The First Online Women’s Fashion Brand In China: Handu’s Journey To Success
As the national leading online fashion brand in China, Handu was first launched in 2006, targeting female consumers between the ages of 20 to 35. Handu have grown from, an annual revenue of ¥200,000 RMB as a Taobao store to national leading e-commerce brand with an annual revenue of ¥16 billion dollars in RMB. The tremendous growth of this fashion brand makes this to be a classic case study to gain important business insight to the Chinese market.
In 2012, Handu was ranked one among all the women’s fashion stores on Taobao, with an annual revenue of 5.6 billion RMB. Additionally, between 2012 to 2016, Handu was also ranked first as the overall best fashion brand on Taobao, Tmall, JD.com and other e-commerce platform for five years straight. Again In 2014, Handu was crowned first three times straight as the top best seller on Tmall during Double-11 (November 11th) and Double-12 (December 12th), and annually. In 2016, the total revenue of Handu have reached ¥14.3 billion RMB, and a gross profit margin of 45.32%.
In the current digital era, what are some of the successful strategies of brands with high benchmark valuation in China?
Product Group Model
The product-based group system (IOSSP) is the most well-known business model from Handu, where it has been selected to be one of the case studies for course material by MBA program of Qing Hua University, Cheung Kong Graduate School of Business, China Europe International Business School, and EMBA program of Harvard Business School.
This model in particular is defined by the individual product groups consist of designer, webpage specialist, inventory manager to be responsible for one product from selection, to design, to manufacturing, and all processes involved in the online sale. The company will distribute bonuses for the group based on the online sales by the following factors of: inventory turnover rate, revenue, and product gross margin.
If the product released performs successfully with positive results, group expand, and bonuses are distributed within the group. If the sales performance is low, group is disbanded, and reconstructed with new individuals. Large team consists of three to five groups, forming a brand. And, Handu currently own over 300 product groups and 20 brands.
This management model ensures the efficiency and accuracy from design to manufacturing with the most concise details to the products.
The average days required for Handu from design to the launch is approximately 20 days, with over 100 new product releases every day. And, over 30,000 product releases in a year, surpassing the total yearly releases of Zara of 20,000 products.
On one hand, Handu have given these opportunities for the product groups to experience how it is like to look at data, strategies to increase efficiency, and to be wary of gross product margins and inventory, almost similar to manage your own business. On the other hand, Handu is able to manage the business in a large scale with a planning department to manage the bigger picture, such as brand image, products, styles, and numbers of releases needed.
The product groups perform like fast and efficient parts to a powerful engine, but for Handu, contributing its rapid development to its own platform.
During the development period of the brand, Handu have experienced the four stages of business operating ecosystem of online branding, as a singular brand, multi-brand, online brands, and online platform.
Since the implementation plans to expand the brand in 2012, Handu continued to launch sub-brands targeting men, children, and middle-aged women’s fashion. And in 2015, Handu have begun exploring the management agency business, with Kui Fashion being one of its best exemplars.
As a brand with over a decade of experience in Shenzhen, the first year of launching in Tmall for Kui Fashion, with a large expense towards marketing, have reached a sales revenue of ¥100 million RMB. However, the numbers have not been outperformed for the next three years.
After Handu have taken over the management of the brand, Handu have brought in several changes to the brand to reach ¥90 million RMB within only four months. Using the model of less stocks and more styles, changing the original methods for order, product details, visual design improvements, promotional planning to increase the numbers of new releases and user experience.
By standardizing the management model from Handu and replicate the model to other existing brands and agenting brand, Handu is able to occupy a greater share of the market with a variety of brands. Thus, Handu is able to be involved in other sectors while attaining higher numbers and variety of resources.
Presently, Handu has already been involved with shoes, home electronics, FMCG and other variety of brands. Handu is also currently involved in over 100 brands, with 22 of their own sub-brands (including joint brands), and over 60 brands from their management agency business.
As the number one online fashion brand, Handu is aiming to be the key role in the ecosystem management for online brands, serving all businesses and labels.
Developing Business Technologies
In the early stages of growth, Handu have already begun investing in business intelligence system. With the assistance of the most knowledgeable IT development team, Handu have attained their smart business system. The collection and analysis of data as the core of the system with their BI (business intelligence), OMS (order management system), WMS (warehouse management system), TMS (Transport management system), HNB, SCM (Supply chain management), SRM (Supplier regulation management) and other advanced service and management system technologies.
*Above image is the mapping of the business intelligence system from Handu developed by the IT group to increase efficiency and their own ecosystem.
The system is able to improve the overall product line process, sales performance with each perspective data to monitor, gain insight, and enhance customer service.
For example, the double-11 promotion, which is a celebration of single’s day on November 11, Handu was able to complete the first order in three minutes, and a restock in seven minutes. The order processing speed have reached 15,000 order per minute, breaking the record in the entire industry.
The digitized business system is the specialty of Handu, and because of the systematic processing that Handu has, Handu is able to improve the entire processing between the business and partners to respond quickly to any market changes while upgrading the competitiveness of the brand.
