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An obstinate streak: Wu Fangfang refused to sell her Miss de Mode brand when the financial crisis struck |
Two days of record sales are a cause for celebration and Wu Fangfang, founder of Shanghai Qianrui Garment Company, is all smiles.
She is also frantically busy. A two-day online sales event, which was hosted by Taobao Mall, the business-to-consumer online marketplace, has brought in more than 100,000 orders and Rmb10m ($1.5m) of sales.
At a desk in her offices in the Shanghai suburb of Minhang, the elegant 35-year-old chief executive is arranging for 200 garment workers at her new factory to work all hours to fulfil the orders, while she also updates the US-based venture capital investors who have just put in second-round funding of $10m. Sales projections for 2011 for her popular children’s clothing brands
Miss de Mode, MILBoy (Made in Love Boy), and Jenny Bear have risen to Rmb250m.
It seems that Ms Wu’s gamble of switching from bricks-and-mortar retail outlets to online-only is paying off. Taobao Mall is part of Alibaba, the Chinese e-commerce group, and Ms Wu was honoured in September as one of Alibaba’s best “netrepreneurs” at the company’s annual Alifest summit for entrepreneurs.
“We are now at a point that we’ll lose money if we do less than Rmb2.5m in sales every month,” she says.
Yet just two years ago, Ms Wu was fending off creditors and being pressed to sell her business at a firesale price. But, she says, fast reactions and the courage of her convictions helped her to make the switch to online that has proved so successful.
In addition, she has an obstinate streak, having more or less earned her own living since she became a fashion model at the age of 13 following her parents’ divorce.
When the financial crisis first hit, she says: “I didn’t panic ... I used the situation to coolly evaluate my business model and decided that, over the long term, I will be fine because children’s clothes and e-commerce were both growing sectors in China.”
At that time, Ms Wu’s company owned just one clothing brand, Miss de Mode for girls, which she had started in 2005. Her company designed, manufactured and promoted the clothes, which were sold through a network of Miss de Mode retailers. Sales had grown quickly, with the number of stores increasing from 30 to 107 in just two years.
When a crisis threatens
When Wu Fangfang’s business was nearly sunk by the financial crisis of late 2008, she learnt some lessons on how to deal with uncertainty.
●Maintain confidence: “Every day I made sure that I smiled in front of my staff. I wanted them to know that we were going to survive the crisis and I was 100 per cent optimistic.”
●Talk to creditors: “I met all my creditors face to face. [With] some creditors, such as factories that were far away, I took the time to visit them. I told them personally that I would pay back in a year’s time. I told them I would never run away and I would never let them down.”
●Keep your integrity: “Many people at that time started picking fault with shipments of clothes and sent them back to the factory to get out of paying – we didn’t do this.”
●Inform your staff: “We met every two, three days and I would tell them any good news, however small and insignificant. I would say, ‘We made Rmb50,000 today,’ which was not very much, but sounded uplifting at the time.”
At the start of 2008, all the retailers asked Ms Wu to increase output. “They told me this fall/winter season is going to be very good ... But when the [financial crisis] struck, they abandoned more than half of their order,” she says. Most of the stores reneged on their contract to buy more products.
Ms Wu could not sue each retailer, but she also could not sell the clothes anywhere else as she had no other sales outlet. She had to swallow the loss, representing Rmb12m that year, while sales continued to slow.
It was a rude awakening for Ms Wu. Creditors started calling at the company’s offices. An entrepreneur from the city of Wenzhou, where her brand was popular, offered to buy the Miss de Mode brand and her stock for Rmb2m.
Take the deal, her mother urged – at least she could recoup some of her original investment. “But this brand is like my child. I couldn’t possibly give it up,” says Ms Wu.
Many of her 30 staff were supportive. One even suggested that she pay the workers shenghuofei – basic living costs – for two months, but Ms Wu felt it was vital to maintain salaries.
However, she did accept a loan from her office assistant, who refinanced her apartment to help Ms Wu pay outstanding bills. With that and by refinancing two of her own apartments, Ms Wu raised Rmb2.8m to stave off creditors.
She did not bother to ask the banks. “It’s almost impossible for small, private businesses to get a loan in China, unless you have guanxi [connections],” she explains.
With sluggish cash flow and a pile of unsold stock, Ms Wu had to find another sales outlet fast. Luckily, Taobao.com, the Chinese e-commerce site, had just launched Taobao Mall. She was already familiar with the group: in fact, it was Taobao that had inadvertently prompted her to start the Miss de Mode brand.
When the Chinese site took on Ebay China in 2005, Ms Wu was running a small wholesale garment and design business that sold its products on Ebay China. Friends in the business would call her when extras left over from an export clothing shipment were available. She and her small design team would collect the items, add extra flourishes and sell them.
When Ebay China closed the following year, Ms Wu developed Miss de Mode into a brand that sold through bricks and mortar retail outlets only. “At the time Ebay users like me looked down on Taobao. It was known for selling cheap things,” she says.
Nonetheless, her loyalty to Ebay was waning. She felt it had made mistakes in China: it was too slow; PayPal did not work in the country; and it had hired a lot of foreigners who did not understand the Chinese market. By contrast, “Taobao had Alipay [Alibaba’s online payment system], it offered instant messaging and it was free”.
So, when the financial crisis struck, Ms Wu decided to use Taobao.
New ventures rarely run smoothly, but one of her problems came from an unexpected quarter: some of the original Miss de Mode retailers. Sales had yet to pick up on Miss de Mode’s online shop on Taobao Mall, when Ms Wu was shocked to receive a demand from 70 of the stores, including some that had reneged on their contracts, for her to close her online outlet because it was affecting sales of the remaining stock.
Again, Ms Wu turned to her staff for their opinions. Many said to close the Taobao store down: online sales were still a small proportion of overall revenue and they had spent three years building the store network. But Ms Wu saw it differently: “I told them we held the key of e-commerce in our hands now and we should use it.”
She decided the Miss de Mode brand would be sold online-only as soon as possible. In 2009, when the last of the “franchisee” contracts expired, Ms Wu halved the online prices, which had formerly matched those in-store. By the end of May, Miss de Mode had Rmb500,000 of sales. Ms Wu launched two more children’s lines – MilBoy, which is now outselling Miss de Mode, and Jenny Bear.
Ashort car journey from her offices, Ms Wu shows off the three floors of the new 4,000 sq m factory and warehouse in Songjiang District. She believes it is important for the company to have its own factory: “We can respond to the market and needs very quickly. Less than 6 per cent of our stock remains unsold.”
However, fast growth has brought new challenges. Overall costs have gone up. Ms Wu has had to hire staff very quickly: the design team now has 60 people; the fulfilment and e-commerce centre has another 120; and the new factory has hired nearly 200 garment workers – the ones racing to fulfil the extra orders.
“It’s getting harder and harder to find people ... but the fact that we have a venture capital partner and that we’ll eventually have an initial public offering will make our company more attractive,” says Ms Wu. The intention is to list in 2014, either in Hong Kong or the US.
“We faced the worst hardship in 2008 so from now on, I feel that we can face anything,” says Ms Wu.
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