UPSTARTS

Selling the
Dream
Internet retailer Wooha
is targeting China’s new
rich who want to stand out
from the crowd

by TOM SPENDER

I
t may not be happening fast enough for
some in the US, but Chinese consumers
are beginning to save less and spend more
on higher-end goods – and few companies are
riding this wave better than Internet retailer
Wooha.com.
Founded in 2006, Wooha has a simple
premise: it sells high fashion, including lines
not available on the Chinese mainland, to
increasingly wealthy consumers across the
country.
Yet while the idea is simple, making it
work is anything but in a vast country with an
underdeveloped and expensive logistics infra-
structure. But, Wooha’s founder Corey Lien always look for things that might look very odd sits behind a large desk in an office with bare
has managed to steer the company to where it together, but when you do put them together brick walls. The constant “sploshing” sound
is now; growing 35% month-over-month. you get new value and innovation from it.” of a rock falling into water signals the arrival
“I like to integrate things,” Lien says. “I Dressed in a crisp striped shirt, Lien of new emails. A serial entrepreneur born in

26 China International Business | May 2010

 Taiwan and educated in Canada, the 35-year-
old launched his first company at age 17,
and at 24 founded HealthTrade, a website
matching suppliers of pharmaceuticals with
buyers, including hospitals in Taiwan. He led
the company to IPO when he was 26, and
three years later sold it for USD 50 million.
From there Lien moved into the
aspirational lifestyle sector. “Wooha began
with lifestyle being the ultimate goal, to allow
people to explore and learn about different
lifestyles. And fashion is the easiest way to
let people understand what London looks
like, what people in Japan look like. It’s a first
step,” he says.
INDIVIDUALISM
Outside Lien’s office, casually-dressed
staffers wander around an open-plan space
located in a former industrial park in south-
east Beijing. The office was collectively
designed by the entire Wooha staff in 2008 —
which perhaps explains the pop music playing
in the background and the upstairs loft space
replete with beanbags, weights and table
tennis — and has helped the company live by
the same self-determination and individuality
that it aims to offer its customers online.
Starting Wooha, Lien bet that greater
spending power among Chinese would be
accompanied by a desire to stand out more
as individuals. Previously, access to sophisti-
cated foreign fashions had been restricted to
the elite that could afford to travel abroad. In
2006, when Wooha was launched, just 20
million Chinese citizens held passports, about
1.5% of the total population, according to a
China Daily article in that year.
To market their idea of culture to
Internet shoppers, the Wooha team played
around with images, video content and
writing in a bid to convey not just the product
but also its brand essence. “In the beginning,
it was difficult for us to understand what
we were talking about,” Lien says. “[In fact,]
we are still talking about enjoying life and
bringing lifestyle to people. We are still trying
to position it on our website. It was tough to
make sure the 16 of us [at the company then]
were in sync, let alone convince others.”
Wooha got through its first two years
of operation without convincing a significant
number of buyers, but last year saw what Lien
describes as a paradigm shift, and now Woo-
Jeff Lau
ha needs a staff of over 120 to keep up with
demand. Customers began to pay well over
what Lien and his team thought to be their
price ceiling: the company’s biggest order to
date was RMB 98,000 for a single bag and a
jacket. “I was like, what?” says Lien. “I wouldn’
t buy it myself, to be honest. We put it on the
Internet just for show; we didn’t think we
would move that item.”
BOOMING MARKET
Wooha’s popularity is coinciding with a
boom in foreign travel among Chinese, who
this year will make 57 million trips to foreign
countries — an increase of 15% on 2009 —
according to the China Tourism Academy, a
think tank for the country’s tourism author-
ity. By 2020, about 100 million Chinese are
expected to travel overseas, according to the
UN World Tourism Organization (UNWTO).
Meanwhile, China’s luxury goods sector
passed the US last August to become the
second largest in the world according to ana-
lysts, behind only Japan, a “key indicator that
people are looking for something other than
functionality,” Lien suggests.
Wooha estimates it currently has a
target market of around 20 million Chinese
and growing. Typically, they are professionals
between 25 and 40 years-old, have a good
income with an annual salary increase of
between 10% and 30% – and higher if they
switch jobs. “They have a very positive outlook
and are doing more spending than saving at
this point,” says Lien.
Almost half of Wooha’s customers live
in major cities such as Beijing, Shanghai and
Guangzhou, but citizens from all over China
are buying. About 3% of Wooha’s customers
are from Inner Mongolia, and 2.5% are from
Yunnan Province in the far southwest of the
country. In fact, the further away from the ma-
jor cities they are, the more customers spend.
“They also ask us for advice: what to buy,
what’s going on in the fashion world, do we
have any recommendations. People further
away want to be engaged,” he says.
DELIVERY COSTS
According to Lien, Wooha is currently
growing at 30-40% each month. Though he
would not give detailed numbers on revenue
and profit he says the average Wooha order is
worth RMB 3,000. He also says that the ma-
jority of the company’s competitors are still
trying to squeeze tiny profit margins from
selling low-priced goods in an environment
where the cost of delivery is actually higher
than in places like the US. This is due to a
less established logistical infrastructure and a
lack of local firms like UPS and FedEx.
“Last year we had lots of competi-
tion,” says Lien, “but we are losing some. We
like them to stick around because creativity
comes from competition.” But would-be
players in the field face a stiff challenge in
finding investment to grow their businesses,
with the Chinese venture capital industry still
in its infancy and investors wary of putting
money into companies that have yet to post
revenue. While Lien approached investors
who had already put cash into his previous
ventures, others find it difficult to get money
from Chinese banks, which make around
90% of their loans to state-owned enterpris-
es, according to Bao Fan, founder of China
Renaissance, a Beijing-based investment
bank dedicated to helping Chinese entrepre-
neurs.
“I’m a total believer in the private
sector, I think that those people represent
the future of China, but they are not properly
served from an investment banking point of
view. So underground lending shockingly
has been a very important source of capital to
companies,” Bao says, adding that entrepre-
neurs often have to tap unregulated “grey”
lending markets for growth capital. “It’s a
lose-lose situation. The company has to pay a
very high rate and it’s usually short-term capi-
tal. The lenders are taking a lot of risk and are
not really protected,” he adds.
BUILDING A NETWORK
If Wooha’s achievement so far has been
in bringing the world to China, Lien hopes
that as local brands improve their profile
abroad he will be able to use his current logis-
tics network — he has agreements in place
with international delivery firms such as ship-
ping giant FedEx — to flip his business on
its head and start taking China to the world.
That being said, even in China only 20%
of the products currently sold are Chinese,
according to Lien, with the rest made up of
leading foreign brands like Gucci, Dior and
Coach.
For the moment, he is biding his time.
Chinese brands will only find the consistency
they need to be marketable abroad when they
are forced to think about the essence of their
brands during fluctuations in an economy
that is currently registering sustained growth.
“Providing it in reverse is very
interesting, very good for China, and some-
thing we want to do. I’m waiting for the
brands in China to be more sophisticated and
consistent,” Lien says. “Right now the brands
fluctuate, they do a good product and then
change it too fast. They are not yet feeling the
pain. China in general is not cheap any more
and quality is coming in. But in the fashion
world it takes more than just that.” ■
China International Business | May 2010 27