Upstart Seeks to Create
A Chinese Fashion Power
By RACHEL DODES and MEI FONG
In a sleek New York showroom overlooking the Hudson River, designers and stylists were busy on a recent day, putting finishing touches on an African-inspired collection of poplin and raffia dresses, silk sheaths and metallic lamé turbans by the label Ports 1961.
When presented on New York runways during fashion week earlier this month, the Ports 1961 collection was reviewed and bought by the same stores that buy big designer names like Marc Jacobs, Michael Kors and Oscar de la Renta.
What makes Ports 1961 different from those American brands is that it's manufactured and based in Xiamen, a coastal city in southern China. The company's efforts to position itself alongside high-end European and American brands underscore China's hopes to move from an apparel-manufacturing center to become an owner and marketer of luxury brands. But in the image-conscious world of high fashion, a China-based company faces unique hurdles.
In recent years, East Asian firms have entered the fashion business by purchasing Western companies. Hong Kong manufacturers S.C. Fang & Sons have owned the Pringle of Scotland label since 2000; Taiwanese publishing executive Wang Xiao Lan bought Parisian luxury firm Lanvin a year later. Ports 1961's owner, Alfred Chan, is also considering that route: He recently expressed interest in buying the high-fashion Jil Sander label, owned by a private-equity firm Change Capital Partners in London.
But the 60-year-old Mr. Chan -- who runs Ports 1961 from a 1920s Beaux-Arts mansion on an island off Xiamen -- also thinks he can create a successful new brand from the ground up. He aims to make Ports 1961 a household name in the West within five years. Since clothing for many high-end Italian and French labels is already being made in China, he says his ambitions aren't far-fetched. "They just sew the label in Europe, but much of it is made in China," he says. "We can do this, and better."
Still, in a recent email, Mr. Chan expressed concern about negative publicity surrounding China-made goods. "I feel strongly that the right way to inform consumers is what Pepsi was doing: a blind test....This is the real fair treatment of any company's product." Products should be judged by the way they look and feel, he said.
Launched in the U.S. in 2005, Ports 1961 is now sold in 60 locations, including Neiman Marcus, Saks Fifth Avenue and Vivre.com, a high-end online retailer. The company says it expects the number of retailers carrying the line to double next year. Its $800 dresses and $1,600 coats, made mostly of European fabrics, are starting to get mentioned in fashion magazines. Its first two branded boutiques, designed by the same architect who created Jil Sander's minimalist spaces in Milan and Paris, are set to open next year in Los Angeles and New York.
To compete in the rarified high-fashion world, Ports 1961 hired executives and manufacturing experts who have worked with top fashion companies such as Coach and Michael Kors. From early on, the company insisted to retailers that it be positioned on the same floor as European brands like Missoni and Roberto Cavalli. In the September issue of Vogue, Ports 1961 took out an eight-page ad spread, shot in Iceland.
Ports 1961 benefits from the unusual business model of Ports International, an apparel maker and retail chain controlled by Mr. Chan and publicly traded in Hong Kong. (Mr. Chan says he hopes to eventually merge privately held Ports 1961 into Ports International.) While most apparel companies in the U.S. and Europe outsource production, Ports International owns its entire supply chain, making clothing for both its own label and Ports 1961 in Xiamen.
The potent mix of low labor costs and an increasingly global market for talent allows Ports 1961 to sell its clothing at a significantly lower price than European and American competitors. For example, a black tank dress in a wool-cashmere blend from Ports 1961's current collection sells for $775. A similar style by the Italian brand Fendi sells for $1,200.
The result: Ports International's net profit margins were 25% last year, up from 19% in 2005. Brands like Burberry and Hugo Boss, which outsource production, have margins in the mid-to-high teens.
Jennifer Gonzalez, a 28-year-old business-school student in New York, is a Ports 1961 customer who liked to wear the line's $500 sweaters and blouses on casual Fridays at her former bond-trading job. She says the brand is "fashion forward, but not too trendy." She says she cares more about the fit and the fabric of her clothes than where they were produced.
