Case Study

Shanghai Tang:
Taking Chinese Fashion to the World
Doris Rajakumari John*

Shanghai Tang is the best of 5000 years of Chinese tradition exploding

into the 21st century.
– David Tang1
The tag, ‘Made in China’ usually suggested mass-produced products, dubious quality and
cheap prices. One Chinese brand sought to change this perception and establish itself as
a truly Chinese brand in the global market. Shanghai Tang (Tang) ventured to be the first
Chinese luxury brand, positioning itself to be a fashion retailer offering a range that was
typically Chinese, but with a modern flavor. With ‘Made by Chinese’ as its tag line, Shanghai
Tang had been making inroads into the fashion capitals of the world such as London, Paris and
Milan, ever since it came into being in the 1990s and had established itself, with reasonable
success as a Chinese luxury brand. This success did not come easy to Tang, which suffered
a setback in the US market, where it had to close a store which was launched with much
fanfare. With a change in management from its parent Compagnie Financiere Richemont2
(Richemont)—the Swiss luxury goods major, which held a majority stake in Tang—a new
strategy was worked out and the brand had been revived. Sales reports showed that the brand
was able to make profits only in the Asian markets and was yet to make a mark outside Asia.
Responding to this trend, Tang decided to focus on the Asian markets, mainly China.
Analysts said that Tang would have to face a number of challenges in sustaining its success,
even in its home market. China, which ranked as the third largest consumer of luxury goods in
the world, had been tapped by major fashion labels such as Prada, Armani, Hugo Boss and
Gucci. These brands were already well-established in China and were preferred by most high
end Chinese customers. Surveys showed that customers in emerging economies like China
were more demanding than those in the established markets, although most customers were
not very experienced or knowledgeable about the various brands. Fashion critics also felt that
* Research Associate, Icfai Research Center, Chennai, India. E-mail: dorisjohn@gmail.com

1
“Shanghai Tang”, http://store.asiastore.org
2
Richemont is one of the world’s leading luxury goods groups. Its luxury goods ranged from clothing , watches,
jewelry, to other accessories . Its portfolio included popular brands such as Mont Blanc, Chloe, Dunhill, Piaget
and Cartier.

2008Study
©Case The Icfai University Press. All Rights Reserved. 29
Tang’s offerings still lacked the truly international touch. While analysts wondered if Tang’s
success could be sustained, its Chairman, Raphael le Masne de Chermont (Chermont), was
positive about the brand, saying that it would establish itself as a world class label.
“We would like to be like Armani is for the Italians, to be the future ambassadors of Chinese
culture, as Shanghai Tang gains strength. The West needs to understand and respect China,
in a friendly way. China is not like the Western view of it, but rather is eager to learn and
share, and is fair in business”,3 he said. It was to be seen if Tang would achieve success as a
world class label, while continuing to establish itself in its home market. Analysts also wondered
what strategies Tang would adopt and how it would achieve its goals.

The Early Days

Tang was launched in 1994 by David Tang Wing-Cheung (David), son of a wealthy Chinese
businessman in Hong Kong, as a custom-tailoring business catering to high end customers.
The English translation of Shanghai Tang meant ‘The Bund’, the historic bank in Shanghai fabled
for its colonial structure. Shanghai itself was synonymous with elegance and charm, and was a
place where the western influences superimposed themselves on an entirely Chinese city. Shanghai
Tang utilized the talents of Shanghai tailors who had fled communist China in 1949. Tang’s
imperial tailors were the few remaining masters of traditional Shanghainese tailoring. They revived
the diminishing art of ‘Chinese haute couture’ (delicately crafted apparel) and ensured that their
creations captured and evoked Chinese culture. With the imperial tailors on their side, Tang
counted itself as one of the last few bastions of the esteemed classical craft. In 1996, anticipating
a market boom in goods sold to tourists attracted by the handover of Hong Kong from the British,
David ventured into the ready-to-wear segment (Annexure I shows the Logo of Shanghai Tang)
Tang offered a wide array of velvets,4 silk jacquards5 and printed cottons in brilliant textures and
colors. Apart from its clothing range, Tang also offered home furnishings, leather goods, silverware,
porcelain, and novelty gifts that featured Chinese inspired designs. Tang’s products were renowned
for their combination of traditional Chinese designs and motifs with lighthearted humor and
contemporary sensibility. The highlights of Tang included fusion of the old-China fashion with
bold-new-world styles and colors. Traditional women’s jackets and dresses were made available
in colors such as Neon pink, tart lime and confectionary blue, and always integrated the use of
Chinese patterns into their design. Also, material of highest quality and workmanship were used
in all their products.
Its first store, a 12,000 square feet flagship in the historic Pedder building on Pedder Street
in the shopping district in central Hong Kong, attracted a million visitors in its first year of
business (Annexure II shows Shanghai Tang’s store in Hong Kong). Spread over two full floors,
the store featured a blend of traditional and contemporary Chinese décor, featuring artifacts
from the private collection of the founder David Tang. The store was a great success and
continued to attract a number of visitors. “People come back because of the product, the
concept, the name and the brand, and also because of the experience”, a senior official at
3
Lisa Movius (2005), “Luxury’s Chinese Puzzle: Overcoming Challenges to Tap Growing Demand”,
www.movius.us, June 15.
4
Velvets are soft fabrics like silk, rayon or nylon, that have a smooth, dense pile and a plain underside.
5
Jacquards are fabrics with elaborately woven patterns.

