Shanghai Tang: the First Global Chinese Luxury Brand?

HKU650

CHI KIN (BENNETT) YIM

SHANGHAI TANG: THE FIRST GLOBAL CHINESE LUXURY BRAND?

When he created Shanghai Tang in 1994, Hong Kong businessman David Tang intended to launch China’s first bona-fide luxury brand. The idea was “to create the first global Chinese lifestyle brand by revitalising Chinese designs—interweaving traditional Chinese culture with the dynamism of the 21st century”.1 In the first few years, Tang’s flamboyant, cross-cultural style and ties to international celebrities fuelled the buzz surrounding the label. But the company was unable to establish its core customer outside its home market, Hong Kong,2 and it struggled to find a niche among successful, established global brands [see the Appendix for descriptions of a selection of successful global luxury brands].

In 2005, under new leadership and revised creative direction, Shanghai Tang expanded into several regional markets, with a particular focus on Asia. But was the company on track to become the first global Chinese luxury brand? Would David Tang’s vision be realised?

The Story

I just thought to myself, that if you agree that China will eventually be the largest economy in the world, it was time to start a brand that was quintessentially Chinese.3 - David Tang, founder of Shanghai Tang

David Tang’s vision was to create a lifestyle brand that reintroduced traditional Chinese aesthetics to a new consumer audience. A self-described “broker between East and West”, Tang said that he constantly reconciled the various cultural influences he absorbed throughout his life.4 Born into privileged Hong Kong society, Tang’s grandfather made his fortune from

1 Shanghai Tang company website http://www.shanghaitang.com (accessed 5 February 2006) 2 Shanghai Tang’s core customer in its home market was wealthy western tourists. 3 Wong, T. (19 April 2003) “Chic Chinoiserie”, Toronto Star. 4 Leris, S. (16 September 2005) “Chairman Tang”, Evening Standard.

Monica Park prepared this case under the supervision of Dr. Chi Kin (Bennett) Yim for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. © 2007 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the internet)—without the permission of The University of Hong Kong. Ref. 07/332C (Revised in Feb. 2009)

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This document is authorized for use only by Dr Bikramjit Rishi until July 2012. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860. 07/332C Shanghai Tang: The First Global Chinese Luxury Brand?

the Kowloon Motor Bus Company. Tang’s father owned racehorses, and his mother was a Hong Kong socialite. At the age of 14, Tang was sent to England to attend boarding school. Initially unable to speak English, Tang quickly adapted to the habits of well-bred British society and spent weekends visiting friends’ families at their country houses while attending the Pure School in Cambridge.5 He studied law and philosophy at King’s College in London and then returned to China as a lecturer in philosophy at Peking University.6

Tired of academia, Tang ventured into business, beginning with a job at Cluff Oil. He also became the exclusive importer of Cuban cigars to Asia and Canada and managed “a family investment fund, an oil-drilling business and a gold mine in Africa”. 7 While he enjoyed success in these ventures, Tang felt a wave of opportunity flowing from China and set his sights on the creation of a lifestyle brand that was quintessentially Chinese. He was determined to create a brand that embodied everything he loved about the beauty and mystery of China from days past. The idea was to reintroduce this aesthetic and the impeccable Chinese sartorial tradition to an entirely new audience in a way that was relevant to modern tastes. Tang’s aesthetic was inspired by the Art Deco Shanghai of the 1930s, when the city was considered “the pearl of the Orient”8.

In August 1994, his vision was realised. The Shanghai Tang flagship, a 12,000-square-foot store on Hong Kong’s Pedder Street, opened its doors to the public. Tang created Shanghai Tang as a lifestyle emporium where shoppers could purchase photo albums, watches, bedding, a sweater or a tailor-made qipao (a traditional Chinese dress) in one shop [see Exhibit 1 for product categories and price ranges]. He also sold communist era kitsch at upscale prices, like Mao Tse Tung watches and goods emblazoned with a red communist star, like the items sold in small side street shops in Hong Kong long popular with Western tourists. To elevate their country-of-origin status and mitigate China’s reputation for making cheap, low-quality products, the items carried the label “Made by Chinese”. Wealthy tourists visiting Hong Kong, Shanghai Tang’s core customer, often stopped at Shanghai Tang’s flagship store to buy the signature Tang Jacket, a tunic with a mandarin collar in shockingly bright colours, or a silk handbag embroidered with cherry blossoms.