Mr. Chan declines to disclose sales for Ports 1961, though publicity surrounding the label has a halo effect on the larger Ports International; its holding company, Ports Design Ltd., had sales of about $132 million last year. Ports International has more than 300 stores in China.
Other industries have already seen the impact of acquisitions by Chinese companies. China's Lenovo acquired the personal-computer division of International Business Machines Corp. in 2005. More recently, Nanjing Automobile bought the quintessentially British MG sports-car brand.
Fashion, however, may be a harder nut to crack. Although China dominates apparel manufacturing -- producing as much as a quarter of the world's clothes, according to some estimates -- image is paramount in the world of luxury goods. Ports will need to overcome China's reputation for cheap and, lately, tainted products as well as counterfeits.
"Global consumers overseas associate China with things like cheap takeout and pirated DVDs," says P.T. Black, a partner at Jigsaw, a Shanghai consumer-research company. "It's not like the French, who've spent decades promoting their champagne culture and refined lifestyle, images which work very well with their luxury labels."
Indeed, Ports 1961 plays the image game carefully. On the "About Us" section of its Web site, the company notes origins in Canada, but doesn't mention that it is now based primarily in China. Even in China, some Ports 1961 salesclerks tell customers that the brand is Canadian.
Mr. Chan, who comes from a wealthy Chinese family with interests in mining and textiles, went to college in Canada, eventually becoming a Canadian citizen. He and his brother set up a contract manufacturing business in 1975, called Etac Sales Ltd. His brother was based in China and sourced basic apparel and home furnishings. Mr. Chan was in Canada, selling the goods to stores there, such as Kmart and Bargain Harold's.
Mr. Chan recognized the risk of operating as a middleman and set his sights on acquiring a high-margin, upscale clothing brand. "As a contract manufacturer you're vulnerable, dependent on orders. I didn't want to be that way," he says.
In 1989, Etac bought Ports International, a line of career sportswear founded in 1961 by a Toronto entrepreneur. At its peak in the 1980s, the line had sales of 70 million Canadian dollars and more than 50 stores in Canada and the U.S., including a flagship on Fifth Avenue.
By 1992, Etac owned several upscale brands and operated more than 100 stores, with revenue of more than C$200 million, or the equivalent of about US$165 million at the time. But rapid expansion, debt and poor performance of some retail operations led to heavy losses. In 1994, Etac filed for bankruptcy. Mr. Chan blames the company's failure on recession and the removal of tariffs that enabled American competitors to enter the Canadian market. He also said in an email that his family owned a "very small percentage of Etac before Etac went into troubles" and that he wasn't managing the company.
Mr. Chan bought the rights to the Ports brand and an apparel factory in Xiamen from receivership for C$6 million. He hoped for a comeback. "We left open the door," he says.
In 1993, Mr. Chan moved back to China and set about launching the brand there. The brothers' experience manufacturing in China proved an advantage, as did the lack of high-end competitors in the early 1990s. In China, "every consumer was a blank piece of paper," Mr. Chan recalls.
Ports International expanded quickly in China. To give the label cachet, the company hired models Kate Moss and Claudia Schiffer to appear in ads. With items priced between $250 and $350, Ports International is out of reach for most Chinese people, but is targeted at China's rapidly growing middle class, particularly career women in their 20s and 30s.
In 2003, Ports Design went public on the Hong Kong stock exchange. In the past two years, the company's share price has more than quadrupled to about 23 Hong Kong dollars, or about US$3.
Mr. Chan began considering launching a more-expensive label six years ago, when his sister-in-law presented the idea. Tia Cibani -- a Canadian who is the sister of Mr. Chan's wife, Fiona Cibani -- moved to China to work for Mr. Chan in 1994. She presented Mr. Chan with a business plan for everything from the Ports 1961 name to the globe logo.