As Handu is an online clothing brand, all sales are completed online with an average of 70% sell through rate for seasonal products in comparison to their competitions. One of the contributing reasons for this performance is their strategy to stock best-selling and discounted on slow-selling products to reduce inventory stocks regularly.
Every product will be put on shelf for approximately 10 to 15 days as the period to test the popularity. After the testing period, product will be categorized in four categories, best-selling and trending products will be restocked for roughly in several thousands, whereas slow-selling and non-selling products will be immediately discounted during the peak hours for sales. Thus, every seasonal product is able to reach 90-95% sell through rate while the marginal costs.
Handu provides consumers with two different discount models for their members and their fans.
There are four types of membership including regular member, senior member, VIP member, elite VIP members, and consumers are able to receive different discounts based on their level of memberships as well as sneak peaks and early notifications for any upcoming promotions and events.
The followers on the other hand, including all loyal fans of their business can enjoy the all the offers on new releases or selected products with no requirements, with the highest discount up to 50%.
With the exclusive discounts offered to both members and followers to provide consumers with high performance cost for products while increasing sales performance and lowering marketing expenses have brought Handu higher repurchase rate and buying motives.
KOL Marketing and Followers
In the current digital era, brands often stress the impact and importance of a fan base. Since 2014, Handu have contracted Jun Ji-hyun, Anh Jae-hyun, Park Shin-hye, Ji Chang-wook and other Korean celebrities over the past several years. Handu have also contracted the exclusive super model from Chanel in 2017, along with other media marketing in entertainment and fashion industry to rebuild a new brand image targeting younger generations, becoming the first online business to have the most international spokesperson within China.
Selecting a suitable spokesperson is based on the financial state of the fan base. Firstly, celebrities often are able to provide a stronger buying motive than internet influencers or fashion bloggers. Thus, there are countless topics for the endorsements from the celebrities and the celebrities themselves among the fan base of Handu.
Product, fashion topics, and followers are the main factors in the formation of the current active community of Handu.
Handu have also collaborated with large IP (Intellectual property) projects in China. Such as the “Super Brand Day” with FitBit and Alibaba in 2017, and Uncle Tongdao, Bili Bili, Kumamon to undergo a series of thematic marketing and promotional plans offline and online.
From 2008 to 2017, Handu have used these nine years to gain over 15 million followers for their women’s clothing store, followed by Uniqlo with 5 million followers as the second ranked, becoming a brand with the largest fanbase in all of Tmall’s history, including all categories. Making Handu one of the best exemplars of fan base management.
First To The Mobile Opportunity
Over the past several years, the normalization for mobile payment and mobile development, the sales performance for Taobao mobile as the representative for mobile e-commerce have skyrocketed. In 2012, the total amount of users on Taobao mobile have surpassed 3 billion users, and 57 million users with purchasing records with the transaction volume increased by six times.
In comparison to the majority of the businesses on the sidelines, the development on mobile and mobile platforms for Handu have taken a huge leap.
In the trial period started in 2013, the mobile management team have used mobile offer and double discounts promotions on mobile platforms to attract PC consumers to mobile shopping, slowly changing consumers behaviours and habits.
For Handu, who have been the first to trial the mobile platform have reached an annual sale over one billion RMB in 2013, becoming one of the first clothing brand on Taobao to reach a billion in sales.
New Media Implementations and Plans
Under the influences of new media, Handu have formulated a standardized plan for the brand. Aside from the official Weibo account for the women’s clothing line, WeChat have separated the brands and sub-brands with different accounts based on children, old-age, men, housewives and other target audiences.
Firstly, to attract the viewership from target audience, the content on WeChat should be standardizes by informational and promotional content while maintaining content sensitivity to trending topics. For example, during the trending period for this Korean drama called “Descendants of the sun”, Handu took advantage of this hot topic by promoting the clothing of the female actress in the drama, additionally with a free item with purchase, reaching 200,000 views on the article.
Secondly, Handu have also built up online fanbase with Weibo groups. Handu currently have 500 different fan groups with over several hundreds of thousands of fans in each group, bringing billions of impressions to the business annually
Lastly, Handu also utilizes the influence of KOL and streams to bring in more exposure to the products and brand. This is one of the new channels from new media adapted by the brand, distinguishable from the traditional unanimated content such as text and pictures, this strategy is able to entertain consumers while increasing the conversion rate to a larger group at once.
The success of Handu is majorly contributed to the development of e-commerce and technology in the last 10 years, but the innovative business model, team building, online marketing strategies and decisiveness to take the opportunity also greatly contributed to the brands superiority.
As the giants of the online space, Alibaba, JD.com and Inman was focusing on the expansion of offline channels, Handu persisted in focusing on the online market, because their management, operation and business model is superior in the online development.
In other words, Handu have attributes that any online brand needs to succeed because the core of the brand is what overpowers other online brands.
However, the future cannot be foreseen, and whether if the brand will continue to compete for more opportunities and resources online or consider offline developments to find a new business model, we can surely anticipate.