In 1995, Swiss luxury conglomerate Compagnie Financiere Richemont SA (Richemont), the parent company of prominent luxury brands such as Cartier, Alfred Dunhill, Montblanc, Van Cleef & Arpels and Chloe [see Exhibit 2 for brands by product category], became a major shareholder in Tang’s company. The company paid Tang US$13.1 million for a 40% stake and then bought out another partner to raise its stake to a controlling position.9 The company owned brands under four major segments: jewellery, watches, writing instruments and leather goods and apparel. With a big luxury goods player like Richemont behind it, Tang’s brand obtained something significant that no other Chinese fashion house had achieved: the financial and symbolic backing of a European luxury conglomerate. Tang dismissed speculation that, under Richemont’s leadership, Shanghai Tang would showcase more mainstream fashions detached from Chinese influence.

5 Leris, S. (16 September 2005) “Chairman Tang”, Evening Standard. 6 Leris, S. (16 September 2005) “Chairman Tang”, Evening Standard. 7 Leris, S. (16 September 2005) “Chairman Tang”, Evening Standard. 8 Management Today (5 May 2006) “MT in China: Silk Route to Success (Luxury Goods)”, http://www.turnitin.com/viewGale.asp?r=4.2676745289107&svr=8&lang=en_us&oid=40377352&key=ed4c906c537619b43f1 93e6292b323fd (accessed 23 May 2006). 9 McBride, S. (23 July 2003) “Shanghai Tang Wants its Buzz Back”, The Wall Street Journal.

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Our business is to always be quintessentially Chinese and to find our place within the mainstream. If we stop being Chinese, we will completely lose ourselves.10 - David Tang

Riding the wave of self-created momentum (and with Richemont’s deep pockets backing him), Tang once again dreamed big. Shanghai Tang began a rapid expansion, with plans to open stores in New York, London and several Asian cities. Tang’s particular focus was the US. “I want to take New York. I want to pick it up and embrace it with a big squeeze and a sloppy wet kiss”, Tang said.11 In December of 1997, at a star-studded event that rivalled Hollywood premiers, Shanghai Tang’s 12,500 square foot store opened. Sarah Ferguson appeared on the Oprah Winfrey show and gave Oprah a pair of Shanghai Tang’s signature silk pyjamas.12 To coincide with the store opening, high-profile Chinese actress Gong Li was featured in a print campaign, which included ads in The New York Times, Vanity Fair, Harper’s Bazaar and W.13

Situated on Madison Avenue—prime fashion real estate—the New York store was poised to be the western beacon to its sister stores in the east. As was typical, Tang’s excitement and vision were bold, but the dream proved too big for reality. In July 1999, the high-profile New York flagship closed only 19 months after it had opened and relocated to a smaller space down the road from the original.14

There were several reasons why sales did not meet expectations. First, the company overestimated American consumers’ interest in upscale Chinoiserie. Kristina Stewart, editor- in-chief of Quest magazine in New York, was quoted in an article saying, “they certainly courted the Upper East Side scene and threw lavish parties there, but at the end of the day those lime-green Nehru jackets made better wallpaper. You can’t wear that stuff”.15 Second, the Shanghai Tang style was confusing for customers. There was incongruity in presenting both pre-revolutionary and cultural revolution styles in the same store, and the tongue-in- cheek, post-modern take on China’s heritage was ultimately lost on the wealthy American buyer. Third, it was difficult to justify the prices for high-end Chinese trinkets because cheaper alternatives were readily available in Chinatown at the Pearl River department store on Canal Street. Finally, the choice of retail space on Madison Avenue meant high rent (US$2.7 million annually), which ultimately sales revenue could not cover.