"I liked the look of the number 1961, you turn it upside down and it is still 1961," says Ms. Cibani, 34. "I told him that what orange is for Hermès, brown would be for us."
Mr. Chan liked the concept, but thought Ms. Cibani's designs, such as a minidress with a plunging neckline, could alienate older consumers who might remember the clean-cut Ports look of the 1970s. Ms. Cibani insisted that, unlike Ports International, which makes classic styles, the luxury label be on the cutting edge.
The Ports 1961 looks were tested in Canada, where three stores opened in 2003. Sales exceeded Mr. Chan's plan, and he agreed to invest between $20 million and $80 million to launch the brand overseas. Ms. Cibani became head designer. She persuaded Mr. Chan to lease a 10,000-square-foot showroom in Manhattan, in a building where Martha Stewart and Karl Lagerfeld have offices.
To build the label, Mr. Chan hired experienced American managers and artisans from designer labels to teach factory workers in Xiamen. A pattern maker trained at Jil Sander was brought in to instruct Chinese workers how to cut garments. To help start an accessories line, Ports hired the manager of a factory doing contract manufacturing for Coach.
The company's first U.S. employee was vice president of operations Jacqui Wenzel, who had worked as a buyer at Henri Bendel and ran her own merchandising firm. Bruce Baas, vice president of sales, was formerly head of retail at Michael Kors. Both say that the Ports 1961 showroom in New York, with its painted concrete floors, dark wood fixtures and leather couches, signaled Mr. Chan was serious.
"When we saw this space, we knew this was going to be something big," Ms. Wenzel says.
The New York showroom helped the company's celebrity marketing strategy in 2005, when actress Nicole Kidman was in the building, saw the clothes and knocked on the door. The company was happy to outfit her in its latest designs.
An unexpected boost came last year when the film "The Devil Wears Prada" used an image from a Ports 1961 ad as a cover for the fictitious "Runway" magazine. As a result, the Ports name appeared in the film's credits -- right below Prada. "The company continues to enjoy the benefits of the film's popularity," Ports said in its 2006 annual report.
To court celebrities, Ports 1961 introduced a couture evening-wear collection called "Par Mains" this year and hosted a party at the Chateau Marmont in Los Angeles for Hollywood stylists. Although the company didn't nab anyone for the Oscars, celebrities such as actress Portia de Rossi and model Molly Sims have been photographed wearing its designs.
Positioning Ports 1961 at retail has been tricky. Saks Fifth Avenue was the first U.S. retailer to place orders for the label. But Ports 1961 pulled the clothes out of three of the six Saks stores that carried it, because in those stores, Saks placed it with "bridge" and "modern" brands rather than higher-priced designer brands.
"We're better than that," says Mr. Baas. He picks up a pair of $395 cotton slacks and points out details, such as silk piping that covers inside seams. "You can practically wear these inside out."
Michael Fink, women's fashion director at Saks, says the collection has thrived at its stores, regardless of what department it is sold in. He defines the label's customer as "very interested and knowledgeable about what's happening with fashion, but not quite ready to jump into designer price points."
A big challenge remains running a high-fashion business from Xiamen, a steamy second-tier Chinese city whose chief industries are fishing, canned-food production and electronics. Designers Dean and Dan Caten, who worked for Ports International for a few years, left in the early 1990s to form a successful Italian label, Dsquared. Ms. Cibani, who trained under the Caten brothers, also wanted to leave China and move to a fashion capital, where she "could be in the air of the market that I was selling to."
Mr. Chan, who originally wanted to avoid the high overhead of a New York design office, recently acquiesced. "This is about retaining your valuable employees," Ms. Cibani recalls telling him. The five-person design team just moved from Xiamen to New York.
