Bosideng Closes Its Only Overseas Flagship Store: a Failed Attempt to Make the Brand Fashionable

Ten years after going public, Bosideng has wanted a great many things, but it still hasn't worked out three key questions: what the brand stands for, what its core asset is, and what consumers actually want.

This past Monday, Bosideng closed its only flagship store outside China.

The location was excellent. The building has a total floor area of 3,750 square meters and sits in London's Mayfair shopping district, right next to Oxford Street, which draws 24 million visitors a year. The neighbors include the French affordable-luxury womenswear labels Maje and Sandro — both bought earlier by Shandong Ruyi Group — the British personal-care and cosmetics brand Lush, and the French cashmere knitwear brand Zadig & Voltaire.

Open the brand's UK website, which has served the global market since 2013, and all you see now is a few lines of small English type: "This website is closed, please visit our store."

On February 13, a Bosideng Group spokesperson told the British trade publication drapers.com: "After several years of operation, the London flagship store gave us a great deal of experience running an overseas business, and raised our brand's profile in overseas retail and financial circles. But given the instability of the UK retail market after Brexit, and considering return on investment, we've decided to lease out the property and look for the right time to return to the UK market."

The statement carries three implications: that Bosideng's overseas business has done badly; that the flagship store's building will now be run as a piece of real estate (Mayfair is one of London's most expensive districts by home price, with rents reaching £2,700 a week); and that Bosideng may not have given up on the UK entirely.

Five years ago, when this store arrived on a London street with a fashionable new look, it drew a lot of attention. Bosideng hoped it would give the brand an entirely new image. So why did the attempt fail?

Less an overseas expansion than a try-out of a more upmarket, more fashionable image

In its early years, Bosideng was arguably the best-known and most influential of China's traditional down-jacket brands. But around 2010, fast fashion was spreading rapidly in China and online shopping was booming. That hurt a brand like Bosideng — narrow product line, dependent on more than 10,000 physical stores. It was against this background that Bosideng laid out a transformation strategy it called "four-season products, internationalization, and multi-branding."

The London flagship store is considered the starting point of Bosideng's move overseas, and the starting point of the "internationalization" piece of that strategy.

In 2011, the group paid £21 million for the six-story building at 28 South Molton Street, then in July the following year spent £35 million turning the first three floors into the Bosideng London flagship store. The rest of the building became the group's administrative headquarters in Europe.

To be fair, the design and finish of the London store were not bad at all. To build an entirely new image, it did not carry over Bosideng's mid-range "down jacket" positioning from home; it sold high-end menswear instead, bringing in the British designers Ash Gangotra and then Amelia Pretious as creative directors. Eighty percent of manufacturing was done in the UK rather than in China. A T-shirt cost US$85, a down jacket US$398, and suits ran from US$795 to US$995 — pitched against Hugo Boss and Ted Baker.

Right up to April 2014, Zhu Wei, Bosideng's UK head, sounded quite optimistic about the "new Bosideng's" plans abroad. In March 2013 he told the British trade outlet fashionunited.uk that Bosideng was in talks with several large department stores about opening concessions, and that a global English-language website would launch soon. In September he told the Financial Times that "sales at the flagship store grew 50% over the past two months," and that the customers were "not just Chinese tourists, but also British locals and visitors from North America, Russia and the Middle East." In October, Bosideng paid £4 million for 96% of the British menswear chain Greenwoods, which had 88 stores in the UK — a sizable move, and one that looked like preparation for expansion.

But rather than an overseas expansion, this was Bosideng trying out an image overhaul in an unfamiliar foreign market — one where failure would do little damage to its main market. And so an imagined new Bosideng made its debut in London: more upmarket, more fashionable. The repeated comparisons to Hugo Boss were the clearest evidence of that ambition.

In 2009, Bosideng had already bought a menswear brand in China. Over the following years it kept buying aggressively at home and abroad to get closer to that goal. The London flagship store, opened in 2010, was something of a prelude.