It’s tough to start a brand. In one sense fashion is easy, but the competition is intense. Retail is a tough business, and we’ve pumped a lot of money into the brand, and I guess we shouldn’t be surprised if it’s a struggle. You look at something like Ralph Lauren. It took them 30 years to become established as a global brand.16 - David Tang

10 Wong, T. (19 April 2003) “Chic Chinoiserie”, Toronto Star. 11 Hays, C. (19 August 1999) “A Fashion Mistake on Madison Avenue”, The New York Times. 12 Seno, A. (5 December 1997) “Doing the Right Tang in New York”, Asiaweek. 13 Sutton, J. (2 March 1998) “East to East Coast: Tang Sells Fine China”, Marketing News. 14 WWD (25 February 2005) “Shanghai Tang Reinvented”, http://www.turnitin.com/viewGale.asp?r=4.2676745289107&svr=8&lang=en_us&oid=21911753&key=128b94a0e28af65c90 a629fd3645776d (accessed 23 May 2006). 15 Hays, C. (19 August 1999) “A Fashion Mistake on Madison Avenue”, The New York Times. 16 Wong, T. (19 April 2003) “Chic Chinoiserie”, Toronto Star.

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New Direction

Leadership Despite missteps in the American retail market, the Shanghai Tang Hong Kong flagship continued to do steady business and the company maintained its relationship with Richemont. In 2001, Tang decided to devote his time and energy towards other business ventures but he maintained a position on the board and was the brand’s largest shareholder after Richemont. Richemont executives assumed a more active role in the company’s direction. In 2001, CEO Raphael le Masne de Chermont was recruited from another Richemont brand, Piaget, to refocus and redirect the ailing Shanghai Tang brand. Le Masne had stark but complimentary contrast to Tang’s flamboyant leadership style and quietly transformed the company into “a lifestyle brand” of more aesthetic subtlety during the first few years that would be relevant to the discerning taste of the global luxury customer.17 But le Masne took from Tang’s mistake the lesson that would guide the brand going forward: “we need to be more modern”.18

In step with the company’s evolution, top management embodied the cross-cultural blending that would become the brand’s signature: David Tang from Hong Kong, le Masne from France, creative director Joanne Ooi from America and marketing director Camilla Hammar from Sweden. As le Masne noted, “We’re a melting pot of multicultural people who work on the same vision: a Chinese lifestyle brand that’s relevant”.19

Planned Growth Le Masne reported that worldwide sales for Shanghai Tang in 2005 grew 43% from the previous year, and American sales (at boutiques in Honolulu and New York) were up 50%.20 According to one source, yearly sales were somewhere between US$20–$30 million, with the majority of sales at the Hong Kong flagship. In 2005, new stores opened in Zurich, Shanghai, Tokyo and Bangkok, with stores in Beijing and Milan planned to open in 200621 [see Exhibit 3 for retail store locations]. The overall expansion included 11 new stores in the next two years bringing the total to 30.22 The Asian market was “responsible for 80% of the brand’s sales. Richemont’s latest annual report stated that overall sales in Asia (outside Japan) grew 20%, compared to 10% in Europe, 7% in the Americas and 3% in Japan, for the fiscal year that ended in March 2004”23 [see Exhibit 4].

Unlike Tang, le Masne was less concerned with dominance in America and set his sights on the rapidly growing wealthy class in China. This shift in regional focus, particularly for the luxury goods segment, appeared to be on track. “A 2005 Ernst & Young analysis of luxury goods consumption [estimated] that sales in China [would] grow 20% annually from 2005 to

17 WWD (25 February 2005) “Shanghai Tang Reinvented”, http://www.turnitin.com/viewGale.asp?r=4.2676745289107&svr=8&lang=en_us&oid=21911753&key=128b94a0e28af65c90 a629fd3645776d (accessed 23 May 2006). 18 Tischler, L. (January–February 2006) “The Gucci Killers”, Fast Company, 102, pp. 42–48. 19 Tischler, L. (January–February 2006) “The Gucci Killers”, Fast Company, 102, pp. 42–48. 20Jana, R. (1 December 2005) “Shanghai Tang: A Taste of China”, [www document] http://www.businessweek.com (accessed 23 February 2006). 21 Ibid. 22 Edelson, S. (25 February 2005) “Shanghai Tang Reinvented”, WWD. 23 Jana, R. (1 December 2005) “Shanghai Tang: A Taste of China”, [www document] http://www.businessweek.com (accessed 23 February 2006).