At his home, Mr. Chan acknowledges that counterfeit handbags and cheap manufacturing are "part of China." Then he gestures around his mansion's hand-laid marble floors and high ceilings and smiles. "This is also part of China," he says.
images and story from the wall street journal
A Chinese Fashion Power
By RACHEL DODES and MEI FONG
In a sleek New York showroom overlooking the Hudson River, designers and stylists were busy on a recent day, putting finishing touches on an African-inspired collection of poplin and raffia dresses, silk sheaths and metallic lamé turbans by the label Ports 1961.
When presented on New York runways during fashion week earlier this month, the Ports 1961 collection was reviewed and bought by the same stores that buy big designer names like Marc Jacobs, Michael Kors and Oscar de la Renta.
What makes Ports 1961 different from those American brands is that it's manufactured and based in Xiamen, a coastal city in southern China. The company's efforts to position itself alongside high-end European and American brands underscore China's hopes to move from an apparel-manufacturing center to become an owner and marketer of luxury brands. But in the image-conscious world of high fashion, a China-based company faces unique hurdles.
In recent years, East Asian firms have entered the fashion business by purchasing Western companies. Hong Kong manufacturers S.C. Fang & Sons have owned the Pringle of Scotland label since 2000; Taiwanese publishing executive Wang Xiao Lan bought Parisian luxury firm Lanvin a year later. Ports 1961's owner, Alfred Chan, is also considering that route: He recently expressed interest in buying the high-fashion Jil Sander label, owned by a private-equity firm Change Capital Partners in London.
But the 60-year-old Mr. Chan -- who runs Ports 1961 from a 1920s Beaux-Arts mansion on an island off Xiamen -- also thinks he can create a successful new brand from the ground up. He aims to make Ports 1961 a household name in the West within five years. Since clothing for many high-end Italian and French labels is already being made in China, he says his ambitions aren't far-fetched. "They just sew the label in Europe, but much of it is made in China," he says. "We can do this, and better."
Still, in a recent email, Mr. Chan expressed concern about negative publicity surrounding China-made goods. "I feel strongly that the right way to inform consumers is what Pepsi was doing: a blind test....This is the real fair treatment of any company's product." Products should be judged by the way they look and feel, he said.
Launched in the U.S. in 2005, Ports 1961 is now sold in 60 locations, including Neiman Marcus, Saks Fifth Avenue and Vivre.com, a high-end online retailer. The company says it expects the number of retailers carrying the line to double next year. Its $800 dresses and $1,600 coats, made mostly of European fabrics, are starting to get mentioned in fashion magazines. Its first two branded boutiques, designed by the same architect who created Jil Sander's minimalist spaces in Milan and Paris, are set to open next year in Los Angeles and New York.
To compete in the rarified high-fashion world, Ports 1961 hired executives and manufacturing experts who have worked with top fashion companies such as Coach and Michael Kors. From early on, the company insisted to retailers that it be positioned on the same floor as European brands like Missoni and Roberto Cavalli. In the September issue of Vogue, Ports 1961 took out an eight-page ad spread, shot in Iceland.
Ports 1961 benefits from the unusual business model of Ports International, an apparel maker and retail chain controlled by Mr. Chan and publicly traded in Hong Kong. (Mr. Chan says he hopes to eventually merge privately held Ports 1961 into Ports International.) While most apparel companies in the U.S. and Europe outsource production, Ports International owns its entire supply chain, making clothing for both its own label and Ports 1961 in Xiamen.
The potent mix of low labor costs and an increasingly global market for talent allows Ports 1961 to sell its clothing at a significantly lower price than European and American competitors. For example, a black tank dress in a wool-cashmere blend from Ports 1961's current collection sells for $775. A similar style by the Italian brand Fendi sells for $1,200.
The result: Ports International's net profit margins were 25% last year, up from 19% in 2005. Brands like Burberry and Hugo Boss, which outsource production, have margins in the mid-to-high teens.
Jennifer Gonzalez, a 28-year-old business-school student in New York, is a Ports 1961 customer who liked to wear the line's $500 sweaters and blouses on casual Fridays at her former bond-trading job. She says the brand is "fashion forward, but not too trendy." She says she cares more about the fit and the fabric of her clothes than where they were produced.
