18 Sept 2019
The Greater Bay Area: Flash Fashion in the Pan-Pearl River Delta
After capturing the Hong Kong market, brand-name flash sale pioneer, OnTheList, is plotting a push into the Greater Bay Area
Founded by two French entrepreneurs, Hong Kong-headquartered start-up OnTheList will hold its first flash sale in mainland China in September in a move the company hopes will herald a city-by-city push into the Greater Bay Area (GBA).
From small beginnings in the city, the end-of-season brand flash-sale specialist has developed from running short-term sales in pop-up spaces to its own permanent store in Central. Now, after expanding into Singapore and Taiwan – and with moves into other Asia-Pacific markets underway – company co-founder and Chief Executive Officer, Delphine Dultzin, says it is ready for a push into China and the GBA.
The GBA aims to closely link nine cities in Guangdong province with the Hong Kong and Macao Special Administrative Regions (SARs) to create an economic zone which will form a key component in the next phase of China’s economic development. The area covered by the initiative has a combined GDP of US$1.5 trillion.
Success from Excess
OnTheList has not only turned the problem of excess stock for brands big and small into a business success, it has tapped into the fashion market zeitgeist by addressing a growing clamour for corporate and environmental responsibility which considers the destruction of unsold stock a 21st century no-no.
By employing a free and premium customer membership model – OnTheList has 200,000 members, 30% of whom are currently active either on or offline. The company has also been able to build up an invaluable database of who is buying what at its regular flash sales, either at its permanent store in Hong Kong or at pop-up store sales across their Asian network.
At the core of the company’s business, however, is stock and where the brands it works with warehouse that stock, according to Dultzin. She said: “This central plank of our operating strategy will continue as expansion into China and the GBA gets up and running.”
Among the luxury groups OnTheList works with in Hong Kong are LVMH and Kering, giving the company a head start in understanding mainland customers who make up the vast bulk of visitors to the city, which is also a core component of the central government’s GBA plan.
Order of Mainland Magnitude
Dultzin said that the company received its licence to operate a business on the mainland last month (July 2019) and plans to hold its first flash sale in Shanghai in September. She said: “For the moment, we are in Hong Kong, Singapore and Taiwan. Hong Kong is the biggest market in terms of stock because there are more stores in Hong Kong.
“From a typical brand, we will receive 15,000 pieces (of stock) in Hong Kong as opposed to maybe 4,000 pieces in Taiwan or Singapore. But the mainland is another order of magnitude entirely; in mainland China, the amount of stock is huge. For example, for a brand which is holding 15,000 pieces in Hong Kong the equivalent in mainland China would be 50,000 pieces.
“Another factor to take into account is that also very difficult for a brand to take their stock out of the mainland once it is there. The potential for us is much greater.”
In Hong Kong, 90% of OnTheList’s customers are indigenous Hong Kong people and 10% come from the city’s non-Chinese community. They are mostly women aged between 25 and 45, and this is true across the range of branded products which the company sells at its flash sales at discounts of up to 80% of the original price.
Dultzin said: “The size of the discount varies and we arrive at a figure after discussions with the brands we work with, which, since we started business in Hong Kong almost four years ago totals 250. We sell everything from clothing to furniture and from wine to children’s wear.”
OnTheList does business both offline – in the form of its flash sales – and online, for products which don’t require the customer to try them on for size and feel.
One Country, Many Cities
After much study and deliberation over the complexities of entering the mainland market, OnTheList decided the time was right to make its move. Dultzin said: “We will launch our first flash sale in Shanghai in September. The reason we chose Shanghai is because many of the brands we work with have their stock warehouses in and around the city.”
The company plans to have flash sales for two brands per month as their Shanghai operation gets underway: Dultzin said: “The mainland market is very complicated so we don’t want to move too fast without first testing the market. Our plan is to try flash sales with pop-up stores in different places in the city so that we can find out the optimum locations.”
Such is the size of the mainland market, OnTheList will also adopt a city-by-city approach as it expands further into the mainland and the GBA.
Dultzin said: “From a business point of view, we don’t see China as a country, we see each city in China as a ‘country’ in its own right. While from an administrative point of view China is much more complicated than Hong Kong or Singapore, the potential of the market and that in cities across the GBA is just too big to ignore.”
Discussions with brands are already underway about future expansion into four cities: Shanghai, Beijing, Chengdu and Guangzhou, with a view to expanding into tier two and three cities across the mainland, including the GBA.
While selling products at discounted prices raises issues around the maintenance of integrity and value, brands do see the upside of working with OnTheList, according to Dultzin, especially when it comes to China’s tier two and three cities.
She said: “We believe people in those tier two and three cities will also be keen to buy big name brands at discounted prices. After talking to some of the brands, while they have understandable concerns about their products being introduced to customers at a heavily discounted price, it is interesting to note that they too see the benefit of introducing new customers to their brands, even if it is through us at discounted prices.”
In the end, Dultzin believes that her company’s business model makes logical sense. She said: “We are the last link in the selling chain. If the stock wasn’t coming to us it would be disposed of. At a time when environmental and corporate responsibility are growing concerns, it makes sense for them to use us to sell as much of their stock as possible instead of destroying it.”