieu David: How did you do that?
Vivian Chang: Making it into at-shirt. No one makes it into t-shirts.
Matthieu David: Oh ok, I see! The format, the format is different.
Vivian Chang: People were making it into thicker sweaters, like a twin’s sets. Or just like ordinary pullover a sweater, a V-neck sweater, so I make cashmere into dress so even make cashmere into evening wear so you can go to gala dinner in winter time and not feeling cold.
Matthieu David: Why do you think people did not do it before? No other brands did it before.
Vivian Chang: Actually, they are brands doing it, but it is maybe more for luxury brands so one sweater can cost two thousands dollars minimum.
Matthieu David: Ok, and what your pricing?
Vivian Chang: Nowadays, I focus myself only in China so my retail price is from around two thousand rmb to ten thousand rmb.
Matthieu David: So you are the same price level as a luxury brand right?
Vivian Chang: No, I am still half price.
Matthieu David: Half price ok, that is on the way. I would like to come back later on it. How do you build a brand with a price tag, which is actually close and closer to luxury brands. We go back on this later, it would be very interesting to know about it.
Find the right factory to execute your vision
Mathieu David: So, you had your idea about using cashmere and you came back to China because at that point you were in the West and at that time then you had to look for factories. Could you explain us about how you looked for factories? I read online that you went to Shanghai, Harbin, Zhengzhou, and finally you found out a good factory in Shanghai to place orders. Could you explain us about all the difficulties and how you solved them to start a successful apparel brand in China?
Vivian Chang: In the first two years I do not have big quantity especially the first year. It was very difficult to get a good factory willing to work with me. Because I do not want to produce ordinary cashmere sweaters. So to be able to explain to them what I want to do as already, it’s a bizarre thing, they kept telling me “no one does cashmere like that, you can not do it”. So long story short, I have to go to the factory almost every day and try to make friends with the factors owners.
Matthieu David: But when you are looking for factories in Zhengzhou, Harbin, at this very first stage, I guess it was assessing the factories right? So how do you assess if the factory is good or not? Getting access to factories is kind of easy now, with Alibaba and all everything published on internet, it seems that the access seems easier recently.
Vivian Chang: In the first few years I could not access the factories directly, I could only see who ever want to produce for me and then I would decide to work with them. This happened for the first three years.
Matthieu David: Because of the volume and specificity of our products
Vivian Chang: Yes.
Matthieu David: Ok I see, and you were working only one by one, with each factory and then moving on to another factory, or were there various factories for different products?
Vivian Chang: If we talk about now, now I have several factories to work with -like with my big orders I work with very professional factories that do everything by the book. You do not have to worry about the quality control and you also work with different factories and different machinery. So for different style we have to work with different factories.
Matthieu David: I see, when you are saying that you are going to meet with factories every day I am guessing that these were in Shanghai?
Vivian Chang: The one I visit every day is in Jiaxing (嘉兴) . Its just outside of Shanghai by about one and half hours by car.
Matthieu David: What do you have to talk about every day with them?
Vivian Chang: Just try to maintain the relationship and make friends. I have a lot learn to from them. I was lucky to be able to find a factory owner who is willing to teach people. I showed him that I willing to learn and then I go there and chat with him every day so he started to make some samples for me.
Matthieu David: Interesting, I saw that you had to go there very often because they was some miscommunication and they may not tell everything at the same time but you have to observe what they do to understand how they do and so on, that is the reason is really about building a relationship you can have a better offer from them, a better way of working with them.
Vivian Chang: I think if you work with the smaller factories, the communication has to be more frequent and then you have to check all the time to make sure that they are doing what you want them do. If you are working with bigger factories their team is also more professional, then we have less communication issue.
Matthieu David: When you say they are more professional, you mean that they have a design office – they have an office, which can help you as well understand the design you bring to them? What make them more professional when they are bigger?
Vivian Chang: For example, the person who leads the team in the factory they have more knowledge to how to solve problem and also if you have a design and then you discuss with them how to make the design or how to produce.
