Few investment bankers would give up a comfortable salary to move to China to start a new business. And not many bankers would choose to start an online clothing store.
But Norman Cheung did just that, co-founding zooq.com, an internet fashion site that operates out of Shanghai, last year.
Business is brisk. Sales at zooq.com, which offers US and European fashion labels at an average price of $100, has been growing at a monthly rate of around 40% since its official launch in November.
“Everyday you see a lot of mono-brands or multi-brand stores setting up shops in China,” Cheung told WiC. “But there aren’t many people like us. Our model is different from the international firms.”
Cheung says that zooq.com has a leg-up on some of its competitors by basing in Shanghai, which allows for faster delivery. The company promises one-day fulfilment in Shanghai and less than two days for other parts of the country. Its more upscale product range – the majority of the brands sold are from the UK and US – also sets zooq.com apart from most of its domestic competition.
So why did Cheung choose the e-commerce sector? Apart from the obvious – China’s online retail market is booming – Cheung also says that start-ups don’t always have to play catch up in the e-commerce business. “While many international companies are quite well known around the world not many people in China have heard of them. So whoever wants to enter the market – whether it is Asos (see WiC145) or Net-A-Porter – they all start from a level playing field in China.”
Local knowledge is also going to be important, and Cheung admits that the buying behaviour in China is dramatically different from what he has seen in other parts of the world.
“One thing we have noticed is that Chinese consumers like to call in or chat online before they order. That was something that caught us by surprise. They love interactions. It’s very different from the West where people usually just order online and if they don’t like something they will just return it,” Cheung says.
So zooq.com has people at its warehouse who take calls around the clock. Cheung added that Chinese shoppers also tend to ask detailed questions about how the fabric feels or whether its colour is different from how it is rendered on computer screens.
“Sometimes not everything can be conveyed in pictures so they want to make sure they know what they are buying. And we actually encourage that too. It’s better for us to make sure they have ordered the right item,” he explains.
As a result, return rates at zooq.com are low at about 10%, significantly below comparable operations in North America, where retailers say between 20% and 40% of their online sales are returned, according to the Wall Street Journal.
Cheung admits that he sometimes misjudged which items were likely to be most popular. “Our female shoppers love body-hugging dresses. But they don’t like to reveal too much so they are less receptive to products that are too sheer or see-through. However, they do love showing off their legs. So some of our most popular products have high necklines but short hemlines,” he suggests.
As a newcomer to the industry, zooq.com is yet to turn a profit. At the moment, Cheung’s focus is on building brand and growing market share, although he says he is optimistic about the company’s propspects. While most of his orders come from first-tier cities, he also says he is getting some of his largest orders come from second and even third-tier cities: “Maybe that is because people in big cities have more shopping options. But for some of the smaller cities we are seeing robust demand. Aside from Shanghai our orders come from everywhere in the country.”
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