Xia Hua of Eve Enterprise on Helping China’s Male Luxury Shoppers Get Their Fashion Fix

Not everyone would agree about its fashion merits, but there's no doubting the staying power of the somber, boxy suit that Sun Yat-sen, the Republic of China's first president, donned in the 1920s and was popularized by Chairman Mao Zedong some 50 years later. More recently, the "Mao suit," as it's known in the West, has begun to sneak back into vogue as local fashion houses design updated versions of the Chinese icon.

After her company, Eve Enterprise Group, was asked to re-tailor a Mao suit for President Hu Jintao for the country's 60th anniversary celebrations in 2009, Xia Hua told China Daily newspaper that the updates range from a slimmer cut to new fabrics, which are combined with the suit's traditional touches, like rows of buttons and a standing collar — all aimed at attracting China's increasingly fashion-conscious consumers.

That knack for combining the new with the old — as well as the West with the East — is now Xia's hallmark. Having launched her luxury menswear firm from a small booth in Beijing's bustling Xidan shopping district in 1994, Xia is one of a small group of local entrepreneurs now aiming to put China on the global fashion map with their own high-quality brands.

It's not easy, of course. At a time when China struggles to shed a reputation among consumers as the home of low-end fashion, high-end American and European fashion houses — from Louis Vuitton to Chanel to Gucci — have been invading the country's tony shopping districts in step with rising local wealth. Also chasing after the country's new legion of wealthy shoppers are Eve Enterprises' four menswear brands — Eve de Uomo, Notting Hill, Kevin Kelly and Jaques Pritt — whose annual sales of some RMB 1.3 billion (US$205 million at department stores and franchised outlets across China are a fraction of their multinational competitors' sales.

But prospects are enticing. A December report from consultants at Bain notes that luxury good sales in mainland China grew 27% from the previous year, to RMB 87 billion, with similar forecast for 2011, despite a slowdown in the fourth quarter. With growth expected to continue, experts say it's just a matter of time before China, combined with Hong Kong and Macau, overtakes Japan as the world's second-largest luxury goods market, after the U.S.

Critically for Xia is that Chinese men like to shop. Unlike in other countries, menswear in China is a sizeable part of the luxury market, at around 25% of overall sales. According to Eve Fashion's founder, one key to attracting those shoppers is clear: Rekindling the spirit of local craftsmanship.

Xia, who is now chairwoman of the menswear company she launched after resigning from a teaching post at a university, recently joined other members of the nonprofit China Entrepreneur Club (CEC) on a speaking tour of the U.S., and sat down with China Knowledge@Wharton following a presentation at Wharton to discuss the country's changing fashion landscape, and her transition from classrooms to changing rooms.

An edited transcript of the conversation follows.

China Knowledge@Wharton: How did you grow Eve from a small stall in Beijing to a company with more than 500 franchised stores across China?

Xia Hua: We saw a great opportunity about ten years ago, when China's private sector began booming, especially in fashion. Not only have we made money, but we also have built a brand portfolio that consumers respect. Every brand under the Eve umbrella requires that we manage not only our products, but also a group of consumers who understand and respect our brands. We want to make our customers the best promoters of our brands. With that in mind, we have launched innovative products that differentiate us from our competitors, and we aim to provide customer service on par with global luxury brands.

China Knowledge@Wharton: How would you describe your strategy for serving your customers?

Xia: It's all a matter of understanding who we are designing for, who we are selling our products to and who the people are that we are ultimately serving. In building our brands, we adjust our strategy every year based on what customers are looking for. We launch new designs, marketing concepts, services and promotions tailored to them. The most important thing is that we have a solid system for market research, which enables us to understand who likes our products most, and who they are in terms of age, their professions and even individual shopping preferences. Based on our market research, we develop our design concepts, marketing and service models.

China Knowledge@Wharton: Have the shopping habits of your customers changed much over the past few years, and if so, how has your company responded?

Xia: Chinese consumer patterns have been changing dramatically in five-year cycles over the past 15 years. I've been fortunate in that I have experienced each of those cycles. In the first five years, Chinese consumers were focused primarily on low-priced products, and the functionality of those products. For fashion consumers, that was a period of simply buying clothes to wear. In the second five-year cycle, when most of the international luxury brands entered China, consumers began buying brands that reflected their social identity. And the third five-year cycle is under way right now.

