Flexible fashion
November 28, 2005
By: Ding Qingfen
China Daily

SHANGHAI: It's important to strike when the iron is hot.

Gavin Yang, chief operating officer (COO) of Shanghai-based HOZ Fashion International Co Ltd China, says that entering the market at the most opportune time is the key to long-term success.

Famed US fashion sportswear brand HOZ first set foot in China in mid-November when it announced it would establish its local headquarters in Shanghai. It is not the first international company of its kind to enter the domestic market, but its timing was carefully considered.

"HOZ is in the right place at the right time," Yang says.

"That is our competitive edge."

HOZ was established in Florida in 1943 as a manufacturer of sports accessories for local fishermen. When World War II came to an end in 1945, the company's business began to decline and almost went bankrupt.

US designer Howard Zathz took over the operations in the 1960s, however, and successfully transformed the company's brand image.

HOZ has become quite popular among US, European, and Japanese youth interested in street culture and urban fashion. The brand strongly advocates the spirit of freedom, originality, and enthusiasm.

The company shifted its focus to China two years ago following the announcement that the country would host the 2008 Beijing Olympic Games.

The company started a nationwide study in March this year involving more than 50 international sportswear brands and 500 affluent consumers across China's major cities. The project found that the 25 to 35 year old age bracket favours sportswear that combines local trends with the functionality of athletic gear.

Over the past two years, international sportswear brands including Nike, Adidas, and Reebok have sensed these trends, and responded by making sportswear products more fashionable.

"HOZ has specific brand strengths compared with other big international manufacturers," Yang says.

"The US headquarters is very excited about the results of the study, and is planning to expand its business into the local market."

The timely decision attracted attention from local sportswear brand agents, retailers, and marketing directors from China's major shopping malls.

More than 400 retailers have discussed the possibility of co-operating with HOZ.

"That is hardly ever seen in China, and it says a lot about our strengths," says Yang.

Branding before profit

The company has already invested more than 30 million yuan (US$3.7 million) in its China business.

"That figure is expected to rise to 100 million yuan (US$12.35 million) by the end of 2006, and branding is our top priority," says Yang.

"HOZ even expects not to profit for as long as three years from the local business," he emphasizes.

With one-fifth of the world's population, China is a significant element in the company's global development strategy.

HOZ expects to build a leading brand specifically designed for affluent consumers in China.

"That will stimulate HOZ's global development," says Yang.

"Chinese trends could exert unbelievable influence on the world market, especially the Asia-Pacific region."

HOZ has chosen US pop group the Backstreet Boys as the company's brand image promoter in China.

"It is the first step of our branding strategy in China," says Yang.

The company has an established bond with the popular boy band. In early 1989, Zathz saw that his daughter was obsessed with the Backstreet Boys' music, so he decided to financially support the gruop, which has sold 75 million albums worldwide.

The company is sponsoring the Backstreet Boys' first concert in China, following a five-year absence from the stage, at a price tag of more than 10 million yuan (US$1.23 million).

"Most of their fans in China were born between 1970 and 1980, and they are our target customers ," says Yang.

The company also expects to invite local stars to promote its branding campaign in the future, the COO says.

HOZ products will be available for sale by the end of the year, and two HOZ China flagship stores will open on Beijing's Wangfujing Avenue and Shanghai's Huaihai Road.

Fifty HOZ stores will open across major cities next year, including Beijing, Shanghai, Guangzhou, Dalian, Harbin and Chongqing.

"Our business focus is on East China, including Zhejiang and Jiangsu provinces, where consumption capacity is powerful," says Yang.

The 50 stores feature a consistent brand image. The company also established a research and development centre in Shanghai in July. It designs products tailored for local consumers. Thirty items have already been customized to local tastes, Yang says.

Sixty per cent of the goods sold in HOZ's China stores are for women. They are generally more affordable than international brands such as Adidas and Nike, but the company is not operating at the bottom of the market.

"The prices are reasonable," Yang explains.

Talent remains an obstacle to expansion, however. There are now 100 staff members working in HOZ China in marketing, R&D, and corporate branding.

"Getting talented people is the key to development," Yang says.

The company has established a training system, and will frequently send employees at all levels overseas in the next three years for courses.

HOZ China will also put 10 per cent of its annual revenues into training programmes.

"Another 20 per cent will be used for advertising, which is why we do not expect to profit in the short term. Although there are challenges ahead, from a long-term perspective, it is worthwhile," says Yang.

As the former COO of domestic sportswear brand 361, Yang successfully helped the unknown company become one of the top brands in China within a year. Approximately 8.5 million pairs of shoes were sold during his time at 361.

"Knowledge and experience can help me this time, but I am also excited about the challenge," Yang says.

"I am very confident about HOZ's China business."