As the starting point of Bosideng's overseas push, both the address at 28 South Molton Street and the opening date were chosen with care. July 26, 2012 was the day before the London Olympics opened. According to a report at the time in CBN Weekly, at 4pm on opening day the Olympic torch relay, setting out from north London, passed right by the store's door and drew a crowd of onlookers. As Zhu Wei put it: "By riding on the Olympics, we can let visitors from around the world discover Bosideng as a new brand."

To consumers in the UK and other international markets, Bosideng really was a new brand; to Chinese tourists, it looked distinctly un-Bosideng. In a way this resembled the Chinese brands that like to buy ad space in The New York Times — all to build a high-end image.

Jason Denmark, Bosideng UK's retail operations director, said in an interview with China Daily that the goal was a distinctive line "based on European fabrics and craftsmanship, blending Chinese and British elements." But the change to the Bosideng logo alone showed how completely the Chinese elements had been played down: the wings and the pinyin lettering in the old logo were enlarged, and the Chinese characters vanished.

The following January, Bosideng did hire Marty Staff, a former Hugo Boss and Calvin Klein executive, as its "US advisor," a job with no clear remit. It opened a pop-up at the Rothmans menswear multi-brand store in New York, showed new products in a static exhibit during New York Fashion Week, and again let it be known that it was talking to upscale department stores and wanted to buy property on Fifth Avenue to open a store — all the posture of a company about to enter the US market.

In March it also launched a new brand called "Bosideng Plus Zero," saying it would be "headquartered in Rome, distributed mainly in Europe, using Italian design while still being made in China."

For all this noise, over the past five years Bosideng never had more than this single store abroad, from beginning to end. You could call that caution, but it is also hard to say the brand had much real appetite for foreign markets. No surprise, then, that it had only a few hundred followers on Facebook and Twitter.

In April 2014, Bosideng ended its partnerships with British designers and manufacturers and went back to Chinese suppliers.

In practice, the marketing effect of opening the London store was much like buying ad space in New York's Times Square. Its more important audience was probably consumers back home, and the point was to shake up their dated impression of a brand more than 30 years old.

But judging by conditions in China at the time, the push abroad did little to change that fixed impression. The high-end positioning overseas and the low-to-mid-range positioning at home became two parallel lines that never fed each other. Just a month earlier, Bosideng had issued a profit warning: revenue for fiscal 2013 had fallen by double digits year on year, the brand's first drop in five years.

What Bosideng needed to understand is that even lifting a brand's image can never be done by one superbly located store carrying a product line that looks nothing like the rest.

Bosideng's Overseas Expansion

2012.7

The Bosideng London flagship store opens, with an investment of £35 million

2013.5

UK website launches

2013.10

Buys 96% of British menswear chain Greenwoods for £4 million

2014.1

Opens a pop-up at the Rothmans menswear multi-brand store in New York

2014.2

Takes part in a static exhibit at New York Fashion Week

2014.3

Launches the new brand Bosideng Plus Zero

2014.4

Ends partnerships with British designers and manufacturers

2017.1

The Bosideng London flagship store closes

Bosideng wanted to be fashionable and young, but it never worked out how

On "brand rejuvenation," the idea everyone talks about now, Bosideng was arguably ahead of its time.

As noted above, Bosideng began talking about transformation as soon as it went public in 2007. The high-end positioning in London shows it genuinely meant to move its product line upmarket. The thing being moved upmarket, though, was not the down jacket but the newly opened menswear line.

It is worth looking at two brands from the same era that did succeed in making down jackets both upmarket and fashionable.

Take Moncler. Founded in 1952, it started out as professional skiwear and was for a time a sponsor of the French national expedition team. After the Italian businessman Remo Ruffini bought the brand in 2003, he repositioned it as a fashion item for everyday wear. He first pulled manufacturing back from around the world into Europe and began developing fabrics with technical properties. Then he took the brand out of sporting-goods stores and moved it into fashion boutiques.