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2008.” 24 According to the report, by 2015 China would overtake the US as the world’s second-largest consumer market of luxury goods after Japan.25

However, the brand had to be relevant to both wealthy Chinese customers and wealthy non- Chinese customers, who had different points of reference for what was considered elegant Chinese style. Chinese consumers in the apparel market still seemed to belong to two extremes. Angelica Cheung, editor of Vogue China, said these two groups were “a very moneyed minority seduced by foreign luxury labels, and the overwhelming majority who are interested only in cheap, affordable clothing. There’s not much for anyone in between”.26 The company's three Shanghai stores sold 50% of their merchandise to local young, urban professionals. The other half was sold to westerners looking for Asian-inspired garments in rich fabrics and colours. Courting wealthy Chinese consumers appeared to be a good idea, but when attempting to build a luxury apparel brand translatable in several markets, it was easier said than done. “Young Chinese women wish to be modern and chic”, Cheung said. “Westerners might think that Chinese women look great in a cheongsam or similar Chinese clichés but that sort of clothing reminds modern women of their grandmothers. Instead everyone today wants to look like Kate Moss”.27 Consumer segments in Asian cities outside China also needed convincing, though of a different sort. For example, in Japan, the world’s largest luxury goods market, le Masne said customers wouldn’t embrace a Chinese brand unless it had a certain cachet in France and Italy.28

To stay relevant in the high-end fashion market, Shanghai Tang expanded its fashion horizons and collaborated with several top designers. The Shanghai Tang jewellery range, made by Sandra d’Auriol, a French designer based in Hong Kong, sold well. Philip Treacy, famed accessories designer, made hats for winter 2005 and worked on another collection for spring 2006. A line of trendy, embellished T-shirts for spring 2005 came from Studd by Gabby Harris. And introduced exclusively to Shanghai Tang stores in May 2005 was a collection of special edition Puma shoes, the Shanghai Tang Peony. Le Masne expressed the intention to start lines of licensed products, such as eyewear and fragrances, that tended to significantly increase sales figures while at the same time introducing the brand to a wider audience who could afford the relatively cheaper products. The high-profile collaborations and possible line extensions, along with new stores, were intended to raise awareness of the brand.

Rather than grand store openings and costly celebrity endorsements, Shanghai Tang focused on localised public relations and sponsored events relevant to each regional market. Also, prime retail locations remained central to its channel strategy of maintaining access to luxury consumers. In addition to its freestanding stores, Shanghai Tang opened shops in world- renowned hotels such as the Peninsula and the Four Seasons and, to court the wealthy traveller, it also opened shops in Hong Kong International Airport and Beijing Capital International Airport.

Design Much of the credit for Shanghai Tang’s sales turnaround went to creative director, Joanne Ooi, who was recruited by le Masne in 2001. As the brand outgrew its kitschy image, Ooi introduced design statements that ”combined Chinese culture references and sleek, contemporary clothes”29 [see Exhibit 5 for a selection of products]. It was reported that Ooi

24 Ibid. 25 Ibid. 26 Asome, C. (10 May 2006) “Chinese Whispers Turn Out to be Exaggerated”, The Times. 27 Ibid. 28 McBride, S. (23 July 2003) “Shanghai Tang Wants its Buzz Back”, The Wall Street Journal. 29 Jana, R. (1 December 2005) “Shanghai Tang: A Taste of China”, [www document] http://www.businessweek.com (accessed 23 February 2006).

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was offered her directorship after submitting the following comments on the Shanghai Tang flagship to le Masne:

It’s an overpriced Chinese emporium that has no credibility with local Chinese people, let alone with fashion people. Its very narrow market is high- end tourists. It’s a once-in-a-lifetime destination shopping experience, a kind of fashion Disneyland. Plus, it’s unwearable and eccentric.30 - Joanne Ooi, creative director, Shanghai Tang

At the creative helm of the brand she once found risible, Ooi was clear on Shanghai Tang’s international image, saying, “the goal is to be the ambassador of modern Chinese style”.31 To achieve this, Ooi conducted her research for collections in art museums and read books on regional history. To serve as inspiration for the autumn 2005 collection, Ooi commissioned artwork “by established Chinese contemporary artists and young art students”.32

For one collection, Ooi focused on Chinese calligraphy by turning traditional Chinese characters into decorative patterns. 33 “Ethnic tribes in China’s Hunan province” inspired another collection of clothes, as did the “fur-lined clothing worn by Mongolian and Tibetan nomads”.34 Ooi preferred these design sources to fashion magazines and of-the-moment trends. More important, however, was that this established the credibility of the brand’s intention to become an ambassador of China’s national aesthetic. On this point, Ooi said, “I try to stay away from a pastiche of what Westerners think of as Chinese culture”.35

Branding Chinese culture could be an effective point upon which to differentiate from European and American luxury brands. However, as the company expanded, the cultural branding angle became complicated and ran the risk of alienating potential customers in Asia. In short, exoticised images of Asia were less appealing to Asian consumers. While popular with a portion of Hong Kong’s wealthy class, Shanghai Tang had not yet proved popular among Chinese consumers unconvinced as to why they should pay top-dollar for Shanghai Tang’s reinvented Chinese style.

