Founder Tang Dafeng says Liebo, which started on Taobao, will become China's Zara

In this report we want to look not at aesthetics but at fast fashion as a way of making things.

Our report began with a question: given China's market, its manufacturing capacity, and consumers' fast-growing appetite for design and brands, how likely is it that a fast-fashion brand like Zara or H&M will emerge in China?

Put simply: who will be the next Zara?

We all know that Chinese consumers already spend much of their lives online. On a city's main shopping street there are always a few brands that sell in high volume and set the trend of the moment. Now that Taobao and Tmall have become the most important places to shop, what are the odds that a big brand will come out of them? Will the next Zara be born here?

You may never have thought about "the next Zara" from an e-commerce angle. But pick a few criteria — growth rate, sales, brand influence, future growth potential — and the companies that come into view all, without exception, come from the internet.

In early 2015, Liebo, a brand that grew up on Tmall, announced it would go public before the end of 2016, along with two other brands, Yinman and Handu Yishe. Liebo, founded nine years ago, has grown its sales by 200% a year. In 2014 its sales passed 1 billion yuan, 54% of which came through mobile. That year the company finished more than 10,000 design sketches and made 5.03 million garments, and its customer service staff dealt with 3.3 million customers. It is now a group with seven sub-brands and 800 employees.

Even so, few people connect this brand, with its distinctive ethnic style, to "the next Zara." In that view, Zara stands for an aesthetic, while Liebo is too niche — even though its customers are anything but few.

In this report we want to look not at aesthetics but at fast fashion as a way of making things. Liebo launches 8,000 to 9,000 new styles a year and reacts extremely fast. Its full cycle for a new item is 15 days, close to Zara's legendary 15 days.

When the retail industry explains Zara's success, one of the main points is its ability to invent new processes. (Zara once, unusually, gave an interview to The New York Times, and the resulting article, "How Zara Grew Into the World's Largest Fashion Retailer," describes this ability in detail.) Product has never been Zara's strength; otherwise it would not be accused so often of copying. The company's core is fast response: processes that respond to customers, a design team that works quickly, and a logistics system that moves quickly.

Yet this king of retail shows none of its high-street ease when it comes to e-commerce — at least not in China. That is what makes comparing Zara with Liebo interesting. In the interview with founder Tang Dafeng, you will see her return again and again to what Liebo shares with Zara: control of the production process, and quick reactions to changes in the market.

Our questions also kept coming back to this point.

How the business began

Q: What was Liebo like at the start?

Tang Dafeng: Every day was a bit different. One day we might sell a single piece; later we were happy to sell 30,000 yuan in a month. I remember that in 2009 annual sales were probably only about 20 million yuan. Back then we were always putting out fires, and everyone would quickly sit down together to work things out. I didn't know what a plan was, and I rather disliked plans. We simply couldn't keep up, so we would quickly bring someone in and put them to work, whatever they turned out to be good for.

Q: When did you start planning?

Tang Dafeng: In 2010. Offline brands gradually started coming onto the platform. By 2014 foreign brands had arrived too, and the big international names were on the same starting line as you, competing for the same consumers. From luxury goods to every big name, domestic and foreign, Tmall went from a few hundred merchants to tens of thousands. That shock was inevitable. How do you find your own clearest face, and what methods and means do you use? All of this is a process of constant learning.

I think building a brand follows a path of its own. The first step is probably a category: do one strong category well, and don't talk yet about what your brand is. Just get that one category right. The second step is building the brand. The third step is expanding into different channels. Once your channels are on solid ground, you might launch sub-brands for different market segments.

Q: What difficulties from that period do you still remember?

Tang Dafeng: In 2009 I didn't make budgets, didn't know how to manage cash flow or finances, and we paid one supplier the full amount up front. The goods might arrive two or three months later; only then could you start selling, and only then did the money come back. That is cash flow. But we were growing too fast — maybe fivefold, tenfold — so you had only 10 or 20 million yuan on hand while trying to do 200 million yuan of business a year. At that point your cash flow can't keep up.

If you ask what is especially hard now, it is a big challenge facing all e-commerce brands. Traffic has become saturated and very scattered. Basically everyone who was going to buy clothes online is already online. The easy growth is completely gone, so how do you keep the company growing? That is a very big question.

If Liebo is ethnic style, how did it become a fast-fashion brand?

Q: How do you define ethnic style?

Tang Dafeng: Liebo is an ethnic-style designer brand. My definition of "ethnic" may be broader than most. I prefer to describe it as a fairly primitive, naturalistic state, a continuation of folk custom itself.

The most primitive part, built up over thousands of years of civilization, is actually very natural. It is an expression of nature. For example, the sun is very hot, it looks round, and it gives off golden light. That is a very clear sensation. In tribes and cultures all over the world — Maya culture, Native American culture, Egyptian culture — it is the same, and each expresses it through its own cultural and artistic forms.

Of course, in a tropical place where the colors around people are especially intense, they may wear very bright clothes. In a very cold place such as Finland, the colors of many things are quieter. These are feelings people develop toward nature. So I think this is the real appeal of "ethnic." It needs no language, no history, no so-called accumulation of culture. It needs only people's most genuine feelings and sensations, expressed as they are: this is what I feel inside.