Matthieu David: Ok, and what do you bring to them? You bring to them a design? You are a designer right? You studied design?
Vivian Chang: Yes, I studied fashion design. This is useful for meetings where we have to not only bring the design to them but we have to give them the instructions, very clear and down to every centimetre.
Matthieu David: So do you put the instructions on paper or you have to communicate with them about all this? You can write everything on paper and then the big factories will produce what you say, but the small factories you have to explain much more?
Vivian Chang: You know with some small factories, they are so small they do not even know how to handle emails so you have to printout the instructions and then send it to them.
Matthieu David: I see. That’s why it is good to be in China because you have access to factories while people out of China cannot communicate as well as you do, and you also have a market in China. So you have both sides actually of the business, which is not the case in Europe anymore because the factories will not be able to work on small series and be as flexible.
Vivian Chang: It is much more flexible to operate from China, especially in terms of manufacturer. I do not work that much with small factories anymore. Smaller factories do not mean the quality is bad; it only means I have had to spend more time supervising them to start a successful apparel brand in China.
“It is much more flexible to operate from China, especially in terms of manufacturer.”
Matthieu David: Yes, It is closer to a craftsmanship than actually a factory right?
Vivian Chang: Yes.
Matthieu David: So what is the minimum order you had to produce to begin to work with larger factories?
Vivian Chang: One style, from fifty to one hundred pieces depending on the different factories.
Matthieu David: Ok, about the material and cashmere, I think a lot of people are asking questions about how to make sure the quality and the material is the right one, or even a good one. How did you get this knowledge, and how do you do check for quality?
Selecting the right quality material is key when you start a successful apparel brand in China. Source: City Weekend
Vivian Chang: First, I actually started to test cashmere in 2008 before I started the business. I have tried more than twenty types of cashmere from different companies. So what I do is I used the cashmere to knit a garment and then wear it several times. I wash it and I wear, basically testing them on myself. So I narrowed it already down to several suppliers. Now I know no only is their cashmere soft and feels good on the body but I also know that after the garments are washed the colours does not fade. So by testing the cashmere on myself I narrowed down to 3-4 suppliers to work with. At the end, it was the state owned garment companies have the best cashmere.
Matthieu David: The state owned enterprises from China have the best cashmere?
Vivian Chang: Yes, they have the best raw materials to begin with.
Matthieu David: How do you explain this?
Vivian Chang: They have their own farm, they have their own goats, and they have the best fiber.
Matthieu David: So you buy the material and you give the material to the factory and then the factory is using your material?
Vivian Chang: For the source, I manage it very strictly because I want my cashmere to have a very good quality.
Matthieu David: About funding- did you have to raise money, did you have to raise family money, did you have to invest yourself money or clients came very quickly?
Vivian Chang: I break even from the second year onwards but I had a very small team, I just have one staff and me, we had two people for three years.
Matthieu David: The cost was many to produce right? To buy the material, to place the product, and to finance the inventory?
Vivian Chang: Yes, but I did not grow very fast in the first few years as it was not my plan but from day oneI knew I wanted to sell my collection in good stores. I had small stores approached me but they are selling on branded garments in their stores, I said no to all of them. I was saying no to business to me even until today.
Position your product correctly through the right retail partners
Matthieu David: Interesting, that comes to the second aspect I am very interested in understanding better from you the retail relationships when you start a successful apparel brand in China. Is how do you enter those very high-level shops such as Lane Crawford.I think lot of people dream about going entering Lane Crawford and you have been able to go to these places?
Vivian Chang: It was my dream too for many years, I was very happy when I got it.
Matthieu David: So, is there a recipe?
Vivian Chang: I think it takes time. For many years I have keep on delivering good quality, the same quality – I think that is a reputation too, so before I started to sell at Lane Crawford, I was selling in some of the shop in Beijing and Shanghai. I was already selling very well. Normally in wintertime, my brand can be the top seller in the whole store. I was already selling well. So I think that is my good reputation, and so when I met the Lane Crawford buyers, they had a project for designers who are interesting of working with them, It was like a big competition. You bring your work and you go to Lane Crawford to line up and all the designers with their own work in their hand start presenting what they have to the buyers.