China’s First Global Luxury Brand?

Since China had both economic and cultural cachet, Shanghai Tang and other Chinese brands were poised to enter a new era of heightened global interest in all things Chinese.36 Would Shanghai Tang follow in the tradition of established global luxury brands associated with a national aesthetic? As le Masne said, “If Hermes is a representation of French lifestyle-chic, or [Ralph] Lauren is [a representation] for the Americans, and Armani is for the Italians, why not Shanghai Tang for the Chinese?”37 Was the company on track to become the first global Chinese luxury brand?

30 Tischler, L. (January–February 2006) “The Gucci Killers”, Fast Company, 102, pp. 42–48. 31 Jana, R. (1 December 2005) “Shanghai Tang: A Taste of China”, [www document] http://www.businessweek.com (accessed 23 February 2006). 32 Ibid. 33 Ibid. 34 Ibid. 35 Ibid.. 36 Ibid. 37 McBride, S. (24 July 2003) “Shanghai Shocker”, Far Eastern Economic Review.

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APPENDIX: SELECTION OF SUCCESSFUL GLOBAL LUXURY BRANDS

LVMH Moet Hennessy Louis Vuitton LVMH was the world’s largest luxury goods company with more than 1,500 retail outlets (including 280-plus Louis Vuitton stores), around 150 DFS Group duty-free shops, Le Bon Marche department stores and hundreds of designer boutiques worldwide.

In 1854, Woodworker Louis Vuitton started with a store in Paris to sell his handcrafted luggage. Vuitton introduced the LV monogram in 1896 and opened stores in the US and England by 1900. In 1977 Henry Recamier, who was a former executive and married into the Vuitton family, entered the business and transformed the business from little-known status symbols to designer must-haves. Within ten years, sales soared from US$20 million to nearly US$2.5 billion. In 1987 Recamier merged Louis Vuitton with Moet Hennessy (maker of wines, spirits and fragrances) and all were under the name LVMH Moet Hennessy Louis Vuitton. When Bernard Arnault became chairman in 1989, LVMH increased its fashion holdings by buying Givenchy, Christian Lacroix and Kenzo. Arnault is credited for transforming the LVMH Group from a small producer of clothing and champagne to a global luxury conglomerate made up of the world’s most powerful luxury brands. LVMH owns such fashion brands as Berluti, Celine, Christian Dior, Donna Karan, Emilio Pucci, Fendi, Marc Jacobs and Thomas Pink. Central to the group’s strategy is management of its “star brands” paired with product quality and a culture of innovation. According to Arnault, a star brand is a brand that is “timeless, modern, fast-growing, and highly profitable”. 38 The majority of LVMH brands have a long history of craftsmanship and were originated in Europe. The LVMH management strategy was to build a work environment that supported creativity while at the same time enforcing strict business discipline. Worldwide revenue in 2005 totalled US$ 16.8 billion, up 11% from 2004.

Ralph Lauren Polo Ralph Lauren Corporation originated the concept of the lifestyle brand. Ralph Lauren, born Ralph Lifschitz, grounded his brand in a quintessentially American image of wealth and status and consistently carried this aesthetic throughout his retail stores and product lines. He began his career as a sales representative for Rivetz, a Boston tie maker, and in 1967 he began designing ties for Beau Brummel of New York. He named his own style division “Polo” because of the upper class image it evoked. In the early 1970s, Lauren partnered with Peter Strom to form Polo Fashions and focused on tailored menswear. In 1971 Lauren introduced his signature polo logo and his women’s line. In the same year, the first licensed Polo store on Rodeo Drive in Beverly Hills and his first in-store boutique at Bloomingdale’s in New York City were opened. In 1980, Polo Ralph Lauren expanded further into licensed products, including home furnishings, jeans, fragrance and eyewear. In 1997 Polo went public and, following a large restructuring, bought back its European licensee to reclaim greater control of the Polo brand. The company's brands were: Polo by Ralph Lauren, Ralph Lauren, Ralph Lauren Purple Label, Black Label, Blue Label, Lauren by Ralph Lauren, Polo Jeans Co., Rugby, Chaps, RRL, RLX, RL Childrenswear, and Club Monaco. Net revenue for fiscal year 2005 was US$3.3 billion.