30 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
Shanghai Tang commented. Shanghai Tang’s success was reflected in its revenues of $18 mn in
its first year and profit margins of 60% in the consecutive years.
With the aim of taking the brand global, David launched Shanghai Tang in New York in
November, 1997. According to Vikki Wong (Wong), the Director of Marketing at its Hong
Kong store, “He really saw there was a niche in the market that was not yet filled by anyone.
Our ultimate goal is to become the first and foremost Chinese global brand”. Located on a
posh stretch of Madison Avenue,6 Shanghai Tang’s three-level store was a combination of
tradition and modernity, decorated with mosaic colored tiles, lavishly carved wooden fixtures,
plush chairs, beautiful wall paintings and fabric with typical Chinese designs. The cost of its
12,000 odd square feet store was estimated to be US $12 mn. The launch, which attracted
much media attention, featured an extravagant party with Chinese food, opera and dance.
A number of fashion celebrities from China and around the world were invited and the opening
was a grand success. Many expected the brand and the store to create a big impact on global
fashion. A business magazine reported, “New York’s Shanghai Tang will do for all things
Chinese what Ralph Lauren’s clothing and accessories did for Americans”. The store’s collection
of fashion included Kung Fu pants, Mao-style jackets and cheongsams,7 all in bold and
fluorescent colors with typical Chinese motifs and designs. “People have always associated
Mao with very boring colors. We’re trying to revert the idea that Chinese dress is traditionally
boring. Styles once worn by peasants and factory workers during China’s turbulent cultural
revolution, now retail for $200 to $900”, Wong said. To promote its brand, the store used
celebrity-driven marketing, with many top models and actors endorsing its brand by wearing
Shanghai Tang clothes to public events. Some of these celebrities included Lauren Hutton,
Kevin Costner, Mick Jagger, The Duchess of York, Sarah Ferguson and Whoopi Goldberg.
In 1998, Richemont, a Swiss-based world’s leading luxury brands company that owned
many world class labels like Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin,
Jaeger-LeCoultre, IWC, Alfred Dunhill, Montblanc and Chloe, bought a majority stake in
Shanghai Tang (Annexure III shows the number of outlets of various brands of Richemont).
This was part of many of the acquisitions that Richemont made during that time in order to
expand its range. In 1999, Shanghai Tang’s Madison Avenue store faced problems and was
closed down. The reasons that were attributed to this closure were mainly Tang’s miscalculation
of the American fashion market. Shanghai Tang’s fashion was considered very ‘costumery’ and
not relevant to modern lives. Also, fashion brands needed a constant supply of new designs to
keep customers coming back. According to a report, it was dismissed as an ‘overpriced,
mini Chinatown’. Fashion experts felt that Tang had not studied the market well and had been
hasty in opening his Madison Avenue store. The store also entailed huge rents which could not
be sustained with its low sales volume.
The store paid a rent of US $ 2 mn8 per year. Although retail experts speculated that Tang
was not put off by the rents because its Pedder Street outlet at Hong Kong also attracted
6
Madison Avenue is a fashion center, known for housing the best stores and designer boutiques in the world.
It is often frequented by movie stars and international celebrities from all over the world.
7
Cheongsams are long dresses with high collars and slit skirts, traditionally worn by Chinese women.
8
“Luxury’s Chinese Puzzle: Overcoming Challenges to Tap Growing Demand”, op. cit.

Case Study 31
equally high rents, it was the sales-expenses mismatch that seemed to be the main reason for
the decision to close the shop. Settling for a sub-lease offer, the company decided to close the
store. “We have been presented with an attractive offer for our space and have decided to take
advantage of it to leave a very high-rent situation”, a spokeswoman for the company said.
Retail experts also speculated the impact that the brand had on the American consumer.
While many said that Shanghai Tang’s bright Chinese apparels did not appeal to the American
tastes, the company’s spokeswoman argued otherwise. According to her, “In the beginning it
was hard, but once we got going, we developed a core customer who loves us. We have a huge
entertainment and editorial following. The Chinese or Asian trend in fashion is continuing”,
she said. Commenting on the closure of its store at Madison Avenue, Johann Rupert, Richemont’s
South African Chairman said, “Learning is a skill much prized in the Richemont organization.
You can make a mistake, but you can’t make it twice”. In December 1999, a new store was
opened at another location on Madison Avenue—this time settling down for nearly half the
store size as well as the rent. Tang also decided to sell its merchandise online. Despite the
changes, Shanghai Tang was still struggling to grow. At its home market in Hong Kong,
the situation was no better with the onslaught of the Asian financial crisis.