Matthieu David: After that you have got the contact?
Vivian Chang: Yes, that’s how I got to know the buyers
Matthieu David: Ok, did you try to reach them directly before, maybe through work?
Vivian Chang: I tried. It was not a yes or no it was just keep on trying but then two/three years at all the stores. A lot of times I do seeding, I give a lot of gifts to people and industry insiders that I think are influential. I want them to try because I am confident in my own sweater, so I want them to try to wear my clothing. If they like it, it’s going to do well for me through word of mouth.
Matthieu David: The other thing, do you put sale people on the point of sales? Who is selling?
Vivian Chang: For example: in Lane Crawford, it is called a multi-brands stores, it is like one store where they have many brands. It is different that a department store. In a department store you have your own storefront and a department store but in Lane Crawford, you do not have your own store, you only have you own rack, one/two/three rack only. So stores like Lane Crawford, it’s called multi-brands store so they have our own sales staff.
Matthieu David: But then how do you make sure that they understand your brand, that they know to talk about your garments correctly?
Vivian Chang: I give them training every season.
Matthieu David: Every season so two times per year?
Vivian Chang: Yes.
Matthieu David: And that’s enough?
Vivian Chang: That’s enough.
Matthieu David: Ok, because people at Lane Crawford are very good at that right?
Vivian Chang: Also others stores I also give them sales training
Matthieu David: Two times?
Vivian Chang: Yes, only two times. Sometime once. I have met one store manager she’s actually almost as knowledge able than me in terms of clothing, because she has been selling clothes for like fifteen years, she knows all about fabrics, materials, and how it looks on consumers.
Matthieu David: Yes, your pictures looks very good on the website, it all looks very comfortable. What is your objective when you take pictures – to look comfortable to wear more than actually the usual cashmere you can see, which is more official?
Vivian Chang: I think my objective when I take photos is I want to look modern, and I want to look trendy. I do not want try to sell cashmere.
Matthieu David: In an interview you said that you wanted to imitate the style of the seventies, right?
Vivian Chang: That was maybe for one of the seasons. It was the inspiration for one of the seasons.
Matthieu David: So, you got those contacts basically by contacting them several times, through the different malls, department stores. You built relationship, sometimes you participated in competition etc. Could you tell us more about the typical contract you have when you do wholesale. So, you sell to them and then the typical contract you have with those retailers.
Vivian Chang: Typically not, I whole sale to them.
Matthieu David: Ok but there is no minimum, you agree together on how much volume they buy and then resell but there is no constraints. They do not push you to produce a certain amount and so on, is there a specific element in the contract?
Vivian Chang: Yes. In Europe actually the minimum order is much lower, for small brands like me. It’s probably just two thousand euros. But in China the minimum order we set is higher.
Matthieu David: And you have to produce first, so basically you have to manage your working capital in a way that you can finance for the production and then you sell to them. So I guess you have to be very careful on the working capital to manage, right?
Vivian Chang: No, costumers pay thirty per cents deposit when they place an order.
Matthieu David: Ok, I see.
Vivian Chang: So, I did not have much issues in funding when I decided to start a successful apparel brand in China.
Matthieu David: Ok, how many locations do you have?
Vivian Chang: I have thirty-two stores but then this year I began working with Club Monaco and they have thirty-five stores… So, total of almost seventy.
Retailers like Club Monaco (pictured above) are a distribution partner for apparel brands in China. Source: Total Retail
Matthieu David: You work with Club Monaco and your own brand, right? You do not produce for them. Also Club Monaco is accepting all the brands to be in their own shops?
Vivian Chang: Yes, they are doing that even in their headquarters in New York, they are selling jeans and sneakers from different brands.
Matthieu David: Ok, I did not know that.
