Luxe.Co’s interview with CEO of Shiatzy Chen, Ziwei Wang：next 30 years' growth will be in China

Founded in Taiwan in 1978, the high-end fashion brand, Shiatzy Chen, features Chinese traditional techniques and styles, aiming for the summit of global fashion from the beginning of the brand. Nowadays, Shiatzy Chen has gone through 40 years. After its experience of international brand building and global market expansion, how will Shiatzy re-examine its achievements and experience? How will the brand innovate and break through for more rapid development?

Mr. Ziwei Wang, the CEO and President of Shiatzy Chen, had an exclusive interview with Luxe.Co recently. Mr. Wang is the second son of Ms. Shiatzy Chen, the founder and the soul of the brand. He took over the whole business of Shiatzy Chen since 2017. “We will certainly have more expansion.” said Mr. Wang, the second generation of the fashion brand.

Above: Mr. Ziwei Wang

The expansion mainly refers to more breakthrough in customer groups, brand positioning, product lines and sales channels. When Mr. Wang took over the family business, the mainland China market has just started and has been his long-term focus. "People may think we focused on internationalization a few years ago. Now I would like to bring it back and be more down-to-earth,” said Mr. Wang, " The next 30 years will be Chinese Market.”

Shiatzy Chen established a studio in Paris in 1990 and opened the first store in Paris in 2001. Shiatzy Chen was the first Taiwanese designer brand entering European market. In 2009, Shiatzy Chen became the only Chinese member of Syndical Chambre de la mode feminine. As a remarkable brand with “Chinese elements” in the global fashion market, Shiatzy Chen has participated in Paris Fashion Week for 19 seasons up to now.

Together with its sister lifestyle brand, Cha Cha Thé, Shiatzy Chen opened two new stores in Chongqing at the end of 2017. In addition, Shiatzy Chen launched special limited-edition Chinese-style kids wear on its online shopping channel. Today the concept  of “created in China and Chinese designer brands” has made increasing influence in the global market, reviewing Shiatzy Chen, the world’s established high-end fashion brand, will provide us valuable reference on the future development of brands "created in China”.

Breakthrough in product lines: Horizontal and vertical expansion

Shiatzy Chen has always been known for its creative design with Chinese elements, while combined with contemporary styles. The brand’s most remarkable advantages are its material selection, traditional techniques and craftmanship. But at the same time, these distinctive features may easily evolve into a bottleneck when the brand has developed to a mature stage.

Mr. Wang expressed that womenswear accounted for 80%-90% of the total sales of the brand at present, while accessories (shoes and bags) were relatively limited and accounted for about 5%. Expansion in product lines is the area that Shiatzy Chen need strengthen.

The average price of Shiatzy Chen's products is about 8000 yuan. Therefore, the main female customer groups are aged from 35 to 50 years old in the mainland China market. This is relatively younger than the age groups in the markets of Taiwan, Hong Kong and Macau. "According to our experience of more than 20 years in Taiwan, Shiatzy Chen's clients are generally entrepreneurs ' wives and their second and third generations," said Mr. Wang.

Obviously, for the brand’s inherent status currently, it is difficult to attract effectively the new generation customer groups to become the brand’s loyal fans.

"I've been thinking how to achieve a further breakthrough in the brand performance, whether it is through expanding product lines or expanding new consumer groups,” said Mr. Wang. "Horizontal extension" is the innovation strategy that he is considering. However at the same time, for a mature brand with 40 years of development, refining the performance of each single store and deepening the purchasing potentials of VIPs are the brand's current focus and development direction.

Mr. Wang set the strategic direction for the future development of Shiatzy Chen as recruiting new clients with “cross-over joint collections and lifestyle products”, and strengthening existing clients with “refined single store experience and VIP maintenance".

Breakthrough in customer groups: To elevate the recognition among new customer groups through cross-over projects

In the overall market of mainland China, Mr. Wang hopes that the performance of each single store has a good growth. The brand will invest more to help existing stores perform even better. In the mainland China market, more than 70% of sales are contributed by VIP customers. Therefore, the brand will provide excellent services for them. This year, the brand will also focus on the breakthrough in activating the consumption of customers in the middle and latter segments.

Starting new product lines will face greater market risks and a great deal of investment. Collaborating with mature brands for cross-over products may be relatively easier to reach new customer groups.

"2018 is the 90^th anniversary of Disney. We are the only luxury brand in China that signed a partnership cooperation with them. We will launch a series of Mickey-themed clothing to the market." said Mr. Wang.

This collaboration can not only easily and effectively attract the exiting fans of the collaboration brand, but also add the young personality of the collaboration brand to Shiatzy Chen. "I think collaboration need the mutual recognition and passion from both parties,” said Mr. Wang, “Timing is important too.”

“We signed with the Italian eyewear producer, Safilo, in 2016. But we have not finalized specific products. We decided to focus on the China market development from 2018, and Safilo reached for us again. At present, we are still in discussion of pricing, sales channels and other details.” said Mr. Wang. In 2008, Shiatzy Chen will launch 40 styles online for young consumers, in order to attract the young crowd and enhance their recognition of the brand.

Breakthrough in Channels: Store quality is more important than quantities; Online is key

Shiatzy Chen opened its flagship store in Avenue Montaigne in Paris in August 2017, right next to Prada. This was the first brand-new flagship store in Europe after its store at Saint Honoré, which was opened in 2009.