The Turnaround
In September 2001, Raphael le Masne de Chermont (Chermont) was appointed as the Executive
Chairman of Shanghai Tang. He had a vast knowledge of Asia and had experience in the luxury
goods sector, having worked on the Piaget, Baume & Mercier, Officine Panerai, and Cartier
brands at Richemont. In 2002, when SARS (Severe Acute Respiratory Syndrome) hit Asia,
Tang’s sales were at an all-time low and Chermont had to revive the company. At this time,
he met Joanne Ooi (Ooi), a Chinese American entrepreneur raised in the US and living in
Hong Kong. Ooi was running a successful showroom selling luxury European brands and her
own, modern, Chinese-inspired designs. Previously, she was the Asian Sales and Marketing
Director for fashion brand, Stephane Kelian.9 Chermont asked Ooi to offer her comments on
Tang’s Hong Kong store. Her observations were quite critical. She remarked: “It’s an overpriced
Chinese emporium that has no credibility with local Chinese people, let alone with fashion
people. Its very narrow market was high-end tourists. It’s a once-in-a-lifetime destination
shopping experience, a kind of fashion Disneyland. Plus, it’s unwearable and eccentric”.
Realizing her talent and potential, Chermont made her an offer.
Ooi joined the company as the Marketing and Creative Director, and, along with Chermont,
began to work on a turnaround strategy for Tang. They decided to focus on women’s
ready-to-wear, since that was likely to be the highest-profile part of the line. The offerings had
to be modern, relevant and luxurious and not very ‘antique’ in nature. They launched a number
of collections that were definitely more modern than their previous collections. However, it
fell short of industry expectations, and Ooi conceded to this. “The brand had no depth, no
sincerity, no differentiation”, she said. She knew that the brand needed to have a unique
identity which was typically Chinese and also had to be contemporary. In search of this
unique identity, Ooi formulated a strategy. She decided that every collection would reflect a
China-related theme. “I decided it was really, really imperative to create cultural roots for
9
Stephane Kelian is a Paris-based high end shoemaker.

32 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
every single product”, she said. Based on this new-found concept, Ooi designed a collection
consisting of bold design statements that moved beyond the traditional Mao-style jackets and
combined Chinese cultural references and sleek, contemporary clothes featuring Chinese
calligraphy, in which the traditional characters from Mandarin and Cantonese were turned
into decorative patterns. The range included both an ‘authentics’ range and a more modern
range of ready-to-wear. Tang stocked Men’s mandarin suits and children’s wear with names
such as ‘Double Fish Tang’, ‘Velvet Tang’, ‘Happiness Tang’ and ‘Eight Ferries Silk’. The retail
prices of these ranged from $150 for women’s cotton jackets, $1,200 for cashmere coats, $150
for pants and $110 for short-sleeved silk tops with mandarin collars. The ‘authentics’ collection
included silk shirts which were priced at $275, a velvet jacket with a silk dragon-print lining
for $645, a Chinese-button cotton mandarin shirt for $105, a silk-lined Mongolian cashmere
sweater for $595, and woolen slacks for $250.
Ooi designed the Fall/winter 2003 collection, inspired by the traditional costumes of a
Chinese minority group called the Miao. The range was a success and sold better than the
previous two collections. Convinced by this plan, Ooi concentrated on collecting design elements
from Chinese history from antique markets, art galleries, museums and historic sites. She also
began to read Chinese history voraciously and stayed in tune with Chinese pop culture. She
based the collections on themes derived from her research on regional histories, rather than on
fashion magazines. Collaborating with designers such as Philip Treacy and Gabby Harris, Tang
introduced pop art-inspired housewares and gifts, baby Mao suits, and even customized Puma
sneakers which reflected an East-meets-West style. Ooi also continued to anchor her design on
authentic Chinese art and culture. She defined a theme for a season’s collection and sent a brief
on the concept by e-mail to the designers and consultants around the world. Once the brief was
distributed, Ooi gathered the sketches from designers at various centers and sent them out across
the network. “I allow the designers to pollinate themselves”, Ooi said. Finally, their ideas were
unified. Ooi also had a strict standard for the wearability of Tang’s range. According to her,
“Every item should transport the wearer mentally to someplace exotic in terms of time and
region. But it’s also important that every piece we make is able to be worn with a pair of jeans.
If it can’t be, we’re not succeeding. That’s the nature of modern dressing”.
Shanghai Tang’s range also had a made-to-measure business, where customers could create
their own wedding gowns and evening gowns for $1,500 to $5,000. The price depended upon
the choice of fabric, which included hand-brocaded silk, lace and beaded fabrics, which cost
$40 to $80 a yard. The most popular bridal gown style was the traditional cheongsam with
custom-made buttons. Tang’s jewelry range, made by Sandra d’Auriol, a French designer based
in Hong Kong, was being expanded and Chermont wanted to include licensed products such
as eyewear and fragrance. As part of growing its brand, Chermont wanted to increase Tang’s
store in the US and other major cities of the world. “We want to have another five or six
boutiques in major cities in the US within two years”, he said. The sites were expected to
include Las Vegas, Los Angeles, San Francisco, Miami and Chicago. It planned to seek partners
in each of these cities to operate. Earlier that year, Tang had opened a worldwide boutique in
Paris and its first store in Shanghai. The Paris store was designed as a ‘Chinese culture shop’,
which, apart from the range of clothes, included home accessories, a tea house, an exhibition
center for Chinese art, and a travel agency that organized trips to China. Chermont said that he
planned stores in the US on similar lines, but would tailor them to suit the local needs.