Q: Many people would not connect something as singular as ethnic style with fast fashion. They think fast fashion is something like Zara, with lots of basics that suit most people. But Liebo's customer base seems much smaller?

Tang Dafeng: Liebo was part of fast fashion from the start. When we began, Zara's model hadn't yet become a topic here, nobody was studying it, and Larry Lang hadn't yet put it in front of Chinese audiences.

Every e-commerce fashion brand works on this many-styles, small-batch model. Back then we might place an order today and have the goods tomorrow. We had our own factory, first orders were very small, and we reordered five or ten pieces at a time. This many-styles, small-batch, fast-response model is very similar to Zara's, and we also have pre-sales, which physical stores cannot do.

Q: Fast fashion is widely imitated but also widely criticized. How do you see this business?

Tang Dafeng: Actually, it isn't that Zara "has fast fashion in its genes." To be precise, it caters to many of modern people's needs, and that is why this way of making clothes exists. Good value for money, and the fashion is decent too. If (a product) offers really good value, it can upend a great many things — just as almost everyone now has a computer. If a computer cost a hundred thousand yuan or more, not everyone could have one. Clothing is the same: it looks good, it's good value, and you decide how to put it together, with you at the center.

E-commerce, through many of its steps, has cut the cost of people getting to know one another. You read a review and you know whether something is good, without having to ask anyone. If fast fashion and e-commerce bring people anything, it is the ability to try something they want quickly and easily.

Q: How do you see the difference between you and Zara?

Tang Dafeng: The difference is that they have become very big. They are mainly physical stores, so our customers are not quite the same. Of course their model is very mature, and they have a great deal of capital for expansion and scale. But e-commerce will only grow; it is already part of people's lives. We are another Zara, a future Zara. That's how I see it. Of course there is a lot (we can't yet match). What they have took decades to build, so there is certainly much for us to learn.

Q: Will Liebo become a Chinese Zara?

Tang Dafeng: As a brand, yes, absolutely. Though to say that of Liebo itself may not be very realistic. Liebo is for people who don't quite follow the rules — girls with a bit of Sanmao in them, who love to wander, who are rather wild and artistic. Zara is more mass-market, so Liebo still leans toward being a designer brand. In the future, a Zara-like model may emerge within the Liebo group, and it will be a bit more mass-market.

What exactly is "fast fashion"?

Q: How long is the new-product cycle now?

Tang Dafeng: One week, though every brand is a bit different. Liebo might launch new items twice a week, while most brands launch once. And different platforms have different launch rhythms.

Q: And roughly how many looks per launch?

Tang Dafeng: Put it this way: the whole group does roughly 8,000 to 9,000 styles a year, and Liebo itself does a little over 2,600.

Q: How do you manage to respond so fast?

Tang Dafeng: We split launches into regular ones and ones that need a fast response. They are two different things. A factory can't run entirely on the very fast model, because then sometimes there are no orders and sometimes the orders all pile up at once. That is very unfair to ordinary workers, who either work themselves to death on overtime or suddenly have nothing to do.

So capacity has to be planned sensibly. The whole supply chain is a very precise piece of planning: you have to schedule the suppliers and check that their capacity is reasonable. So we set aside 70% of products and plan them five to six months ahead. That way the factory only needs to start production two months ahead — especially since photo shoots, rounds of revisions and all sorts of other things come in between.

This part is fixed in advance, and it is still somewhat faster than offline. Offline brands usually give suppliers six months; we now give 60 days. The other 30% is fast response. For example, some of the products we're working on now went on sale at the end of April, after only about 15 days.

We have a capacity plan: you reserve a certain percentage of capacity just for reorders and fast-response orders, and a dedicated planning department handles this.

Q: Did you build your own supply chain?

Tang Dafeng: We used to have our own factory, but we closed it. We are not professional factory operators; our heart and our strengths aren't there. So the most important thing is to build a complete product process: starting with early research and planning, then working out the fabrics, then designing the piece and turning it into a real sample garment. Then arranging production sensibly so that it responds quickly, keeps up quality and quantity, and reaches the warehouse on time. It is one closed loop. A problem at any point in it affects the supply chain. It took us several years to make it solid.

Q: How do you work with contract factories and fabric suppliers now? Roughly how many factories and suppliers do you have long-term relationships with?

Tang Dafeng: Some of our longest-standing suppliers, both fabric suppliers and garment makers, have been with us five or six years, even seven or eight. Others have been with us two or three, or three or four years. Each year about 30% are new, and each year about 30% are dropped.

With suppliers, what matters is not how many you have but how good they are. Only then can they work with you over the long term and know all your traits and needs, so we keep weeding them out. At our peak we had one to two hundred suppliers. Then we gradually cut back, and now we have perhaps a dozen or two dozen main fabric suppliers and just over 20 main production suppliers. We also rate our main suppliers every month and give them new requirements, so that both sides gain and do better.

Q: How do you choose contract factories and fabric suppliers?

