Strategic Management

'The Democratization of Fashion': Vera Wang and William Fung on the Implications of Going Global

Vera Wang built a brand creating wedding-day fantasy gowns for celebrities and socialites. She became a household name even to the average shopper, although her creations were often too expensive to hang in their closets.

Most of those same shoppers have likely never heard of William Fung. But chances are, they own some of his work -- and may even be wearing it right now. The century-old Hong Kong-based trading company -- founded by Fung's family during the Qing Dynasty -- sources and coordinates the supply chains for about 30% of the brands found in the average American shopping mall.

As the world grows more interconnected, businesses are learning to adapt to new realities. To compete in a numbers game, Wang is trying to turn her business into one that is widely known and widely worn, expanding into a more moderately priced line for Kohl's. And as retailers face greater pressure to keep up with rapidly changing trends, expand into new markets and streamline production, Li & Fung is managing new complexity in the production process. 

"There's a democratization of design, not just fashion, and it is a challenge for designers to constantly be creative but also worry about the reality of that creativity," Wang said during a recent Penn Fashion Week keynote discussion with Fung, managing director of Li & Fung, and Wharton marketing professor Jerry Wind, who acted as moderator. "The next step is that, pretty soon, I'm sure Vera Wang designs will be global," Fung noted. "In the old days, communication was not as effective. Today, when the Internet connects so many people, fashion information and styling information go around the world in a matter of days." Added Wang: "in seconds."

A Dramatically Different World

Both agreed that the fashion business is dramatically different from the world each entered when they were starting out in the industry. For Wang, an introduction to that world began with a feeling of disappointment. "I tried to be an Olympic figure skating champion and failed miserably at it," said Wang, who would later design figure skating costumes for Olympians Nancy Kerrigan and Evan Lysacek. "That led me to Paris -- not because of fashion, but because I had a French figure skating boyfriend."

Wang spent her time in France studying art history at the Sorbonne and taking in the atmosphere of the City of Light. "There are two things in Paris that you can't miss -- fashion and food." She fell in love with the former. "When I got back to the U.S., I decided I wanted a career in fashion; that's not easy to do because I had never been to design school or fashion school or any of those places that qualify you."

While working as a sales girl at the Yves Saint Laurent store on Madison Avenue in New York, Wang had a chance encounter with the fashion director of Vogue. The connection led to a job, and Wang spent 17 years moving up the magazine's ranks. Her experiences fueled a desire to become a designer, and she eventually landed a job at Ralph Lauren. "When I got engaged, I was working for Ralph. I didn't want him to make my wedding dress because what if I didn't like it?" she said. "So I ended up realizing what seemed to be a business opportunity. I wasn't a bridal designer; I was a very, very experienced fashion professional." 

Wang and Fung are family friends; their parents knew each other, and both families left China to escape the Communist Revolution in the late 1940s. Fung noted that, although he was recently honored by the Parsons School of Design in New York City, "I can't even draw." Good design, he added, "doesn't have to be expensive. Good design can be an everyday article of clothing; it doesn't have to be couture. Li & Fung is the side that makes it not expensive; we're the production side."

Li & Fung was founded by Fung's grandfather in 1906 in the Chinese city of Canton, now known as Guangzhou. At the time, the company focused on direct exports and meeting demand from Western customers for items such as porcelain and silk. When the Communist regime took control in China, the family and the business left for Hong Kong, which was then under British control. The company later expanded into exporting clothing, toys electronics and plastic flowers, and ultimately transitioned into a focus on sourcing, supply chain management and logistics. Fung's brother Victor is the firm's chairman.

Higher Wages, Higher Prices

"The biggest challenge faced by us now is to service any market.... We have to know what the trends are, not just in fashion but culture -- what people are wearing when they go to coffee shops, or the discos, and how to deal with a problem like when your customer is in the Western market and the manufacturer is somewhere thousands of miles away in Asia," Fung noted. "Then there is the whole creative process and the practicality of making those designs come to fruition. It all has to be interconnected. What my company does is bring the two sides together."

Fung predicts that the era of cheap goods from Asia is over. The turning point was the 2010 suicides of 14 workers at the Foxconn electronics manufacturing plant in China, which produces components for Dell, Hewlett-Packard and Apple, among others. The company responded to the deaths by promising to offer higher wages, but Fung said the incidents also marked a change in direction for Chinese leaders.

"[The Chinese government] is planning a 13% increase in wages each year for five years. That means Chinese wages will almost double. It marks a turning point ... and I expect a huge increase in consumer prices," Fung said.

If companies are to avoid alienating consumers by passing on the full brunt of an increase in the cost of doing business, "the best antidote is to make supply chains more efficient," Fung stated. "Taking the fat out of supply chains is going to be a big thing, including making logistics more efficient and making goods 'shop ready' so they don't have to be handled three or four times in an American distribution center with high labor costs."