Capsule collections with well-known designers such as Junya Watanabe and LV creative director Nicolas Ghesquière followed. In 2006, former Valentino creative director Alessandra Facchinetti was brought in to lead design on the high-end Moncler Gamme Rouge line, shown only at the major fashion weeks.

In 2003, Moncler's sales were still under €50 million. By 2012 the figure had reached €489 million.

Or take Canada Goose, now so common it is almost a cliché. It came a little after Moncler, founded in 1957 to make cold-weather down jackets for police in Ontario, Canada, and for rangers who had to work inside the Arctic Circle. In 2001, third-generation founder Dani Reiss took over, started a women's line, simplified the cuts, and added the now instantly recognizable band of fur around the hood. The company also went to more fashion trade shows, played up its "Made in Canada" label, and caught the eye of high-end boutiques.

Then the celebrities who had to shoot in cold places wore it on set and made it popular. Beyond that, the company always kept prices high, kept output conservative, and controlled its channels tightly. You rarely see Canada Goose in a discount store, and there are no diffusion lines to speak of.

In 2001, Canada Goose's annual revenue was just US$3 million; by 2016 it was US$300 million. The latest news is that it plans to list in both New York and Toronto.

What these two brands did to turn themselves into fashion is not complicated: high-quality craft and production, tight control of channels and output, close work with designers, buyers and celebrities — the people who decide what counts as fashionable — and, throughout, a focus on the core down-jacket business.

Bosideng had the money and enough accumulated expertise, but brand marketing in the social-media age was its weak point, and that happens to matter enormously.

The other fatal problem: in the ten years since it went public, Bosideng never put its main money into making down jackets fashionable and expensive. It spent its effort instead on fast-fashion womenswear, high-end menswear, children's wear, group-buy customization, and other brands and businesses.

Losing sight of your core business and brand image is not a wise choice. Erdos, another traditional Chinese clothing brand once as prominent as Bosideng, kept its brand upgrade centered on its core product, the cashmere sweater. Whether it was starting the higher-end, younger sub-brand 1436 or bringing in Uma Wang for a collaboration, the aim was always to refresh the brand's image on the base of the core product.

Seen this way, Bosideng dodged something important: it had held the number-one spot in national down-jacket sales for 18 straight years, and then gave that advantage up, leaving down jackets largely out of the work of going upmarket, fashionable or young. Yet the product was well suited to lifting the brand — Moncler and Canada Goose are both good examples.

The four down-jacket sub-brands the group built up — Bosideng, Xuezhongfei, Bingjie and Kangbo — had no clear split of target customers either, and most were concentrated in third-, fourth- and fifth-tier markets.

Expanding beyond down jackets wasn't wrong in itself, but it muddled the brand for consumers

More awkward than the closure of the overseas store is what has happened to Bosideng's results over the past five years. After hitting a record 9.32 billion yuan in revenue in 2012, the group's revenue kept falling, down to 5.787 billion yuan last year — almost back to where it was before the 2007 listing in Hong Kong.

Over that period, apart from going overseas, what Bosideng put the most money into was expanding beyond down jackets by buying brands. According to a report by China Business Journal, when this strategy started in 2010, founder Gao Dekang promised that "over the next three to five years, we will raise non-down-jacket business to 30% of total sales," turning the company into a "comprehensive apparel brand."

But after round after round of buying and then shutting down "clothing brands with weak profitability," the non-down business ended up with three brands: the high-end Bosideng menswear, and the mass-market Jiexi womenswear and Mogao casualwear. In fiscal 2016, sales of Bosideng menswear and Mogao fell 32.5% and 25.7%; only Jiexi grew, by 4%.

These new categories did not appear to complement Bosideng's main business at all. They made the brand's positioning look muddled instead. By comparison, Moncler and Canada Goose — also built on down jackets, but positioned at the high end — responded to generally warmer winters worldwide by rolling out spring outdoor pieces built around fashion rather than warmth: fur-trimmed capes, vests, raincoats, lightweight down jackets. They read as a natural extension of the core product. Moncler's non-down products even contributed 35% of its sales.