Mr. Chan declines to disclose sales for Ports 1961, though publicity surrounding the label has a halo effect on the larger Ports International; its holding company, Ports Design Ltd., had sales of about $132 million last year. Ports International has more than 300 stores in China.
Other industries have already seen the impact of acquisitions by Chinese companies. China's Lenovo acquired the personal-computer division of International Business Machines Corp. in 2005. More recently, Nanjing Automobile bought the quintessentially British MG sports-car brand.
Fashion, however, may be a harder nut to crack. Although China dominates apparel manufacturing -- producing as much as a quarter of the world's clothes, according to some estimates -- image is paramount in the world of luxury goods. Ports will need to overcome China's reputation for cheap and, lately, tainted products as well as counterfeits.
"Global consumers overseas associate China with things like cheap takeout and pirated DVDs," says P.T. Black, a partner at Jigsaw, a Shanghai consumer-research company. "It's not like the French, who've spent decades promoting their champagne culture and refined lifestyle, images which work very well with their luxury labels."
Indeed, Ports 1961 plays the image game carefully. On the "About Us" section of its Web site, the company notes origins in Canada, but doesn't mention that it is now based primarily in China. Even in China, some Ports 1961 salesclerks tell customers that the brand is Canadian.
Mr. Chan, who comes from a wealthy Chinese family with interests in mining and textiles, went to college in Canada, eventually becoming a Canadian citizen. He and his brother set up a contract manufacturing business in 1975, called Etac Sales Ltd. His brother was based in China and sourced basic apparel and home furnishings. Mr. Chan was in Canada, selling the goods to stores there, such as Kmart and Bargain Harold's.
Mr. Chan recognized the risk of operating as a middleman and set his sights on acquiring a high-margin, upscale clothing brand. "As a contract manufacturer you're vulnerable, dependent on orders. I didn't want to be that way," he says.
In 1989, Etac bought Ports International, a line of career sportswear founded in 1961 by a Toronto entrepreneur. At its peak in the 1980s, the line had sales of 70 million Canadian dollars and more than 50 stores in Canada and the U.S., including a flagship on Fifth Avenue.
By 1992, Etac owned several upscale brands and operated more than 100 stores, with revenue of more than C$200 million, or the equivalent of about US$165 million at the time. But rapid expansion, debt and poor performance of some retail operations led to heavy losses. In 1994, Etac filed for bankruptcy. Mr. Chan blames the company's failure on recession and the removal of tariffs that enabled American competitors to enter the Canadian market. He also said in an email that his family owned a "very small percentage of Etac before Etac went into troubles" and that he wasn't managing the company.
Mr. Chan bought the rights to the Ports brand and an apparel factory in Xiamen from receivership for C$6 million. He hoped for a comeback. "We left open the door," he says.
In 1993, Mr. Chan moved back to China and set about launching the brand there. The brothers' experience manufacturing in China proved an advantage, as did the lack of high-end competitors in the early 1990s. In China, "every consumer was a blank piece of paper," Mr. Chan recalls.
Ports International expanded quickly in China. To give the label cachet, the company hired models Kate Moss and Claudia Schiffer to appear in ads. With items priced between $250 and $350, Ports International is out of reach for most Chinese people, but is targeted at China's rapidly growing middle class, particularly career women in their 20s and 30s.
In 2003, Ports Design went public on the Hong Kong stock exchange. In the past two years, the company's share price has more than quadrupled to about 23 Hong Kong dollars, or about US$3.
Mr. Chan began considering launching a more-expensive label six years ago, when his sister-in-law presented the idea. Tia Cibani -- a Canadian who is the sister of Mr. Chan's wife, Fiona Cibani -- moved to China to work for Mr. Chan in 1994. She presented Mr. Chan with a business plan for everything from the Ports 1961 name to the globe logo.
