The original concept for LA MIU was simple: sexy yet comfortable underwear, inspired from top-brands but designed and manufactured in-house. LA MIU would build its own brand, target the mid- to high-end market, and reach customers nationwide via e-commerce.
In 2008, the women’s undergarments market was highly fragmented, with the largest player holding only a ~1% share of the total ~$10 billion market. There was clear opportunity in the market despite the multitude of competitors. Products available in department stores and shopping malls were either too sexy or not sexy at all, with no middle ground. Moreover, similar quality products in China were almost twice as expensive as in the US.
Driven by Dong Lu’s simple mantra “make good things,” LA MIU positioned its products as sexy but functional, and at half the price of its competitors’. Gross margin in the undergarment market was nearly 80% (most likely due to some sort of informal collusion) so cutting prices by half would not kill the business. Moreover, as Dong Lu stated, “consumers expect stuff on the Internet to be cheap, really cheap.Although LA MIU manufactures and brands its own products, there are no professional fashion designers on staff, all designs are “inspired” from existing brands. This is common practice in the fashion industry. The US site Shoe Dazzle also closely and quickly redesigns the latest trends. In China, VANCL is another such “fast-follower” Chinese online-only brand. Even large brands, such as Zara, hire buyers to purchase samples of great looking designs by competitors. These samples are brought back and patterns, buttons, and different types of cloth are mixed, matched, and modified to create new designs.
Customer service is a top priority at LA MIU, because buying lingerie is an intimate affair. According to Dong Lu, women are more loyal to their lingerie brand than anything else, with the sole exception of their hairdresser. Once they find a great fit, they rarely change brands, or at least until their body shape begins to change with age. Like Zappos in shoe shopping, LA MIU views every call from a customer not as a annoyance, but as an opportunity to win a customer for life.
LA MIU maintains a call-center of ’30 or so’ young women, half of whom take calls and the other half of whom respond via instant messenger. Although LA MIU has a policy that allows customers to return products within 30 days with no questions asked, the return rate is ‘basically zero.’ Customer service are trained to nudge customers who do return products to try other products by giving away coupons and store credit.Marketing at LA MIU has been turned into a science. Internal systems calculate the ROI on all online ads in real-time, with alerts indicating how much they should be bidding for ad-space so that it can be adjusted on a day-to-day basis. Aside from Internet ads, LA MIU also hosts fashion shows at stylish clubs like LAN Club and China Doll in Beijing and other top clubs in Tokyo. LA MIU is constantly competing for attention to ensure that the brand stays fresh in the consumer’s mind.
The most complicated part of the business is actually behind-the-scenes: warehouse and distribution. Today LA MIU distributes over 3000 SKUs to over 500,000 clients. That makes for a huge warehouse. Still, each order is collected and packed by handlers who wheel carts through halls stacked with bras, panties, and outerwear. Dong Lu’s biggest challenge is to scale his manufacturing and distribution operations to keep pace with demand–upgrading the warehouse is a massive endeavor.
A future ambition for LA MIU is to expand into the broader category of women’s wear.
Asked what his wife thinks about his job as the head of a growing lingerie empire, Dong Lu says that although she was wary at first, she was impressed at the professionalism during the photo-shoots and knows that it’s just a job.
Fortunately for Dong Lu, the photo shoots–and the revenues–also impress investors. LA MIU raised US$5 M in 2009.
No comments:
Post a Comment