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Shanghai Chic Hits The Runway (Int'l Edition)

International -- Asian Business: China

Shanghai Chic Hits the Runway (int'l edition)

Chinese are flocking to artist Chen Yifei's clothing stores

When Chen Yifei was an art student in New York in the early 1980s, he used to stroll through Manhattan, marveling at the fashions on the street and in the stores. As he admired the clothes, Chen reflected that few people in hometown Shanghai could afford such style. Besides, his compatriots were only just moving out of basic communist blue and gray.

Today, Chen is an internationally acclaimed artist whose realistic portraits fetch up to $200,000 and hang in galleries from Beijing to Paris. And China is ready for stylish fashion. So the artist has exploited his fame to start a fast-growing chain of clothing boutiques. If things go well, Chen may even take his company public in Hong Kong later this year.

Launched in 1998, the chain, called Layefe, now boasts 162 outlets, two-thirds of them franchises, in 35 cities from Shanghai to Xi'an, with separate lines for men and women. Last year, Yifei Group claimed a profit of $2.7 million on sales of $19 million. The stores are so successful that Yifei is moving beyond the rag trade, offering a line of "lifestyle products," including cosmetics, leather goods, and home furnishings. "We want to be like Tommy Hilfiger or Ralph Lauren in the West," says the 53-year-old artist.

But before Chen can be like Hilfiger or Lauren, he may have to push them out of the way. If China joins the World Trade Organization this year as expected, by 2004 foreign retailers will be allowed to set up shop anywhere on the mainland. In the scramble for market share, local outfits without a big name and solid following are sure to fall behind.STARK AND SPACIOUS. Chen is betting that he has a strong enough reputation to make the grade. Funded initially with proceeds from his paintings, Yifei Group has in the past year attracted investments from big names, including Japan's Softbank and Itochu and France's Vivendi. Foreign investors have kicked in a total of $2.5 million to help fund an ambitious expansion that is expected to double the number of outlets by yearend. "So far, return on their equity has been very, very successful," says Charlie Shi, chief financial officer at Softbank Corp. China Venture Capital. A second round of financing is in the works.

As an artist, Chen understands the importance of image. For his Layefe stores, he has devised an upscale austere look. Walk into a stark, spacious Layefe shop, with its muted gray-and-black decor, and you could be in a tony boutique in New York or London. In China, the minimalist look sets Layefe apart from the colorful interiors of such retailers as Hong Kong-based Giordano International Ltd. or the chaos of the local department stores.

Chen oversees a team of 20 fashion designers. The clothes are modern and simple and appeal to young urbanites who want to look successful but not flashy. "Whenever I go to Shanghai, this is the brand I usually buy because they have a uniqueness and the flexibility to fit different body types," says 35-year-old Gu Ming, who works in the Asian fashion industry. "Every time I wear the clothes, people say they're quite interesting."

Chen's team has shrewdly divided the collection into three lines that appeal to different age and income groups. The Layefe Street collection aims for white-collar office workers with a monthly income of $120 to $240. Layefe, the main line, caters to young executives who earn $360 or more a month. And the Layefe Collection is a line of office and evening wear for high-earning thirtysomethings. A winter coat runs from about $120 to $320. While pricey by local standards, Chinese seem willing to pay for the superior quality and cut.

Chen's name is the main marketing asset. "If I were not Chen Yifei," he says, "I don't think I'd have been able to develop my business this fast." In April, Yifei Group plans to launch a marketing blitz to promote both its existing products and the new lifestyle line. Unsurprisingly, Chen will feature in many of the ads.

Can an artist build a fashion empire? Angela Moh, a consumer analyst at Morgan Stanley Dean Witter in Hong Kong, reckons that Layefe can "piggyback off Chen's fame." But a name only goes so far. Because Layefe is so dependent on franchising, it may be hard to maintain consistent service and image. Sales also could slump if China's economy slows, as expected. And with foreign retailers waiting to pounce, the artist-entrepreneur will soon discover if Chen Yifei is any match for Ralph Lauren.By Alysha Webb in Shanghai

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