Case Study 33
 A majority of Shanghai Tang’s customers in China were tourists. To publicize the brand,
Shanghai Tang held a number of promotional events. This included fashion photographer
Glenn Luchford’s10 shoot at Beijing’s ‘Forbidden City’ and the ‘Temple of Heaven’ in Mainland
China, apart from conducting fashion shows to attract tourists. Chermont however, did not
want to restrict his brand’s clientele to any particular segment, but wanted to broad-base it.
“I dislike the idea of core customers, as if people below or above a certain age shouldn’t wear
Shanghai Tang. That said, I would define them as sophisticated working and traveling people,
sophisticated personalities, with standards”, he said. Despite the lack of star designers, Tang
had been favored by celebrities of both the East and the West. Its customers included Prince
Charles, the late Princess Diana, Margaret Thatcher, Hillary Clinton and Hollywood star Nicolas
Cage. Commenting on its success, Joseph Wang, the Vice-Chairman of Ogilvy & Mather,
said, “The reason for Shanghai Tang’s success is that it’s unique. It is all about the essence of
being Chinese”.11
Although privately held, Richemont did not divulge the exact sales figures; Chermont said
that the Madison Avenue store’s revenue was up by 50% in 2005 ($5 mn in annual revenue),
and overall, Tang had grown 40%, mostly in Asia, where 70% of its stores were located.
He also added that the Asian stores had contributed 80% of the brand’s sales and had registered
profits, though the stores in the US were yet to show significant results. By 2005, Tang had
established 19 stores worldwide. It had five stores in Hong Kong and four on the Mainland,12
plus 10 in places such as Paris, London and Bangkok. Based on the market trends, Chermont
had decided to focus on Asian markets, especially China, than on other markets.
Tang planned to have 30 stores open by 2007. With an international team at the helm—
David Tang, the founder, was British-educated and was from Hong Kong, the most westernized
of Chinese cities; Joanne Ooi (Ooi), the Creative Director of Tang was American; its Marketing
Director, Camilla Hammar, was Swedish; and its Chairman, Raphael le Masne de Chermont
(Chermont), was French—Tang was hopeful of achieving its goals. Its range was also innovative.
The theme of the fall/winter 2005 collection was Beijng’s ‘Forbidden City’, the former imperial
seat. Design motifs included elements such as symbols from the emperors’ robes—the sun,
the moon, the five-clawed dragon, the color yellow significant of the royal robes, brocade,
jade, lapis and fur. Another set of clothes was inspired by the garments and jewelry worn by
ethnic tribes in China’s Hunan province, and yet another collection was based on the fur-lined
clothing worn by Mongolian and Tibetan nomads. The spring 2006 collection consisted mainly
of miniskirted versions of the qipao—a traditional Mandarin-collared dress—rendered in bright
hues and decorated with patterns based on paintings by artists in Beijing. The fall/winter 2006
collection, ‘Shanghai Redux’, was inspired by colonial Shanghai in the 1930s, with design
elements reflecting Chinese art deco, jazz and flappers13 (Annexure IV illustrates some new
designs of Tang).
For its 2006 collection, Tang partnered with Beijing’s Central Academy of Fine Arts (CAFA),
one of China’s most prestigious fine arts educational institutions. Shanghai Tang was supporting
10
Glen Luchford is a British fashion photographer and film director.
11
Broun Samantha (2006), “Designing a Global Brand”, http://www.cnn.com/2006/WORLD/asiapcf/03/15/
eyeonchina.brands/index.html, April 6.
12
Mainland refers to all of the People’s Republic of China, excluding Hong Kong and Macau.
13
Joyce Hu, “Doing the Shanghai Tang: The Leader in Asian Luxury Apparel Brands”, www.nhamagazine.com

34 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
CAFA’s first graduation project for the newly-established Fashion Design Division, which was
considered as an innovative educational initiative for China. Ooi planned to exhibit pieces
from the inaugural graduating class of 2006 in Shanghai Tang’s flagship stores around the
world. Commenting on branding in China, Ooi said, “You must be prestigious, since that’s
what people respond to. You must be expensive, prestigious and international to seduce the
Chinese consumer”. With that in mind, “we are producing styles that are more ‘Western’, or
merely inflected with Chinese design, but not heavy-handed chinoiserie14. It must be beautiful,
precious, unique”,15 she said. Although Tang seemed to have turned around and established
itself as a Chinese luxury brand, it faced a number of challenges, mainly in its home market.