Vivian Chang: Yes, but they only want to work with brand that have a specific function: like I have cashmere, others brands have jeans or shoes that is not conflict with what they have.
Matthieu David: I see, to increase a segment because they have clients who come to the shop, they want to optimise the shop. So they want to sell maybe more products, I see, I understand. Lets talk about a mistake you think you could have avoided in setting up your business. Do you remember some mistake you did, that you could have avoided working with factories or working with retail?
Vivian Chang: That is a good question, well maybe after I made a mistake I learned and I fixed and then I forgot it.
Lessons learned for the next apparel entrepreneur in China
Matthieu David: What advice would you give to people who want to start a successful apparel brand in China?
Vivian Chang: I have seen a lot of people start a new apparel brand, and with in the first two years they got too tempted to go to Christmas market, or to go to this weekend market. When you are a small brand you tend to go to those markets to cash on the sales coming in, but then it is not good for the brand reputation. A lot of things take time for your brand to build enough reputation.
Matthieu David: Another thing that is very impressive because with your price tag, you are able to sell without even putting sales people at the point of sales, and you have a price tag which is not low and a brand (I Googled little bit, I baidued little bit) we can not find very much about your brand, so people with their phone at the shop, they cannot find a lot about you, and yet you sell well, you sell very well. That means that you have a good product, if you go to the right retail of people who know about brands and garments, then you will sell.
Up market department stores like Lane Crawford help position your brand in the eyes of Chinese consumers. Source: Lane Crawford
Vivian Chang: Yes, you know like in Lane Crawford people who go to Lane Crawford to shopping, they know clothing very well. They spend a lot of money on clothing brands they know. So once they see your brand on the rack, they know what’s good and what’s not, then they will buy it. You do not need to say that much.
Matthieu David: But they are a little bit treated. Because we think a lot about branding: as storytelling, as sales people, as environment, and experience. When you think about luxury brands, most of the time, they do not even talk about the products! They talk about these experiences, they talk about the branding, they talk about the story telling, and they talk about the history, right? They do not talk about the product. With you it is the opposite; you talk only about the product. Soin some way it’s counter intuitive.
Vivian Chang: I am not luxury brand yet. For me, I think it is important that I want people to like what they buy; I want them to really feel like “Oh this is really a good sweater; I like it, I want to wear it”. Without this mission I would never start a successful apparel brand in China.
Matthieu David: But about factories for instance, do you think you could have gone quicker? For instance, going directly to the larger factories or do you think it was part of the learning to go to small, and then larger, and so on?
Vivian Chang: I tried, I even go to people that I know who have connection with the factory, they are not willing to produce for very little quantity, in the first few years I have too little quantity. So I have to start from the small factory.
Matthieu David: Ok, I went to your website and so I could see some products, they can not buy in your website. It is specific strategy because you want to position yourself like luxury brands, it is a specific strategy because you actually wanted to build the brand that retails first and then maybe after e-commerce or you just because did not have time? Or maybe it is not done yet.
Vivian Chang: Three years ago I did an e-commerce shop through Shopify, and then I realized that having my own website wore me out so much because I have to drive this traffic to my own website that it did not make sense to me so I closed the Shopify shop.
Matthieu David: Ok, I would have saw that your current clients could go to your website and buy new collection, so your products are just similar products on your website. Even that, actually did not have?
Vivian Chang: Very little, because I think, I do not do retail myself so all the consumers are through the stores. So if you go to Lane Crawford to buy my clothing, then you have much better shopping experience than buying at home, I think everything has to be ready. Like e-commerce that is hundred percent ready. So the customers can feel as good on my website as they do in the stores, I have to deliver the same experience. But we are working on the launch of my own e-commerce this year.
Matthieu David: So, by the end of this year?
Vivian Chang: Hopefully, before autumn.
Matthieu David: To sell in China, or in the world?
Vivian Chang: In the world. It will be in two languages:English and Chinese.
Matthieu David: Ok, and your process of setting up the e-commerce, how have you thought about the delivery? When you deliver high quality products- a product with a price point which is not low -which is not as high as luxury maybe but which is not low, how then do you deal with logistics?