Tang Dafeng: We weigh a dozen or more criteria. The simplest is R&D capability; the most important is delivering on time and to standard. Every factory has its strengths, and we try to use them.

What goes on inside Liebo every day

Q: How do you define your role at Liebo?

Tang Dafeng: Xiaofeng and I oversee different brands. I run Liebo and Liancan; Xiaofeng runs Lady Angel, Tianshi Zhicheng and Feichizhong. Each of us leads our own design team — designers, print designers, design assistants, fit models, pattern makers, our partner factories and our production follow-up staff — all working on this together. I like to get involved in planning the whole of next year.

Q: What does the workflow look like?

Tang Dafeng: Take a designer. The designer decides which three collections suit this year and submits them. Each department then reviews them on its own, picks the most satisfying and most coherent pieces, and puts them forward. The operations department may have its own ideas, and so may the planning department. It all gets combined and finally reaches me.

Before that, I may tell them what our main color palettes for next year are and what the big theme is. For example, Liebo's theme this autumn and winter is "Everyone Is an Artist." Then it unfolds from there, combined with their smaller collections. That is basically how it works.

Now I handle approvals, and the teams make their own proposals, vote, and draw up budgets. Having everyone in one structure would be exhausting, so this part works like a startup inside the company.

Q: How do you manage the whole company?

Tang Dafeng: We have 800 people now. The company is divided into three lines. The first is what we call the merchandise flow. It runs from planning, through sampling, to ordering and photo shoots. It is a timeline. Once you have built this line, nearly half the departments of a clothing company are organized around it.

Then for each product line: how many SKUs you need, how many rounds of revisions, how much in sales it can bring in, how much in sales each designer brings in. Every department has these metrics. If you treat them not as part of performance reviews but as your team's goals, they give a very clear direction.

The second line is operations — how to sell the product. Advertising, brand, customer experience, customer service, logistics and warehousing all form one line.

The third is the management line: financial statements, how to draw up the overall budget, how people move, and what staff cost.

Liebo has always been a company that puts product first and marketing second.

About the future

Q: Why open physical stores?

Tang Dafeng: Physical stores, the official website, the app, Tmall, Vipshop — each is a way of presenting the brand. So we wanted to try physical stores, to see whether offline is what we imagined and whether its customers overlap heavily with our online audience.

From what I've seen, the overlap is not high. Online and offline customers are really very different. Their shopping habits differ, and so do the experience and feeling they want. So I think offline can grow into a very big part of the business.

Q: Moving from online to physical stores, aren't you worried about weakening your advantage?

Tang Dafeng: What consumers care about is what kind of person you are and what kind of brand you are. They won't get confused about your brand's positioning just because you appeared on CCTV, placed products in a movie, or sell somewhere big like Shin Kong Place. They won't. Take Nike, a very professional sports brand. Whether its store is in Sanlitun, online, on its official website, on television, at the Olympics or with a football team, its positioning is very clear. When you build a brand, your core stays the same; you just present it in all kinds of ways.

As long as your brand positioning is accurate, you can try all kinds of ways to share the experience with customers.

Q: Why launch a high-end line?

Tang Dafeng: From a business-model angle you might think about it that way, but from the point of view of designers and users it isn't so complicated. Liebo's customers have grown up. They want to wear better-quality clothes, and now they can afford them. There are fewer styles, and perhaps only twenty or thirty pieces are made of each. We call it Liancan, and I wear it myself.

Q: What share of total sales does the high-end line account for now?

Tang Dafeng: Very small. It needs heavy investment, and at the start the main job is to make people aware of the brand.

This year Liancan's minimum order quantity has started to grow. Last year it started at 10 pieces; this year it is basically 80 to 100. I will first sell it inside Liebo stores, nurture it for six months to a year, and then spin it out on its own.

Q: What would you say to e-commerce entrepreneurs who want to become the next Liebo?

Tang Dafeng: I've said it before: think about what you like, not what the market needs. There will always be a group of people in the world similar to you. Whether that group is a blue ocean or a red ocean, and whether it can become a 1-billion, 2-billion or 3-billion-yuan business — I think men may consider that question first. They look first at whether the market is big enough, because only a big enough market can produce a big enough enterprise, like Jack Ma's or Lei Jun's.

Women pay more attention to how they feel in the moment: what clothes you like to wear, what things you like to use, or, staying in a hotel, what feels uncomfortable about it and how you would do it if you built one. This is a way of putting yourself in the picture. Once you develop this habit of thinking, you make something that feels very comfortable to you, far more comfortable than other people's products, and then you will certainly have an audience and buyers. That is inevitable.

Q: What is your focus this year?

Tang Dafeng: I'd like to settle down for a year and first do the brands I already have well. The team keeps making proposals, and there are many things you want to do. But first, a person's energy is limited; second, I think this kind of model comes about naturally when the time is right. The first thing is to let your team mature on its own.

QDaily will keep following companies of this kind: they may have been around for a while and won a good reputation among users and a voice in their industries, but cannot yet be called big companies. For these companies, which keep the spirit of a startup but have begun to reach scale, we will look at what they plan to do next and what they are thinking about now.

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