The Road Ahead

Tang faced competition from international players who had a major presence in the Chinese
market, where it planned to concentrate. The luxury goods’ market potential in China had
been tapped by fashion majors such as Prada, Armani, Hugo Boss and Gucci, ever since
December 2004, when regulation for foreign retailers was eased in China (Annexure V lists a
profile of Shanghai Tang’s competitors). These international players posed a major challenge
to Tang, both at home and abroad. The German fashion giant, Hugo Boss, was the luxury
market leader in China with 65 stores in 37 cities as of 2006. It had been in the Chinese
market for 12 years. With over 5,000 retail outlets in 102 countries, Hugo Boss considered
China as one of the key driving forces behind its international business. The company had
planned to open 10 stores every year in China. Italian fashion major, Armani, planned to open
about 50 new retail outlets in addition to the 35 stores it had in 12 Chinese cities. By the end
of 2006, the company expected to have 40 stores. It also had 28 sale points in large department
stores in the country. Armani also looked at setting up joint ventures with Chinese business
partners. It was the sixth largest international fashion company operating in China. Ermenegildo
Zegna, another Italian group, also had about 60 stores in China. The group considered China
its fifth largest market. Burberry, the British fashion house, had some 28 retail outlets in the
country. Other fashion majors that were present in China included Ralph Lauren and Ferragamo.
The Asian markets were also difficult to satisfy, compared to the more mature Western
markets. According to a Ernst and Young report, Chinese consumers were constantly looking
for new products and established brands. They were more conspicuous customers who took
pride in sporting international labels, which they considered a sign of success and wealth.
Joseph Wang, the Vice-Chairman of Ogilvy & Mather, observed that luxury brands of Asian
origin that wanted to break into the mainland Chinese market, stood a greater chance of
success if they could first make their names internationally. However, market analysts felt that
Tang had not been able to make a mark internationally, not even in the US. They felt that its
store and its offering still lacked that truly international flavor. According to a report, “Shanghai
Tang has not gained enough brand recognition in the US for most consumers to tell the
difference between their pieces and a $30 cheongsam from Chinatown. The company’s artfully
14
Chinoiserie refers to an artistic style that reflects the Chinese influence, and is characterized through the use of
elaborate decoration and intricate patterns.
15
“Luxury’s Chinese Puzzle: Overcoming Challenges to Tap Growing Demand”, op. cit.

Case Study 35
produced catalogs are graced by Asia’s top models wearing featured pieces. This attracts a
more modern, image-conscious buyer, rather than the older tourist consumer. But that new
customer drawn in by the catalog might be very confused if they visited the Madison Avenue
store, which resembles a cigar lounge and is merchandised like a sample sale”.16 Another
lesser-known, Hong Kong-based brand, Blanc de Chine, founded in 1989, also offered a fusion
of eastern and western designs and was gaining acceptability in the US markets. They had a
range of products similar to Shanghai Tang at a lower price. Blanc de Chine had three boutiques
located in Hong Kong, New York and Beijing, and planned to open a Hong Kong store in late
2006. In a survey conducted by TNS,17 as part of KPMG’s report on ‘Luxury Brands in China’,
in 2006, a majority of luxury goods users ‘appreciated the superior quality of the brand’.
The survey also revealed that a majority bought luxury goods to reward themselves, while
those in second-tier cities, which were considered potential markets, attributed their motivation
to buy in order to ‘demonstrate success and social status’ (Some salient findings of the survey
are given in Annexure VI).
Despite the challenges, Chermont was optimistic of the potential of the Chinese market.
With a population of 1.3 billion, Tang’s home market, China, ranked as the third largest
consumer of luxury goods in the world. In 2004, the country’s luxury goods’ sales exceeded
US $ 6 bn,18 about 12% of the world’s total. According to Yang Qingshan, Secretary-General
of the China Brand Association, China’s top-brand consumers accounted for 13% of the total
population—about 169 million19 people, and were estimated to reach 250 million by 2010.
According to a 2005 Ernst and Young analysis of luxury goods consumption, the annual sales
of luxury goods on the Chinese Mainland averaged around $2 bn,20 and it was estimated that
sales in China would grow 20% annually from 2005 to 2008. China was also predicted to
overtake Japan as the world’s top consumer of luxury goods21 by 2015. The number of millionaires
in China was also on the rise. Although there were no millionaires in China even a quarter of
a century back, their number grew by more than 236,000 by the end of 2004. As per Patrizio
Bertelli, CEO of the Prada Group, by 2010, Chinese consumers would have a total of $500 bn
to spend on luxury goods. He also predicted that China could overtake the US as a market for
luxury goods22 by 2020.
According to marketing experts, Shanghai Tang had the advantage of being a ‘Made in
China’ brand. In his book, Billions: Selling to the New Chinese Consumer, Tom Doctoroff,
Greater China CEO of advertising giant JWT Worldwide, remarked, “Western luxury apparel
brands have failed to understand the psychology of China’s consumers. Chinese are torn
between Confucian values of humility and the pursuit of status as a tool for upward mobility.
16
“Doing the Shanghai Tang”, op. cit.
17
One of the world’s leading market research companies.
18
“China to be Top Consumer of Luxury Brands: Goldman Sachs”, www.china-embassy.org,
December 12, 2005.
19
Ibid.
20
“Designing a Global Brand”, op. cit.
21
“China to be Top Consumer of Luxury Brands: Goldman Sachs”, op. cit.
22
“Shanghai Tang Comes on Strong”, www.globalprovince.com, March 01, 2006.

