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Why this Aussie retailer had to move to Hong Kong to find success

 

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A trip to Peru in 2012 gave serial entrepreneur Luke Grana the inspiration for his next big idea: a brand that would produce affordable, high-quality clothing in basic styles. After returning home to Sydney Grana began researching the fashion industry and realised he could keep costs low by developing a direct-to-consumer business model that would cut out any middlemen.

There was just one problem—his fledgling business, now named Grana, couldn’t work from Australia.

“By October 2013 I had my business plan for Grana.com, one fabric and one style, the Peruvian pima t-shirt,” Grana told Retailbiz. “I packed my bags and bought a one-way ticket to Hong Kong. The vision was to set up a centralised warehouse, shipping to a global market.

“It was the most strategic location to start an ecommerce business and to scale in the long-term, but also keep prices low for customers.”

GranaAlthough Grana had successfully run businesses in Australia—including starting a chain of espresso bars while at university and a founding a company providing infrastructure for electric cars—he knew he had to look overseas for success with his latest venture.

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“I researched setting up in Australia, Europe, Singapore and the US but realised the most cost-effective and efficient location to have a centralised warehouse was Hong Kong,” he explained.

“It’s cheaper to ship from Hong Kong to Sydney than Sydney to Melbourne. Importantly, Hong Kong is a tax-free port, international air cargo hub, a world-class logistics hub, and sourcing manufacturers base their headquarters here.”

Fast tracked growth

Grana moved to Hong Kong with $200,000 to start his business. He managed to do a beta launch in April 2014, where he sold 2,000 t-shirts in three weeks. This gave investors confidence in his business and led to US$1 million in seed funding, meaning Grana was able to hire a founding team to officially launch Grana.com in October 2014.

The company has secured US$16 million in seed and capital funding to date, and has expanded from an initial team of three to employing over 75 staff. Operations have also moved from a 500 square foot space to an 18,000 square foot centralised warehouse.

Affordable luxury direct to consumers

Grana’s vision for his clothing brand is to make quality products accessible to everyone. Although he was initially inspired by Peruvian pima cotton, the company now sources luxury fabrics from across the globe including Chinese silk, Mongolian cashmere and Italian merino. These are manufactured into everything from shorts to sleepwear and sold online.

As part of this direct-to-consumer business model, Grana.com products are shipped straight to the company’s warehouse for quality control review, picking and packing before being delivered to customers.

“Traditional brands have distributors and retailers who take a cut and add towards the high mark-up costs that customers ultimately pay,” Grana said. “Sometimes they’re paying high prices for low quality and that’s not right.

“We have more control over the quality sourced and how our garments are manufactured to ensure they go straight to us to keep costs low for consumers.”

This model has been extremely successful and has delivered 15 per cent month-on-month sales growth over the past year.

GranaGoing offline

Although Grana is committed to online retail, he has also given his brand a physical presence through pop-up stores. The company has created 13 pop-ups since launching and has also opened a flagship showroom in Hong Kong where customers can view the clothes.

“[Pop-ups] are a great way to meet our customers, for them to learn about our brand and what we stand for, to feel the fabric and find the right fit, style and colour,” he said.

“We are predominately an online brand; however it is important to give customers an offline experience to try offline and buy online, which is the concept behind our pop-ups and showrooms.

“It accommodates for the new generation of consumers who prefer to have both an online and offline retail experience.”

The plan now is to take Grana further afield, opening a showroom in New York in May and one in Shanghai in July. From there, Grana said he is looking to build a local team in both markets and begin shipping to eight new destinations by the end of the year, including Japan, Korea and mainland China.

Success seems to have come rather quickly for the business, which Grana puts down to his customer base, predominantly millennials.

“Millennials [are our target customer]. They’re always socially connected online, open to new shopping experiences and appreciate minimal and simple styles.

“We have a lot of customers who were buying from the very beginning and are still our repeat customers. If it wasn’t for them, word of mouth wouldn’t have spread so fast. They’re continuing to support and follow our brand growth, which makes me really happy.”

 

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