According to the first-half 2017 financial report, the non-down-jacket business that has been declared a failure again and again still accounts for only 15% of sales, or 452.2 million yuan. Down jackets and OEM manufacturing still contribute more: 56.2% and 25.9%, or 1.4502 billion yuan and 664.3 million yuan.

Bosideng's transformation over the past decade

1. 5

Buys Bosideng Menswear; sets up a joint venture to take part in selling the US womenswear brand Rocawear

2010

Starts its own fast-fashion womenswear brand, Ruiqi

Early 2011

Buys 56% of casualwear brand Mogao and 51% of Shanghai children's wear brand Lanboxing through a capital increase

2011.10

Buys womenswear brand Jiexi for 892.5 million yuan

2012.3

Ends the Rocawear womenswear business; transfers its stake in children's wear brand Lanboxing

2013.7

Buys a 30% stake in Shenzhen womenswear brand Bangbao for 150 million yuan

2014.7

Buys the remaining 70% of Bangbao

H2 2014

Closes womenswear brand Ruiqi

2014

Starts a group-buying business, offering group apparel customization

2015.6

Wins joint investment from Itochu, Japan's third-largest trading house, and CITIC Securities, hoping to expand in third- and fourth-tier cities, but the fundraising proposal is voted down by 69% at the shareholders' meeting

2015.12

Sets up a school-uniform customization company with South Korea's SMART F&D

2016.10

Brings Itochu in as a shareholder again, to lift production capacity in the southeast and expand the OEM business

Alongside the product plans, the company also reworked its retail channels: closing stores, clearing inventory, raising the share of directly operated stores. Of the more than 10,000 stores it once had, it closed 5,053 down-jacket sales points in fiscal 2015, and cut a further 1,328 and 499 retail points in fiscal 2016 and the first half of fiscal 2017. According to the 2016 annual report, directly operated stores now make up 32.1% of the total.

None of this answered a core question: what has Bosideng actually changed as a down-jacket brand?

Publicly available material suggests it mainly redrew the sales territories of its down-jacket sub-brands: "Bosideng and Xuezhongfei sell nationwide, while Bingjie and Kangbo only open stores in certain regions."

The more pressing issues are SKUs and brand image. According to a report by China Business Journal, Bosideng puts out roughly 200-odd down-jacket SKUs a year. "That number looks like a lot by domestic industry standards, but in an era of 'small batches, many styles, fast iteration,' 200 SKUs is far too few and far too slow," an industry insider using the pseudonym Wei Gang said in the report.

Over the past year Bosideng has also tried some new things with its marketing and brand image. It updated its logo, shrinking the Chinese characters and enlarging the English pinyin. When Shanghai Disney Resort opened, it launched a Disney-themed down-jacket collection, released first in its main Shanghai and Beijing stores and online. It also brought in Fabio Del Bianco, Moncler's former chief menswear designer, for a collaboration. During this year's Double 11 shopping festival, its "same price in stores as online" policy helped lift sales, with total transaction value reaching 460 million yuan.

These moves had some effect. The 2016 results show revenue roughly flat but net profit back up 20.3%.

They are still short-term measures, though, and not only did they start late, they also show unclear positioning: the company wants to win over young people (and even children), wants to look high-end, and at the same time wants to be as mass-market as Uniqlo.

The closure of the London store sends one signal: Bosideng means to put all of its resources and attention back into the Chinese market. But that market looks nothing like it did in 2010, when the transformation began. Commercial real estate has grown bubbly, department stores are turning into new-style shopping centers, the middle class has risen, luxury and fast-fashion brands at both ends of the market have started rolling out mid-range or entry-level products, and clothing brands have begun turning into lifestyle brands.

Faced with all this, Bosideng still has questions it should have answered long ago: what kind of brand does it want to build; should it concentrate on the decades-old down-jacket business or on the newer non-down business; and how does it plan to win over consumers who have already moved on, and make its image fashionable and young?