It's this cycle that offers the best opportunity for Chinese brands to grow, because local consumers are beginning to really understand the value of brands and the concept of "rational consumption." They not only are sizing up the products we sell, but also the concepts behind them. So companies building brands in China have to make solid products as well as develop a strong "brand culture." It's only then that consumers are willing to follow you along the way and help you grow.

China Knowledge@Wharton: How important is having an online presence for your strategy?

Xia: Online sales have only taken off in the past five years, especially in the apparel space. Young people started the trend when everyone was focused on low-priced products. In recent years, more middle-aged people started making high-end purchases online, but essentially as an extension of offline brands. Our product positioning is at the high end, and online sales right now account for around 10% of our total sales.

China Knowledge@Wharton: You stated during various presentations in the past that Chinese traditional craftsmanship is the backbone of your brand. How do you incorporate that into your products?

Xia: We've put a lot of effort into this project over the past three years. Ultimately, if Chinese brands are looking for sustainable global recognition and respect, the essence of what they stand for needs to be Chinese. We've been searching for valuable traditional Chinese craftsmanship. It is on the verge of extinction because in most cases, the craftsmen are getting old and have no succession plans in place to pass on their skills on to the next generation. We're trying to hire young people, who can learn their crafts to carry on the tradition.

Such craftsmanship has to be integrated into the fashion business if it has any chance of surviving from one generation to the next. We set up several teams that have old craftsmen working with renowned international designers to help the older crafts migrate to modern fashion. For example, we've commissioned Zhang Tie Cheng, the highly respected craftsman who carved the gold medals for the Beijing Olympic Games in 2008, to make some fashion accessories for us. And we've incorporated traditional crafts, like hand-embroidery and quilting, into our designs.

China Knowledge@Wharton: Who are your competitors?

Xia: The most important ones are global men’s apparel brands, like Dolce & Gabbana and Armani. As our brands continue to develop, the price disparity between us is narrowing quickly, and we are competing directly against them in terms of customer awareness and brand value.

China Knowledge@Wharton: What is your global growth strategy?

Xia: We have embarked upon the first two steps of globalization. First, we have developed a supply chain employing nearly one hundred suppliers and manufacturers around the world to provide the raw materials and other products we need. That enables us to get the best-quality products that we can from anywhere in the world. The second step has to do with human capital. We have set up our own design houses in different parts of the world and have hired the most competent designers in each country to work for our brand.

For the next step, we will take advantage of the Summer Olympics in London to open shops in England and the rest of Europe. Having a step-by-step approach is helping us set up a global strategy based on a solid foundation for a more promising future.

China Knowledge@Wharton: What made you leave the academic world to start a career as an entrepreneur?

Xia: This is a very interesting story. At the time — 30 years ago — I was teaching at China University of Political Science and Law. I enjoyed being with the young students, but ever since I was a child, I had always liked fashion. Because I had never studied fashion, I thought I didn't stand a chance of ever rising up the career ladder in it. But life always presents many happy surprises.

As part of a research project, I took a group of graduate students to visit China's new apparel companies, and I learned, surprisingly, that the people who were really excelling a lot in the sector never went to university or even had a good education. So after that, I submitted the research report along with a resignation letter. Then, I went from being a salesperson to managing a company with 3,000 employees today, and I am proud that we have managed to become a leading fashion brand.

China Knowledge@Wharton: What advice do you give to young people who want to start their own fashion companies?

Xia: I have always liked being able to make an impact on young people, and I regularly give lectures and classes at universities in China. I want to do this because all young people have dreams, but dreams without action will just remain that: Dreams. If you know in your heart you would like to do something, do it now. Many young kids ask me: What is the best time to start a business? My answer is, "Always. There is no such thing as the 'best' time; what needs to be the best is you.” It's only when you really want to do something that you will make the most effort.

When you enter any industry for the first time, it will always be very hard because there will be many people who have been involved in it before you. But being an entrepreneur is not as hard as you imagine. It’s just like any other game you play. As long as you devote yourself to it whole-heartedly, and as long as you can inspire everyone around you to be just as devoted, it will be a wonderful game. What's important is that you learn to change the rules of the game as the game itself changes, so everyone will see the game becoming more and more interesting and will follow you along the way.

Another thing is that you have to have a grateful heart, no matter how capable the people working with you are. They are spending their life to be with you. Only by living a grateful life can you grow the enterprise, and the people following you will be more devoted. Any future glory is created together, with our hearts.

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