The snow lotus is a rare plant with beautiful flowers that originated in China and is famed for its legendary medicinal properties, including longevity. China is also known for its cashmere, or "soft gold", of which it is the world's largest exporter.
How about combining the two - as Snow-Lotus Cashmere? Except for Chinese consumers, especially those above middle age, few people are aware of the brand.
But Beijing Snow-Lotus Cashmere Group Co Ltd wants to change that. "We will build our brand - or switch from being solely a manufacturer to a brand operator - using a tailor-made plan involving increased design capability, marketing, mass advertising, and overhaul our retail chain," says Chen Tao, chairman of the State-owned middle-sized company.
An international team has been formed to support Snow-Lotus's brand building. The cashmere company has signed agreements with US-based UTA (United Times Associates), Italian Lebelleforme Fashion Group and the locally famous model agency New Silk Road for strategy consultancy, clothes, store design and fashion shows.
China is the world's largest exporter of cashmere products, contributing over 75 percent of the world's total.
Currently, 55 to 60 percent of Snow-Lotus sales are exported as OEM. "I believe the proportion will be changed, when our brand is established," says Chen. He says though that at the currently stage, the OEM business is still important. China's export brands include Inner Mongolia's Erdos and King Deer.
The export price has dropped since 2001. The unit price of cashmere products was about $31 in 2001 and dropped to $28.86 in 2006. About 10 percent of the exports were in the European high-end market.
Snow-Lotus, China's first cashmere products manufacturer, was established in 1963. But it has become an entirely different business after its restructuring since the end of 2006. The company, under the government's policy of consolidating State-owned assets and creating national brands, was reshuffled with another four small State-owned companies and four private enterprises and merged by China National Native Produce and Animal By-Products Import & Export Corporation (China TUHSU) affiliated to China National Cereals, Oils and Foodstuffs Corporation.
The restructuring is proved to be successful. "In 2007, all debts were cleared, the financial statement became healthy and our profit was decent, paving the way for us to implement branding strategy," says Chen.
After restructuring, Snow-Lotus, with staff of over 1,000, moved its manufacturing base to rural Beijing's Yinghai Industrial Park, with a plant area at 35,000 sq m. The annual capacity is 1 million cashmere sweaters, 300 tons of cashmere knitting yarn, and 180 tons of brush wool.
Chen says Snow-Lotus will be a domestic branding breakthrough. He believes brand building should begin in the domestic market, given the huge population and rising disposable income level. "For international branding, success will come when conditions are ripe," he adds.
Fashion and luxury
The first thing Chen would like to do is changing Chinese consumers' concept of cashmere clothing. "They are not just for old people and keeping warm. They can be fashionable and meet various demands of people of different ages," says Chen.
In the international market, cashmere is classified as luxury goods. But to a lack of distinctive designs, young and high-end consumers in China tend to ignore the homegrown treasure.
At present, Snow-Lotus' target demographics are people aged 30-45 with middle class incomes looking to buy an "affordable luxury".
"I don't think hundreds of yuan for a cashmere sweater is reasonable, it's dumping," says Chen, adding that thousands of yuan is OK, since cashmere is a relatively rare resource and the cost of original designs is high.
Snow-Lotus has established its own design and market research team, composed of young designers and professionals. And its cooperation with Italian Lebelleforme Fashion Group, with its experience collaborating with world's leading fashion brands, introduces an international touch.
According to Franceso Scianni, chief designer of the fashion group, cashmere is something that middle-income, middle-aged consumers in search of both high fashion and subtle beauty.
Thanks to technological development some cashmere-derived fabrics are both tastefully designed and inexpensive for young people.
Cashmere clothing is traditionally regarded as winter and autumn wear, but Snow-Lotus showed its spring and summer cashmere series at the March 2008 CHIC - China International Clothing & Accessories Fair held in Beijing - in an attempt to break down the seasonal stereotype and expand its products to southern China.
Direct controlled retailing
Snow-Lotus used to largely depend on distributors and department stores for sales. But inspired by UTA, it has decided to overhaul the distribution system and retailing channels.
In addition to traditional regional distributors and booths in large department stores, it will directly control its sales in Beijing, Shanghai and Shenyang and set up direct-control retail outlets divided into four categories.
The first category will be Snow-Lotus "experience stores", an idea that began in the western overseas market.
The experience stores will be larger than Snow-Lotus specialty shops with a wider selection, open shelves and consulting services on cashmere and occasional seminars on cashmere designs and fashion.
"Depending on the experience in its stores, a company can efficiently promote its image and products and, more importantly, it can get consumers' feedback and responses quickly to adjust its design and strategy," says Yang Dayun, president of UTA Greater China.
The second category is specialty shops, focusing on middle-aged people with relatively high incomes and good educational backgrounds. Premier products will be offered and shop decor will be understated and tasteful.
The third will be booths in department stores and franchise shops. The setup of the booths will be designed by Snow-Lotus after negotiations with stores and franchisees.
And to take care of the elderly consumers, "Love Stores" will be established to provide affordable traditional cashmere clothes and accessories.
The company plans to open three to four experience stores in Beijing, Shanghai or Shenyang this year. Elsewhere, 20 special shops will be launched.
"Expansion of the direct-controlled retailing channel will help us interact with the consumers closely and speed up our brand promotion," says Chen.
Chen admits the investment is "huge", but declines to disclose the exact figure, saying that it will be worthwhile, given the added-value of Snow-Lotus products and the long-term development of both its domestic and international markets.