Vivian Chang: I have contacted DHL, they have service to be able to deliver door to door, including tax, and stuff like that.
Matthieu David: Ok, so your go through a very well known, very big firm like the DHL.
Vivian Chang: I think so, because the clothing, the garment I have is also not low price.
Matthieu David: I read somewhere that you are going to start accessories and home wear
Vivian Chang: Accessories and home wear? I started launch wear this year and accessory just scarf and hat and gloves … we have that anyway, yes.
Matthieu David: Ok, and still in cashmere or now you have actually changed a little bit it is not only cashmere or it is only cashmere?
Vivian Chang: In spring and summer we have silk.
Matthieu David: Anything which is Kick-starter or crowd-funding, do you think it could make sense for someone who wants to start a successful apparel brand in China, as you did, to begin with a Kick-starter or crowd-funding, have you thought about it? Because I do not think you did it, but have you thought about it, and going through it, is it something you investigated in or do you think it will not fit with your way of working?
Vivian Chang: I think when I started almost ten years ago, was there even such a thing as Kickstarting?
Matthieu David: I do not think so but in between then and now…
Vivian Chang: No, when I wanted to start my own business, I kind of did not want to report to someone else anymore. I choose a business that I do not have to invest a lot of money; I can take care of this through my own savings.
Matthieu David: What is very interesting is that you said that retail, offline retail was less expansive actually and easier for you than going online, so e-commerce, which is very counterintuitive because most people think “I am going to open a Shopify, I’m going to create my brand, and going to sell online, it is going to cost less.” But what you say this is better to find the right contact, the accurate retail, and to start from here?
Vivian Chang: It is not easier; it took me six years to get to the store, all the store that I want to get into. It is not easier, but I think because, first of all, cashmere is very soft, we have to feel it, we have to touch it to know why my cashmere is different than others. Why my cashmere is better than the three hundred-rmb cashmere out there? So I have to show my clothing to customers so they will see the differences, so they will be convinced that what they pay is worth it.
Matthieu David: This is another aspect that I wanted to understand more about your business, how much do you know about your clients? Because you go through to retail, and you may not have their contact, you may not know, you may not talk to them. How much do you know about them? How can you do your clients understanding?
Vivian Chang: The person who is helping me do the website now, asked me the same thing and made me decide to create my own website to start a successful apparel brand in China. The past three years I felt like I started to forget who exactly are my customers. Before when I did retail myself I knew who are my customers, they are executives in a big company, they are lawyers, they are bankers, I have a lot of business women as my customers.
Matthieu David: But did you know if its use more for gifting, or for buy for themselves, and so on? So that is why actually because of this like of understanding, you are thinking about going online because you could collect more data and get in touch with your own clients directly.
Vivian Chang: Not only that, I also want to present my ideal collection of t-shirts; it should not be very expensive so if I sell directly to my customers, then I cut when they are off. And then I want to have one, like a price-friendly cashmere t-shirt on my own website.
Matthieu David: Oh, you will not sell the same thing right? You will not sell the same collection, or the same product, you have different products. Is it something that the retailers are asking you? Not to sell directly, what you sell to them or you are free?
Vivian Chang: I want people to shop online, I want to make that easier, so if there is ten styles to choose from other than three hundred styles to choose from. I want to sell the essential items on my own website.
Matthieu David: Ok, thanks again. I know you have a meeting in ten minutes so I do not want to take too much of your time. I think it was very instructive to learn more about how to start a successful apparel brand in China: what to do with factories, how to enter retail, how to think not online, but offline first and learn from it. How did you like this interview? Are you less nervous?
Vivian Chang: Yes, I am not nervous anymore. Thank you for asking me a lot of questions, so I do not have to talk about myself. It is easier.
Matthieu David: Yes, that is the job I have to do. Thank you very much Vivian.
Vivian Chang: You are welcome, thank you too. It was a good experience for me, bye.
Matthieu David: See you, bye.
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