"I liked the look of the number 1961, you turn it upside down and it is still 1961," says Ms. Cibani, 34. "I told him that what orange is for Hermès, brown would be for us."
Mr. Chan liked the concept, but thought Ms. Cibani's designs, such as a minidress with a plunging neckline, could alienate older consumers who might remember the clean-cut Ports look of the 1970s. Ms. Cibani insisted that, unlike Ports International, which makes classic styles, the luxury label be on the cutting edge.
The Ports 1961 looks were tested in Canada, where three stores opened in 2003. Sales exceeded Mr. Chan's plan, and he agreed to invest between $20 million and $80 million to launch the brand overseas. Ms. Cibani became head designer. She persuaded Mr. Chan to lease a 10,000-square-foot showroom in Manhattan, in a building where Martha Stewart and Karl Lagerfeld have offices.
To build the label, Mr. Chan hired experienced American managers and artisans from designer labels to teach factory workers in Xiamen. A pattern maker trained at Jil Sander was brought in to instruct Chinese workers how to cut garments. To help start an accessories line, Ports hired the manager of a factory doing contract manufacturing for Coach.
The company's first U.S. employee was vice president of operations Jacqui Wenzel, who had worked as a buyer at Henri Bendel and ran her own merchandising firm. Bruce Baas, vice president of sales, was formerly head of retail at Michael Kors. Both say that the Ports 1961 showroom in New York, with its painted concrete floors, dark wood fixtures and leather couches, signaled Mr. Chan was serious.
"When we saw this space, we knew this was going to be something big," Ms. Wenzel says.
The New York showroom helped the company's celebrity marketing strategy in 2005, when actress Nicole Kidman was in the building, saw the clothes and knocked on the door. The company was happy to outfit her in its latest designs.
An unexpected boost came last year when the film "The Devil Wears Prada" used an image from a Ports 1961 ad as a cover for the fictitious "Runway" magazine. As a result, the Ports name appeared in the film's credits -- right below Prada. "The company continues to enjoy the benefits of the film's popularity," Ports said in its 2006 annual report.
To court celebrities, Ports 1961 introduced a couture evening-wear collection called "Par Mains" this year and hosted a party at the Chateau Marmont in Los Angeles for Hollywood stylists. Although the company didn't nab anyone for the Oscars, celebrities such as actress Portia de Rossi and model Molly Sims have been photographed wearing its designs.
Positioning Ports 1961 at retail has been tricky. Saks Fifth Avenue was the first U.S. retailer to place orders for the label. But Ports 1961 pulled the clothes out of three of the six Saks stores that carried it, because in those stores, Saks placed it with "bridge" and "modern" brands rather than higher-priced designer brands.
"We're better than that," says Mr. Baas. He picks up a pair of $395 cotton slacks and points out details, such as silk piping that covers inside seams. "You can practically wear these inside out."
Michael Fink, women's fashion director at Saks, says the collection has thrived at its stores, regardless of what department it is sold in. He defines the label's customer as "very interested and knowledgeable about what's happening with fashion, but not quite ready to jump into designer price points."
A big challenge remains running a high-fashion business from Xiamen, a steamy second-tier Chinese city whose chief industries are fishing, canned-food production and electronics. Designers Dean and Dan Caten, who worked for Ports International for a few years, left in the early 1990s to form a successful Italian label, Dsquared. Ms. Cibani, who trained under the Caten brothers, also wanted to leave China and move to a fashion capital, where she "could be in the air of the market that I was selling to."
Mr. Chan, who originally wanted to avoid the high overhead of a New York design office, recently acquiesced. "This is about retaining your valuable employees," Ms. Cibani recalls telling him. The five-person design team just moved from Xiamen to New York.
At his home, Mr. Chan acknowledges that counterfeit handbags and cheap manufacturing are "part of China." Then he gestures around his mansion's hand-laid marble floors and high ceilings and smiles. "This is also part of China," he says.
images and story from the wall street journal