Giorgio Armani Giorgio Armani was the sole shareholder of his US$ 1.7 billion lifestyle business. The company licensed its name for perfume, watches and accessories, but continued to earn more

38 Som, A. (Winter 2005) “Personal Touch that Built an Empire of Style and Luxury”, European Business Forum.

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than half of its revenues from apparel.39 In 2003, 53% of his total sales were generated by garments, from sporty AX/Armani Exchange to the luxurious Giorgio Armani brand. Armani had stores in more than 35 countries. The company’s brands included: Giorgio Armani, Armani Exchange, Emporio Armani, Armani Jeans, Armani Collezioni, Armani Junior, Armani Casa and a Giorgio Armani Accessories store. To control the integrity of the brand, Armani owned Simint, the Italian holder of the Armani jeans license, and had several joint ventures with Italian manufacturing companies to bring its apparel production in-house while allowing for a controlled expansion of product lines.

Armani studied medicine and was in the Italian army before starting working as a window dresser for La Rinascente department stores, where he later became a menswear buyer. His first design position was at Nino Cerruti. In 1975 Armani partnered with Sergio Galeotti and established Giorgio Armani S.p.A. The Armani label became known for its unstructured tailored suits. The business went global in the 1980s and gained greater recognition when the designer dressed actor Richard Gere in the film American Gigolo. Armani was successful in creating a true lifestyle brand, extending his design aesthetic into multiple product categories, even expanding beyond fashion and home furnishing. In 2004, Armani announced his intent to develop a series of Armani-branded and styled hotels.

Hermes Hermes International sold a wide range of luxury goods, including scarves, ties, leather goods, watches, stationery and men’s and women’s apparel. There were approximately 215 Hermes stores worldwide and around 40 retail outlets that sold Hermes products. The company did not grant licenses and made most of the products it sold. Famous for its leather goods, Hermes was founded in 1837 in France by harness-maker Thierry Hermes. Hermes won acclaim for its unique carriage design and its saddle stitch became a trademark. Thierry’s son, Emile-Maurice, expanded the product range to include travel-related leather goods, including saddlebags, luggage, wallets, handbags and even jewelry. Emile also chose the well-known logo, the horse-drawn carriage. Clothing was introduced in the 1920s when Emile’s son-in- law, Robert Dumas, took over the company. Dumas introduced the first Hermes scarf in 1937, which became one of the design house’s signature pieces. Dumas’ son, Jean-Louis, took control of the company in 1978 when his father passed away. He brought in young designers to reinvigorate the brand’s image. When the company went public in 1993, the family retained more than 80% of the share holdings. Hermes also owned crystal-maker Les Cristalleries de Saint-Louis, silversmith L’Orfevrerie Puiforcat, shoemaker John Lobb, 35% of Jean-Paul Gaultier’s fashion business and 32% of German camera maker, Leica. In 2002, the company expanded its leather-working business and, through public campaigns, promoted the craftsmen and women behind its products. In 2005, net profit totaled US$298.3 million, up 15% from 2004. As of 2005, descendants of founder Thierry Hermes owned 75% of the company.

Source: Hoover’s Company Information [www document] http://www.hoovers.com (accessed 15 January 2006) and 2005 Company Annual Reports [www documents] http://www.hermes.com (accessed 15 January 2006); http://www.armani.com (accessed 15 January 2006); http://www.lvmh.com (accessed 15 January 2006); http://www.polo.com (accessed 15 January 2006)

39 The paradox of the fashion business at the luxury level is that it is difficult to build a successful business on clothes alone. Successful brands usually make most of their revenue from accessories and fragrance.