36 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
Transplanted from the West onto China’s billboards, glitzy ads featuring Caucasian models
loudly flaunting their luxury wears have little relevance to the Chinese consumer mentality”.
Tang’s founder David Tang took pride in his brand being typically Chinese. “Shanghai Tang is
a Chinese label that set out to rejuvenate Chinese fashion which had effectively come to a stop
in China. Never describe it as ‘East-meets-West’ because it’s not, it’s Chinese. We make
traditional Chinese clothes and we modernize them”, he stated. According to him, Tang
aimed to “create the first global Chinese lifestyle brand by revitalizing Chinese designs—
interweaving traditional Chinese culture with the dynamism of the 21st century”.23 Tang also
had the advantage of being located in the low-cost manufacturing center of the world. The
Chinese government also encouraged home-grown brands and protected domestic business.
Although Tang’s strong presence in China was considered a key advantage, the Chinese
markets had their own problems. There was no one clear strategy for tapping into the Chinese
consumers’ growing spending power, given the vast disparities in wealth levels between urban
and provincial areas. There was also the problem of counterfeit. It was possible for
Tang-inspired pieces to be replicated for a fraction of the price in neighboring Vietnam, or to
find an exact duplicate in Shenzhen, the fake Gucci capital of the world. Ooi was however
defensive about Tang’s clientele. “They are genuine individualists who enjoy wearing their
cosmopolitanism and cultivation on their sleeve, as a badge of honor. Definitely, our customers
are not followers. In fact, they enjoy looking different from the crowd”,24 she said. Purchasers
of luxury goods were mostly working professionals between the age of 20 and 40, and the
number of consumers in this age group in China was 11 times that of Japan.
Richemont’s partnership with Tang was also considered a major strength for Tang. According
to Antony Pettifer, Managing Partner from Brandstorm,25 “Richemont ... understands very well
the brand essence and what they can do with Shanghai Tang. Richemont has very powerful
global management experiences and is determined to push the brand while being aware of
overexposure”.26 Looking towards the future, a number of questions arise: Would Tang be able
to sustain its success as a brand in its Asian markets, especially in China? Could it grow into
a global luxury brand and still remain essentially Chinese? To achieve this, analysts feel that
Tang’s brand has to evolve over the years. According to Joseph Wang, “As Shanghai Tang
continues to develop itself as a brand it needs to have a vision. I believe that they will diversify
their range. It may not just be Chinese traditional clothing. It may move to a more philosophical
style and theme, it could be anything such as harmonious designs, billowing, flowing, the
classical elegance of Shanghai”. 

23
Abram D Sauer (2001), “Shanghai Tang: Firmly Tongue in Chic”, www.brandchannel.com, November 5.
24
“Doing the Shanghai Tang”, op. cit.
25
Brandstorm Asia is a group of independent specialists with proven track records in brand strategy,
brand management, research, management training, advertizing and integrated communications.
26
“Designing a Global Brand”, op. cit.

