Giant slayer: How Sham Kar-wai wants to conquer mainland
Founder of Hong Kong brand I.T tells Divia Harilela how he hopes to conquer the mainland market by looking beyond the major cities
Unlike many fashion moguls, I.T's chairman and founder Sham Kar-wai is a modest, low-profile man, who generally steers clear of public appearances.
He recently made an exception, however, for the celebration of his company's 10th anniversary on the mainland, which was held at a venue near Shanghai's hip Xintiandi complex. Sham went unnoticed at the event as he made his way through the crowds dressed in a beige jacket, a blue button down shirt and jeans. When the fashion show and performance started, he took a seat among celebrities that included Zhou Xun and Shawn Yue, but slipped away quietly as soon as it was over.
You wouldn't think Sham is one of Asia's most powerful fashion figures. Recently named among the top 25 most influential Chinese in global fashion by Forbes China, he is also the mastermind behind the burgeoning I.T fashion empire, which boasts multi-label boutiques I.T and i.t, as well as 10 in-house and licensed brands including Izzue, b+ab, 5cm and Chocoolate.
As of February this year, the company recorded net profits of HK$471 million, up 22 per cent from the previous year.
Sham opened his first boutique at the age of 21. "At that time I had no mission, I just wanted to open a store to fulfil my dreams. I have loved fashion since I was a teenager and wanted to gather some friends and bring things that we liked to wear to Hong Kong. At that time the market didn't have so many choices for young teenagers - there were lots of mass market and luxury brands but nothing in between, just like China was 10 years ago," he says.
The company's first boutique, a 200 sq ft space, opened in Causeway Bay in 1998. It was an immediate hit with young locals who would later prove to be I.T's core customers. Soon I.T gained a reputation for its edit of avant-garde labels like Julius, Ann Demeulemeester and Isabel Marant, differentiating it from luxury department stores.
Today the group's businesses include several multi-brand concept stores and free-standing boutiques for under-the-radar fashion brands such as Comme des Garçons, Gareth Pugh and Maison Martin Margiela.
While most of I.T's businesses have been based in Hong Kong since its inception, Sham chartered new territory in 2002 when he opened his first boutique on the mainland, tapping into the industry's fastest growing market.
"I first went to Shanghai in 1997 and remember thinking how behind Hong Kong it was. When I came back a few years later it had changed so much," he says. "Xintiandi had just opened and I loved the concept behind it because it wasn't just about upscale labels. I felt there was so much potential - there were no mid-range brands or multi-brand designer stores, and I wanted to bring something new to the market."
And so began an aggressive expansion plan for the group, starting with its multi-brand boutiques and later, the launch of new concepts such as Beijing's I.T Market which is a partnership with Japanese label Comme des Garçons (Sham says that Comme continues to be its most successful name). While many luxury brands are struggling to see a return on their mainland investments, China now accounts for 26.9 per cent of I.T's turnover while retail sales have increased by 52 per cent in the past year.
Sham attributes I.T's success to the rapid growth of the middle class.
"China moves at a lightning speed. A lot of Chinese can now travel. Now they demand international labels. People have become wealthier and the middle class is growing and they have a hunger for fashion.
"At the beginning the business was luxury focused but now people want something individual that sets them apart. The middle class earns decent money so they can mix and match the brands they wear. They can't afford luxury brands for everyday use so we have seen the rise of a new segment, which is great for us. Psychologically, they are people who are looking for an alternative," he says.
I.T has taken an unconventional approach to its expansion by focusing on second-, third- and fourth-tier cities where education is proving vital to growth (at present, I.T has 360 points of sales in cities as far afield as Shenyang, Wuhan and Xian).
"Most people in China are not that fashion savvy so it's important to move more into those cities. The sophisticated customer may still be a minority, but eventually will become the majority," he says.
The plan includes building a higher online profile to promote awareness even in areas where it doesn't have bricks and mortar stores. Two seasons ago, it launched a Chinese website, with a small selection of goods available to buy. Sham says sales have doubled, although the numbers are still small when compared to more established e-commerce platforms such as Taobao.
Of course, like all growing markets, the mainland comes with many challenges, especially compared with Hong Kong.
"The weather and behaviour is different from north to south, so we have to customise our selection. China functions like many countries inside one. The customers tend to be more traditional and the culture of shopping is different," he says.
"Then you have operating problems such as human resources. Finding the right staff and keeping them when the environment is competitive is tough. Compared to Hong Kong, marketing and distribution is hard. Hong Kong is small and it's easy to spread a message. China is so big and the cost of advertising is around 10 times more. We generate customers through social media, relationships, and special events."
Naturally, his biggest concern right now is the sudden drop in sales across all retail markets on the mainland, although he still plans to expand the business in the next year. Along with opening more I.T stores in second- and third-tier cities, there will be a stronger focus on in-house brands, which make up about half of I.T's mainland business.
"It's easier to launch our in-house brands as the selection is easier and more suited to the local market. The Chinese understand it as it's designed by a Hong Kong team," he says.
Always looking to differentiate itself from its competitors, I.T is also planning to open its first department store on the mainland in the third quarter next year. It is a joint venture with French department store Galeries Lafayette.
"We finally found the right location after several years. It will be a 500,000 sq ft space stocked with luxury brands, cosmetics, restaurants, and a food court and supermarket," says Sham. "I.T will, of course, have a space inside and will bring a host of new brands from Europe and the West. Like I.T Market, we wanted to bring something new to China. Most of the department stores here look similar so we want to bring something European with a Western taste."
Also on the cards is rejuvenating Japanese label A Bathing Ape, which Sham incorporated into the company in 2011. After operating at a loss for several years, he is hoping to bring the brand back into the black. His Midas touch has sparked insiders to speculate whether he is in the early stages of building his own fashion conglomerate similar to the likes of LVMH.
"Buying brands is interesting - I wouldn't dismiss it, but I am open to opportunities," he says. "Let's see - one thing at a time."