Successful Hong Kong retailer Peter Lau explains to AMCHAM members how Hong Kong will spearhead the global expansion of his clothing chain, Giordano.

Hong Kong apparel and accessories retailer Giordano, already successfully established in Asia, has its sights set on becoming a truly global player by leveraging on the advantages of the SAR.

"Everyone must go overseas. Globalisation is a must, a vital strategy," said Giordano chairman Peter Lau Kwok-kuen at a recent business luncheon organised by the American Chamber of Commerce in Hong Kong.

With its second flagship store due to open in Hong Kong this autumn, the group is positioning itself to take on the competition expected in Asia after 2005 - when garment quotas are to be abolished, cutting the cost of imports. At the same time the company is preparing to enter the home markets of its competitors.

Giordano no longer manufactures its own garments but uses Hong Kong as a platform to source from suppliers in the Chinese mainland, South Korea and Singapore. This way it combines the advantages of the low-cost regional environment with Hong Kong's experience of just-in-time logistical systems and unsurpassed international marketing networks.

From modest beginnings in Hong Kong in 1981, Giordano, known for its T-shirts, khakis and jeans, has advanced step-by-step, first into Taiwan, then into South East Asia and the Chinese mainland. Lately, it has expanded into North East Asia, the Middle East and Australia.

Last year the group re-entered Japan and also made its first foray into Europe by opening a flagship store in Germany. Its medium-term strategy is to enter the US sometime after 2005.

In just over two decades the group has grown to 1,229 stores in 26 markets. Even though a company such as US retail giant Gap is 25 times bigger than Giordano, Mr Lau sees the group's smaller size as one of its strengths. Its decentralised operations are characterised by short design and production cycles, and good inventory control and turnover.

"There is a strong emphasis on customer service and on understanding customers' needs. By being a 'lean and mean operation', the group has been able to retain flexibility. This has helped it to innovate faster than anyone else."

Branding strategies target wide appeal

Giordano has demonstrated its nimbleness in changing tack several times. Having started as a retailer of premium apparel, it repositioned in 1986 as a value-for-money casual wear retailer.

Mr Lau says the group intends to continue pursuing a multi-brand strategy enabling it to go more up-market where conditions permit. Alongside the original Giordano brand which occupies a mid-market position, it has developed the Giordano Ladies brand to appeal to the more affluent consumer, as well as launching (in 1990) Blue Star Exchange to cater for those looking for bargains.

As an example of its flexibility, by the end of the year Giordano will adjust its marketing strategy in the Chinese mainland. It has 523 outlets there, with shops and counters in all major cities, including Guangzhou, Shanghai and Beijing.

Some of these are shops owned by its joint venture with China Resources Enterprises, launched in October 2000 to increase market exposure in the mainland. The clothier's sales are driven largely by its operations in the mainland, which grew nine per cent to HK$405 million (US$52 million) the first half of the year.

Its Blue Star Exchange brand will shortly be launched in several mainland locations to supplement the existing Giordano and Blue Navy marques. Mr Lau says there will be separate marketing teams for each of these brands. In addition, a strategy of geographical segmentation is likely to be applied.

Mr Lau says international retailers intending to enter the mainland market must bear in mind that it is not an easy market to tackle and flexibility is needed.

"The mainland market is difficult in the sense that the economy has just recently opened up and there are a lot of rules and regulations regarding retailing. But the biggest issue in China is that it is such a vast marketplace. You have different cultures, different economic stages. One cannot look at China as one market."

While there is always a learning curve in doing business in the mainland, Hong Kong companies have first mover advantage. "What we have realised is that there is a need for some adjustments to our tactics and execution on the marketing front. We are evolving in this regard and the adjustments will be finalised by the end of the year," Mr Lau said.

Related links:
Giordano www.giordano.com.hk/
American Chamber of Commerce  www.amcham.org.hk/ 
Gap www.gap.com/