Case Study 37
 Annexure I
Logo of Shanghai Tang

Source: www.womensforum.com.hk

Annexure II
Shanghai Tang’s Store in Hong Kong

Source: http://merlin.capcollege.bc.ca

38 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
 Annexure III
Number of Outlets of Various Brands of Richemont
Boutiques Corners

Case Study
Other Date of
Beijing Shanghai Hong Kong/ Total Mainland Hong Kong/ Total
Mainland Entry in
Macau China Macau
Cities China
Cartier 2 2 5 8 17 35 25 60 1990
VC&A _ _ _ 3 _ _ 2 2 2006
Montblanc 2 1 1 7 11 104 30 134 1992
Dunhill 2 3 22 9 36 34 6 40 1993
Lancel 2 2 4 5 13 30 5 35 1996
Piaget 2 1 1 4 8 23 37 60 1992
JLC 1 1 1 1 4 32 21 53 1999
VC&A 1 1 1 1 4 23 29 52 1998
Panerai _ 1 _ 1 2 2 7 9 2004
IWC – _ _ _ _ 13 24 37 2003
BM – _ _ _ _ 30 54 84 1994
Large & Söhne _ _ _ _ _ _ 5 5 _
Montegrappa 1 _ _ 1 2 4 1 5 _
Chloé – _ _ 1 1 _ _ _ 2005
Shangai Tang* 1 2 _ 4 7 _ _ _ _
Total 14 14 35 45 105 330 246 576 _
Note: * Chinese Brand
Source: www.juliusbaer.com

39
 Annexure IV
Some New designs of Tang

Source: www.nhamagazine.com
Annexure V
Profile of Shanghai Tang’s Competitors
Company Profile
Prada Prada SpA is an Italian fashion company (also referred to as a ‘label’ or ‘house’)
with retail outlets worldwide. Originally known in Italian as ‘Fratelli Prada’
(‘Prada Brothers’), the company was founded in 1915 by Mario Prada. Its
product range included clothing, handbags and other accessories.
Armani Giorgio Armani SpA was started by the Italian fashion designer Giorgio Armani,
in 1974, with his partner Sergio Galeotti. It was established as a menswear
label, followed by the womenswear line in 1975. Its various labels include
Giorgio Armani, Empirio Armani, Armani Collezioni, Armani Exchange, Armani
Jeans, Armani Casa and Armani Junior. Its product range also included
perfumes, watches, shoes and eyewear.
Hugo Boss Hugo Boss A G was established by Hugo Boss in 1923 in Metzingen, Germany.
Its major brands include BOSS, HUGO and BALDESSARINI. Other brands
include BOSS Black, BOSS Selection, BOSS Orange and BOSS Green. The
group’s product range included menswear, womenswear, perfumes and other
accessories.
Gucci Gucci is an Italian fashion and leather goods label. It was founded by Guccio
Gucci in Florence in 1921. Gucci Group NV is currently one of the world’s
leading multi-brand luxury goods companies. Its brands include Gucci, Yves
Saint Laurent, Bottega Veneta, YSL Beauté, Boucheron, Sergio Rossi, Bédat &
Co., Roger & Gallet, Alexander McQueen, Stella McCartney and Balenciaga.
The group’s product range included ready-to-wear, handbags, luggage, small
leather goods, shoes, watches, jewelry, ties and scarves, eyewear, perfumes,
cosmetics and skincare products.
(Contd...)

40 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
 Annexure V (...contd)
Profile of Shanghai Tang’s Competitors
Company Profile
Ermenegildo Zegna Founded in 1910 in Trivero, Italy, by tailor and entrepreneur Ermenegildo
Zegna, the high-fashion clothing company is popular for its suits. Its product
range also includes perfumes, eyewear and other accessories.
Burberry Burberry is a UK-based manufacturer of clothing and other apparel, often in
a distinctive check pattern. It was founded in 1856. Its product range consists
of menswear and womenswear and other accessories.
Sources: Compiled by the IBS Research Centre, Chennai.

Annexure VI
Salient Findings from KPMG’s Report on ‘Luxury Brands in China’
Figure 1: Attitudes to Luxury Brands
Percent
0 10 20 30 40 50 60 70 80
Owning luxury goods demonstrates my success and
social status
I appreciate the superior quality of luxurious brands, not
simply the pursuit of famous brand names
Positive

I long for luxury goods but I can’t afford them right now
I own luxury goods because of work necessities
I own luxury goods to reward myself
Luxury goods give me confidence
I own luxury goods because they are popular in my social
circle

I don’t like to show off, so I would not buy any

Negative

luxury goods
I am practical and not willing to pay the premium
claimed by luxury goods

Strongly Agree Agree

Figure 2: Attitudes Towards People Who Own Luxury Brands

Percent
0 10 20 30 40 50 60 70 80
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1234567890123456789012345678901212345
12345678901234567890123456789012123
They are successful 1234567890123456789012345678901212345
Positive

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They are fashionable
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They are showing off, flashy
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Negative

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They are wasting money
12
12
12
They are superficial

123 12
Average 123Shanghai 12 Beijing Guangzhou Tier- II Cities

(Contd...)

