The­ory on Forg­ing a Con­tem­po­rary Mar­ket in China

Fresh off launch­ing a Tmall shop, the la­bel shares its plans to dou­ble the num­ber of stores there to 70 in three years.

WWD Digital Daily - - News - BY TIF­FANY AP

BEI­JING — The Chi­nese con­sumer loves lux­ury, and it loves celebri­ties, that much is known. But The­ory, the Amer­i­can brand that helped pioneer the con­tem­po­rary cat­e­gory in the West, has its own hy­poth­e­sis about China.

“If ev­ery brand was celebrity-driven, the world would be a bor­ing place,” An­drew Rosen, The­ory Inc.’s chief ex­ec­u­tive of­fi­cer, said in a tele­phone in­ter­view soon af­ter the brand un­veiled a Tmall flag­ship. “We of­fer a dif­fer­ent aes­thetic and life­style, and it’s worked for a long time. Based on what’s hap­pen­ing in our busi­ness in China, the con­sumer is re­act­ing re­ally well.”

As a re­sult, the brand has been busy in the mar­ket. On top of its new Tmall front, which made its de­but on Sept. 21, the com­pany op­er­ates a Chi­nese web site, which func­tions as a brand­ing foil to the com­merce-driven na­ture of the new third­party mar­ket­place shop. Off­line, The­ory counts 33 stores and six out­let stores in 17 cities across China, which it ex­pects to dou­ble in three years.

“His­tor­i­cally, we’ve opened eight to 10 lo­ca­tions ev­ery year...we’re tar­get­ing the same rate of ex­pan­sion the next three years,” said Di­nesh Tan­don, The­ory’s ceo for greater China and South­east Asia. “We’ve got close to 35 stores in greater China and look­ing to have 60 to 70 by the end of three years, as far as brick-and­mor­tar goes.”

The com­pany is proud, too, of the pro­duc­tiv­ity per square foot it sees in that mar­ket.

“If you look at our av­er­age store, it’s 1,500 to 2,000 square feet in­side, and the ab­so­lute dol­lar rev­enue would be around $3 mil­lion per store on an an­nual ba­sis,” Tan­don shared.

While China sales are still mod­est for the brand, “maybe 10 per­cent of our global sales... ul­ti­mately I think it should be 25 per­cent of our busi­ness,” Rosen said.

Af­ter a few beats, he leaves room for even more growth. “We think 25 per­cent but who knows, busi­ness is still in its em­bry­onic stages. As we ex­pand out­side of tier- one cities, who knows what the po­ten­tial is?” he mused.

Part of that vague­ness stems from the fact that there is not much of a con­tem­po­rary mar­ket to speak of in China. Of­fer­ing prod­ucts gen­er­ally in the range from $50 to $300, Tan­don said, “we are early movers in this mar­ket in this re­spect. If you look at

U.S. de­part­ment stores, there would be a whole floor of con­tem­po­rary brands, whereas in China, this is a boom that is about to start. We are tar­get­ing lux­ury malls where tra­di­tional Eu­ro­pean brands are stag­nat­ing now and that’s cre­at­ing op­por­tu­nity for us. There’s a bit of up­side on the real es­tate.”

There have been shifts over­all in the brand as well. The­ory wel­comed a new de­signer this year in Francesco Fucci, pre­vi­ously of The Row. With one col­lec­tion shown so far, Fucci’s ar­rival has co­in­cided with a rise in prices.

“I think the prices are about 8 per­cent more ex­pen­sive,” Rosen said. While some of that is a choice by the brand to el­e­vate its pric­ing, he added “a big part of our price in­crease is what has hap­pened with raw ma­te­rial prices around the world.”

Could the U.S.-China tar­iffs adding 10 per­cent to im­ported tex­tiles and hand­bags com­pli­cate things fur­ther for the brand?

“Ob­vi­ously, we would pre­fer that we don’t have to deal with this,” Rosen said. “We don’t know what’s go­ing to hap­pen. I think that ob­vi­ously if prices rise be­cause of it, that’s not a great thing. But it’s go­ing to af­fect ev­ery­one the same way.”

Rosen, who is often cred­ited as a cat­a­lyst of the Amer­i­can fash­ion port­fo­lio model, also had thoughts about the in­dus­try’s big­gest news when Michael Kors re­vealed plans to morph into Capri Hold­ings fol­low­ing its ac­qui­si­tion of Ver­sace, in a sim­i­lar move to Coach Inc. when it trans­formed it­self into Tapestry.

“You know, lis­ten, I think what’s hap­pen­ing is that the world is be­com­ing a global mar­ket­place,” Rosen said. “The com­pa­nies that are able to op­er­ate around the world in dif­fer­ent coun­tries, and those that have a suc­cess­ful plat­form both phys­i­cally and dig­i­tally, and de­velop and have a strong brand iden­tity are get­ting stronger.”

The­ory’s Shang­hai flag­ship.

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