Online challenges

For brand owners like Qian, the biggest concern about e-commerce was how to maintain the brands' high-end positioning.

Qian launched the Lesies brand in 1993. After almost 20 years of hard work, he turned it into a high-end label. And even though Lesies' online shop was established at the end of 2011, Qian is still worried about whether the brand will be seen as a low-level product because it has an online presence.

"The prices of clothes sold in online shops are only half or even a third of those sold in brick-and-mortar stores," he said.

Although Qian was initially reluctant about e-commerce, the sales revenue of Lesies' online shop in 2012 reached 50 million yuan ($8.13 million), accounting for 10 percent of the company's total sales.

Gu said that at first, many brand owners, like Qian, were unwilling to set up online shops, but since the brands had already made their names in China, once their online stores were launched, the sales results were satisfactory.

Last year, two Hangzhou brands were in Taobao.com's top 10 list for women's clothing sales in terms of revenue, according to a report released by the China E-commerce Research Center.

One of the two brands, Na Wain Garment Co, ranked fifth with an annual sales revenue of 190 million yuan.

Hu Changcai, general manager of Na Wain, said that it was fortunate that the company caught the e-commerce train at the last minute.

The company established an e-commerce department in December 2010.

"Before 2010, we regarded Taobao shops as distractions, hampering the healthy development of the industry, because there were so many shops that didn't do business according to the rules," Hu said.

However, after Hu had a taste of e-commerce, he had to admit that the field offers significant opportunities.

"Last year, the sales revenue of our online shop grew four times year-on-year. That's an unimaginably high figure for brick-and-mortar shops," he said.

To maintain a good relationship with the company's fast-growing customer group, Na Wain launched more than 150 online chat rooms for clients. Employees also get in touch with regular customers for suggestions and advice.

But, just like Qian at Lesies, Hu worried about brand positioning before the company launched its online store.

"Our solution was to diversify our products online and offline. Our target customers for the online shop are five to 10 years younger than those for the brick-and-mortar shops," Hu said. "High-end customers can still enjoy our services in brick-and-mortar shops, while younger ones can select more affordable clothing online."

Meanwhile, to maintain the design advantage of the online shop amid the fierce competition, Na Wain established a design team with 15 people. For this year's spring collection, for instance, a total of 96 new designs were released within two months.

Na Wain's brick-and-mortar shops continue to offer customers high-end and professional services at higher prices, while its online shop sells clothes to younger clients. Hu views online shoppers as potential customers for his brick-and-mortar shops.

"As they get older, online customers will gradually become offline customers," he said.

However, for Hu, the development of brick-and-mortar stores is still and will continue to be for some time the focus of the company.

"After all, the sales revenue of our online shop last year accounted only for 8 percent of our total sales. The online business helps us to expand rapidly and to a larger range of customers, but the main profits still come from our brick-and-mortar shop sales," he said.

Qian echoed that view.

"The online business can only be a complementary service to our brick-and-mortar shops. The question is how to balance the branding strategies of online shops and those of the other shops. That's a big problem because both of them share the same brand name," he said.

Meanwhile, Gu said that brand owners in Hangzhou should not be afraid to venture online.

"Willingly or not, Hangzhou's fashion brands have entered the e-commerce era along with other companies. Concerns and challenges remain, but opportunities and profits will come as well," Gu said.

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