Case Study 41
 Annexure VI
(...contd)

Figure 3: I Own Luxury Goods to Reward Myself (By Income)

Percent
Monthly Income Level

Above RMB 10,000

RMB 7,000 - 9,999

RMB 3,000 - 6,999

0 20 40 60 80

Strongly Agree Agree

Figure 4: Attitudes Positive in Second Tier Cities

Percent
0 10 20 30 40 50 60 70

Owing luxury goods demonstrates my 1234567890123456789012345678901212345678901234

1234567890123456789012345678901212345678901234
1234567890123456789012345678901212345678901234
success and social status

I own luxury goods because they are 1234567890123456

1234567890123456
1234567890123456
popular in my social circle

123
Shanghai 123
123 Beijing Guangzhou Tier-II Cities

Figure 5: Intention to Purchase Luxury Products in the Next 12 Months

60
50 123 123
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123
123
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123 123
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40 123
123 123 123
123
Percent

123
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0 123 123 123 123 123 123
Clothes Bags and Watches Pens Cosmetics and Jewellery
Footwear Perfume

123 12
123
Average 123 Shanghai 12 Beijing Guangzhou Tier-II Cities

(Contd...)

42 The Icfai University Journal of International Business, Vol. III, No. 3, 2008
 Annexure VI
(...contd)

Figure 6: Choice of Retail Format for Luxury Purchases

60 123 123
123 123 123
123 123 123
50 123 123
123 123
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Percent

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0
Clothes Bags and Watches Pens Cosmetics and Jewellery
Footwear Perfume
12 12
12 12 Branded Store
Shopping Mall 12 Department Store Out Store/Discount Store Online Purchase

China’s Unique Characteristics

• Brand Awareness
The arrival of international retailers over the last decade has signalled a dramatic change in the
psyche of the Chinese. China indeed, has huge potential as a luxury market, given its massive
urban population and the younger generation’s affinity for designer goods. However, while the
Chinese are very fast to take to luxury products, they still have trouble differentiating within the
sector and distinguishing between the various strata of the luxury market; the country’s big
spenders are often only aware of the most popular luxury labels.
• Perception of Beauty
While beauty in the west is often transformational and edgy, with consumers less afraid to stand
out from the crowd, studies suggest that Chinese women seek a more accessible, inclusive form
of beauty. Features that stick out are generally not perceived as attainable or attractive. As such,
in advertising, Chinese prefer to see Chinese faces, although a truly iconic foreign celebrity will
also work because Chinese admire expertise, power and status.
• Counterfeit Goods
Most of the newly wealthy Chinese still want authentic products, but as a rule, the Chinese are far
more price-conscious, for example, than the Japanese, and the younger consumers have shown
a willingness to mix cheap fakes with genuine products. Studies suggest that people in Hong
Kong are becoming more discerning when it comes to buying genuine clothing brands, accessories
and electrical goods, despite the ready availability of fake goods. Luxury brands will be hoping
that a similar change in attitudes occurs, overtime, on the Mainland.
• Shopping for Pleasure
‘Mall culture’ has arrived in China and shopping is increasingly being adopted as a leisure
activity. Retail Asia magazine predicts that by 2020, China will be home to seven of the world’s
ten largest malls. This growing popularity of malls should help to increase the market size for
luxury products, by strengthening brand awareness and aspiration.

(Contd...)

Case Study 43
 Annexure VI
(...contd)
• Travel
Chinese nationals have shown a strong preference for purchasing luxury products overseas,
for two reasons. First, shopping at the designer boutiques in Europe guarantees that the goods
they buy are not counterfeit, something they cannot be sure of when shopping in some malls in
China. Second, higher taxes and duties mean that Mainland prices can be 30% more than
elsewhere. Chinese citizens are traveling more and spending more abroad as travel restrictions
continue to be lifted, and Chinese tourists have become some of the main buyers of the prestigious
brands from Europe. The French Tourist Board has found that Chinese travellers to France
spend more than people arriving from the US or other European countries. The Economist
Intelligence Unit predicts that by 2008, the number of Chinese overseas tourists will rise to
49 million. The World Trade Organization further forecasts that about 100 million Chinese
people will tour abroad in 2020.
• Motivations: Aspiration and Self-Reward
The reasons why Chinese consumers purchase luxury brands, bear similarities to those in other
countries. But the research of TNS (Taylor Nelson Sofres) found that status and self-reward are
two particularly strong motivations in China. Among those surveyed, attitudes towards brands
were overwhelmingly positive. For example:
• More than 70% saw luxury brands as a way to demonstrate their status and success.
• Less than 30% objected to paying a premium for a luxury brand.
• Just over 60% of the respondents bought luxury goods as a way of rewarding themselves for
their hard work and success.
Therefore, in China, the consumption of luxury goods is very much item-driven, which means
that consumers search for the latest collection or products. At present, in China, consumption
tends to concentrate on personal accessories such as cosmetics, perfumes and watches—smaller
items that can be justified as rewards. This is different in more developed markets, where consumers
tend to seek experiences or products catering more to their personal tastes.
Source: KPMG’s Report on ‘Luxury Brands in China’.

Reference # 48J-2008-08-03-02

44 The Icfai University Journal of International Business, Vol. III, No. 3, 2008