"The most important is building brand image . We spent a lot of time in Europe at the early stage, in order to build an international brand image. For example, participating in Paris Fashion Week is to add value to the brand and make the international market aware of the brand.” said Mr. Wang.

Above: Shiatzy Chen’s flagship store at Avenue Montaigne in Paris

Shiatzy Chen has entered the mainland China market since 2004 and opened 14 stores in nearly 10 years. "We are relatively slow because our strategy is not for profit, but for branding. We have rejected many franchising opportunities. To be honest, many of our stores on the ground floor were at loss at their initial stage. It was not until 2009, these stores began to profit in China. Big brands need flagship stores.” Mr. Wang expressed at previous interviews.

China market is growing and other markets are shrinking. The next 30 years will be market of China. Although the brand is doing well in Taiwan, but the market size is small. Shiatzy Chen has 35 stores in Taiwan currently. Mr. Wang thinks this number will be simplified to 30 in the future.

After taking over the business, Mr. Wang downsized the company in Taiwan, but maintained the numbers in mainland China. “Shiatzy Chen has kept a growth rate over 20% in mainland China in 2015 and 2016.” said Mr. Wang.

At present, Shiatzy Chen has 26 stores in mainland China (as of December 31, 2017). The company used to plan to open 100 stores, but Mr. Wang thinks 50 to 60 stores will be good. The brand plans to open 5 new stores in 2018. But the key is operation, i.e., whether there will ten outstanding stores among them in the next three years.

Above: Shiatzy Chen store at IFS, Chongqing

At the same time, Shiatzy Chen has always been cautious about "franchised stores" and "public listing".

"Many brands start from multi-brand shops, own stores and then to all direct-managed stores. But we started by our own stores. If we accepted franchising, we could have 500 stores. But only when you operate your own store, you will have an intuitive understanding and judgement of inventory, production and sales figures,” said Mr. Wang, “If we wanted to go public, we would have done it a long time ago. But then we will be chased by money once it came in. We will have to open many stores. However, the business is not necessarily refined."

At present, the online sales accounted for 10-20% of the overall sales of Shiatzy Chen. Mr. Wang is still very optimistic about the online platform. "In the long run, the online platform must be the focus, at least in the mainland China market. It may exceed 50% in the future. Even 30% is good. There is big growing potential in the future.” said Mr. Wang.

"His Economy": The unexpected surprise from male customers

With the development of men's fashion and style awareness in China, a broader male fashion consumption market has emerged. “His Economy” has become a new growing spotlight for many brands and capital. Mr. Wang also found this unexpected surprise from his market research.

Mr. Wang did not find exciting menswear brands in his market research in China. This is, in turn, an opportunity. "Last time when I was at SKP Beijing, I did not find any Chinese-design brands. Then we opened our first specialty menswear store in China at SKP. The business is very good. Therefore, we have all our menswear product categories in this store.” said Mr. Wang.

At the same time, he is very optimistic about the future development of the market. “The sales of menswear in China is doing well. This is different in Taiwan, Hong Kong and Macau. Shiatzy Chen’s menswear in Taiwan has shrunk to very small.

"Lifestyle" strategy: To think clearly, no rush

It can be a method of horizontal expansion by adding lifestyle brands, which provides more opportunities to reach and cover consumers daily life.

Shiatzy Chen introduced a cross-over brand Cha Cha Thé in 2008, to convey the life aesthetics and culture of "tea" and "food". At present, Cha Cha Thé has opened two stores in Suzhou and Chongqing in China. It is possible that the next store will be in Paris.

Above: Cha Cha Thé at SKP Chongqing

Mr. Wang thinks the two brands Cha Cha Thé and Shiatzy Chen complement each other at present. They achieved both effects of maintaining brand images and enhancing customer groups mutually. He is also exploring other appropriate models for collaboration.

For example, the two stores were presented together in Suzhou, with a parallel design occupying 400 square meters. In Chongqing, two brands are presented in two different shopping malls.

In order to perform in lifestyle brands, it cannot be achieved through simply adding product lines.

First of all, the brand culture need to be strong, in order to attract a group of loyal fans, who are willing to pay for the brand. Alternatively, products have good price/quality ratios and can reach the increasing experience demand in consumers’ life scenarios. For example, Hermès opened a restaurant in Seoul, Armani opened a café in Cannes and Gucci opened a restaurant in Shanghai. All of them are popular among their fans. Another example is Muji, which covers most scenarios of people’s life with a thoughtful and low-key attitude.

Therefore, Mr. Wang’s strategy in lifestyle products is to “think clearly and no rush”.

Shiatzy Chen has introduced household products in its Taiwan stores in 2006. But it was not very well received, because the price was not very affordable," Mr. Wang said, "A set of bed linen with pure handcraft and embroidery details need 3 to 4 months in the embroidery process. The price was at 100,000 yuan (2006) per set. The production is small and the demand scenarios are limited too. The store rental costs are high in China. These products will not be presented in every store. Therefore, it is natural that these products have not reached scaled sales.

"We also have plans of soap, candles, skincare and other products. We have designed the bottles and jars, but have not put into production," Mr. Wang said, "Now I focus more on how to improve the performance of traditional business and each stores. We have many ideas, but timing is important. "

Mr. Wang expressed that they planned to do something different next, for example, real estate or hotels. “It is not about quantity, but quality.” said Mr. Wang.

Photos provided by Shiatzy Chen

Chinese Reporter: Ying Sun