Chinese fashion has an image problem, Bosideng's struggle shows

[SHANGHAI] Selling upscale apparel in London and New York shouldn't have been so hard - at least that's what Chinese clothing maker Bosideng International Holdings Ltd predicted when it tried to go global in 2012.

Bosideng, which makes down-jackets for giants including Adidas AG, was the most successful outerwear supplier in China when Chairman Gao Dekang, a tailor-turned-billionaire, opened a £35 million (S$62.2 million) store in London's Mayfair. The expansion plan flopped as the label failed to gain sufficient traction. Now, Bosideng is focusing on its domestic market, and counting on foreign brands to help revive profit.

The misfire highlights the challenges for Chinese companies - the world's largest garment exporters - in trying to tap overseas markets with their own brands. For one thing, their vast domestic customer base, historically deprived of choice, created a false sense of recognition, said Doreen Wang, the New York-based global head of consultancy BrandZ.

"Chinese consumer apparel makers think that putting products on shelves means that you've established a brand - because that is how they came up in a China where consumers just bought what was accessible," Mr Wang said. "But in the current consumer environment, building a brand takes a long time and a lot of investment." Bosideng, a Chinese transliteration of "Boston," was selling $1.3 billion of merchandise in China annually, including the nation's top-selling line of down-filled puffer coats, when it enlisted designers Nick Holland and Ash Gangotra to help it take on the premium US and European menswear markets.

Problem was, the Bosideng brand was hardly known overseas and the company didn't understand the investment needed to gain acceptance as a high-end retailer.

"We tried ourselves to sell our merchandise outside China, and not just be a manufacturer for other brands, but ended up reconsidering that," Executive Director Kelvin Mak said in an interview. "If we want to re-enter the international market, we will be more careful in taking that step." The company closed its unprofitable London flagship store in January. The shop's opening five years ago - in a newly built bronze, triangular building off Oxford Street, where the Hog in the Pound pub once stood - was to herald more overseas outlets.

Rather than grow, Bosideng went into an earnings free fall. Profit plunged 90 per cent in three years as customers in China migrated to other companies' online platforms for their clothing purchases, and foreign fast-fashion franchises moved in.

Bosideng's shares, which began trading in Hong Kong a decade ago, have slumped 66 per cent over the past five years, valuing the company at about HK$7 billion (S$1.22 billion).

Marty Staff, a former Hugo Boss executive, coordinated the company's first and only showing of its collection at the 2014 New York Fashion Week. Even so, Bosideng was unwilling to invest large sums on advertising and marketing, Mr Mak said. He cited that as a reason why there hasn't been a deal to carry the label at Saks Fifth Avenue. A spokeswoman for Hudson's Bay Co, which owns the New York-based, upscale department-store chain, said the company doesn't comment publicly on the terms of vendor agreements.

Promotional activities for Bosideng's London store included lending suits to male celebrities and posts on Facebook, Mak said. "We were not comfortable with making that kind of investment as we were just testing the waters," he said.

While China's home-grown technology brands, such as Huawei, Lenovo, Oppo, and Alibaba, have been successful overseas, the country's apparel companies have typically not known "how to build a product with both functional and emotional components," said Richard Ho, senior partner at consultancy Roland Berger GmbH in Shanghai.

What's required is a profile and a story, said Chan Wai-Chan, a retail partner at consultancy Oliver Wyman in Hong Kong. "I would hesitate to call Bosideng a brand," Mr Chan said. "They had a fantastic location in London, but when people walk by, they ask, what's the story? What's this about?" On a visit to the store, Mr Chan said he was told by a shop assistant that Bosideng is "the biggest down-jacket brand in China." "That has limited effect," he said. "They could have the best production abilities, but not the innovative idea behind the brand. That's why they can make jackets for top global brands, but not sell them globally themselves."

BLOOMBERG