PPG—A Pioneer in Clothing Industry
PPG, the successful online clothing retailer, turned a new page in Chinese clothing industry, but that is only a beginning.
What makes PPG so special is that it employs a business model combined of e-commerce and traditional retail, in which Internet and call centers play a fairly important role. This saved PPG much cost of maintaining retail outlets. David Lee, its chairman, said. “We never need to keep a large inventory,” he said.
It is said that PPG has received investment of $80 million from TDF, JAFCO Asia, KPCB and San Shan Capital Partners since it launched in October 2005.
“PPG’s business model challenges the traditional clothing industry,” Wen Zhimin, vice-president of San Shan Capital, a Hong Kong fund manager, said. And PPG’s model and management team are the main reason why San Shan invested in the firm, he said.
Just like Dell in the computer industry, direct sales are PPG’s strength, he said, and 80 percent of its orders are over 250 yuan.
Since the business model helped PPG cut off some of its cost, advertising became their biggest expense, according to Lee.
They spent 230 million yuan on advertising last year, nearly one third of its 700 million yuan in sales revenue.
Its advertisements went everywhere through every channel – from newspapers, TV and magazines to direct mail, all that you can think of.
But it was not always the case. It scaled down its ad budget last October, because of the satisfactory market recognition.
They didn’t stop. “Now, we’re focusing our marketing strategy on branding,” Lee said. “We want to be another Gap.”
“We won’t be opening any retail outlets as long as I’m still in charge,” Lee said. Instead, the focus of PPG will be on expanding its business to second- and third-tier cities through an intensive ad campaign in those markets. “We want to reach most cities across the nation in the next two years,” he said.
PPG said yesterday that it plans to list in the US toward the end of this year or in early 2009, either on the New York Stock Exchange or the NASDAQ. PPG also plans to open a US subsidiary in late March to tap the market there. The next target will be Europe and beyond.
“We intend to expand geographically to Europe and other regions,” Lee said.
He said the company’s expansion should resemble an “octopus” – with China as the head. “It’s our ‘octopus’ strategy.”
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