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EXHIBIT 1: SHANGHAI TANG PRODUCT CATEGORIES AND PRICE RANGE (US$)

Women’s Men’s Children’s Accessories Home Pouches & Candles & Coats: Jackets: Jackets: Cases: Fragrances: 435–625 290–770 130–265 25–50 20–155 Jackets: Shirts & T-shirts: Shirts & Tops: Handbags: Bed & Bath: 170–880 60–155 40 155–430 65–1350 Blouses: Sleepwear: Sleepwear: Cufflinks: Tableware: 125–270 170–295 75–150 60 40–205 Tops: Sweaters: Toys: Handkerchiefs: Frames & Albums: 65–240 120–675 20–35 125 45–205 Dresses: Wallets: Travel:

295–515 40–125 55–155 Sleepwear: Footwear: CDs:

170–295 70 25 Sweaters: Hats & Caps: Boxes:

140–550 30 45–610 Scarves: Stationery:

110–290 40–50 Watches:

90–315

Source: Shanghai Tang company website: www.shanghaitang.com.

EXHIBIT 2: RICHEMONT BRANDS BY PRODUCT CATEGORY

Writing Leather, Apparel & Jewelry Watches Instruments Accessories Cartier Cartier Montblanc Alfred Dunhill Piaget Van Cleef & Arpels Montegrappa Lancel Van Cleef & Piaget Chloe Arpels A. Lange & Shone Old England Vacheron Constantin Shanghai Tang Jaeger-LeCoultre Purdey Panerai Hacket Baume & Mercier IWC Mont Blanc Dunhill

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EXHIBIT 3: SHANGHAI TANG RETAIL SPACE

City Retail Location Type of Retail Space Shanghai Promenade on Mao Ming shop Shangri-La Hotel shop Xintiandi Plaza free-standing store New York Madison Avenue free-standing store Paris Rue Bonaparte free-standing store London Sloane Street free-standing store Selfridges shop Hong Kong Pedder Building free-standing store The Peninsula Hotel shop Hong Kong International Airport shop Intercontinental Hotel shop Tokyo Chuo-Ku free-standing store Singapore Ngee Ann City free-standing store Bangkok The Emporium shop Four Seasons Hotel shop Beijing Beijing Capital International Airport shop Honolulu Ala Moana Shopping Center shop Jakarta Plaza Senayan shop Zurich Globus Schweizergasse free-standing store

A free-standing store sells one brand under one roof. A shop is retail space leased to a company usually located in a department store, hotel or shopping mall.

Source: Shanghai Tang.

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EXHIBIT 4: RICHEMONT SALES

2001 2002 2003 2004 2005 US$ m US$ m US$ m US$ m US$ m

Sales 3341 3415 3632 3967 4679 Cost of Sales (1103) (1223) (1360) (1508) (1668) Gross Profit 2238 2193 2272 2459 3011

Sales by product line Jewelry 809 776 833 927 1064 Watches 1499 1587 1696 1834 2233 Writing Instruments 239 252 276 321 375 Leather Goods 283 268 269 282 326 Clothing and other 512 532 559 603 681 Total 3341 3415 3632 3967 4679

Sales by geographic region Europe 1368 1513 1550 1714 2023 Japan 655 658 701 735 808 Asia-Pacific 648 628 691 749 964 Americas 671 616 689 770 884 Total 3341 3415 3632 3967 4679

Average Exchange Rate 2001 2002 2003 2004 2005 EUR/US$ 0.907 0.8848 0.9947 1.1754 1.2589

Note: Figures from year ending March 2005.

Source: Richemont (2005) “Annual Report”.

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EXHIBIT 5: SHANGHAI TANG SPRING SUMMER 2006 (SELECT IETMS)

“Peony” Magic Coat Silk dupioni three-quarter length coat with “Peony” flower print, frog button closure and beading along the trim, US$625.

Silk Linen Coat Simple and elegant three-quarter length coat in exquisite silk linen, US$435.

Denim “Mao” Jacket Light, modernised denim “Mao” jacket with four front patch pockets and no lining, US$290.

Cotton Pajamas Cotton poplin pajamas with mandarin collar, frog buttons and contrast piping, US$170.

Silk Fan Clutch Fan shaped clutch with “Cherry Blossom” silk jacquard and jade and Chinese knot tassel. Zip closure, US$175.

Topstitched “Double Fish” Cushion Vivid cotton cushions with intricate “Double Fish” motif topstitching, US$95.

Source: Shanghai Tang company website: www.shanghaitang.com.

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This document is authorized for use only by Dr Bikramjit Rishi until July 2012. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860.