The HK start-up taking on fashion giants
HONG KONG: Luke Grana arrived in Hong Kong with no contacts, cold-calling ‘angel investors’ he’d found on “LinkedIn,” and armed with only his CV, a business plan, and some big ideas to overhaul fashion.
But in little more than two years, his eponymous clothing store amassed $6 million in seed funding and has become the go-to shop for under-35s seeking quality staples for their wardrobe.
And yet Grana is not a designer, has little fashion experience, and his inspiration came from a business brainstorming session rather than a passion for couture.
What he does have are plans to shake things up.
“The way we shop for clothes is going to change,” the 32-year-old says.
Global fashion sales currently total around $1.8 trillion a year, with online accounting for five percent, he says, citing a Euromonitor report.
“That is forecast to grow to 30 percent by 2030,” he adds suggesting Grana, which has no physical stores—only a fitting room space where customers can try the clothes before buying online—is well placed to take advantage of this shift.
The current system, with its reliance on expensive shop space, middle men, and vast inventory, he insists is “hopelessly inefficient”—and results in opaque pricing.
“Gen Y is more focused on transparency,” the Australian entrepreneur, part of Generation Y himself, says.
“I made things simple. So if a t-shirt costs $7.50 to produce, we’ll sell for $15—a straight forward mark-up,” Grana explains.
Ahead of the curve
Quality is his other pillar. The brand uses world-renowned material such as Chinese silk from Huzhou and Peruvian Pima cotton, sourced from the same mills that work with luxury brands such as Ralph Lauren and Lacoste.
“We deal direct with the mills and factories, items are then shipped to our warehouse and then shipped to the customer,” he explains.
Hong Kong, the world’s biggest cargo hub, is well suited for his global audience while the US, Australia and Singapore are also key markets.
Of the hundreds of cold-calls he made in late 2013, just one replied: banker Pieter Paul Wittgen.
Wittgen, now the company’s COO, was impressed enough by both Grana and his ideas that he introduced him to a wider network of ‘angels’.
The firm is now has backing by big name investors including BlueBell Group, distributors for the likes of Christian Dior in Asia, and Golden Gate Ventures, a leading backer of start-ups in the region.
Grana’s head of design, Anthony Hill, worked for Paul Smith.
On average Grana’s customers now spends $120 per order, while sales are above expectations—rising 25 to 40 percent each month—he says.
Earnings are currently being reinvested in expansion to Japan, Korea and eventually China but Grana expects to be in profit by late 2017.
It may seem an overnight success but for Sydney-born Grana this has been a long time coming.
In his teens, he read company annual reports and business books. Aged 21 and still at university, he set up his first business—a coffee shop—using $15,000 of life savings.
After nine months he sold for $145,000 and went on to launch and sell, at profit, two similar ventures.
At 24, he set up Charge Point, an electric car charging infrastructure but sold up in 2012 when he realized the concept was “ten years ahead of the industry”.
He took time off to “surf and brainstorm” with his profits.
“I wasn’t demotivated, I was really hungry,” he insists. “During brainstorming I realized there was a disruption coming in fashion.”
But his next start-up Coachy was a webcam teaching service—an “Airbnb for tutoring” in his words.
Again he found his ideas were ahead of the curve: internet speeds then could not support his idea, so he closed up.
“I learned the importance of being in the right market at the right time.”
Do things differently
Grana’s eureka moment came during a holiday in Peru, where he came across Pima Cotton. Within the week he had visited mills and bought samples for friends and family.
“Based on their reaction I knew I had found my product. But I didn’t know about styles, pricing or how to merchandise,” he adds.
So he went and got some shop floor experience working at Zara and French Connection.
Grana seems assured this is his moment.
Certainly the focus on “timeless wardrobe essentials” is prescient: British design house Burberry announced a move to ‘seasonless collections’ as the trend for decluttering sees fast fashion falling out of favor.
At Grana they, focus on timeless colors and run a limited number of seasonal ones. There are no sales, just one standard price year round.
Social media presence has helped spread the word quickly.
Grana’s adverts pop up regularly on Facebook, has amassed 17,000 following on Instagram, and uses Snapchat to give a glimpse into the mills and factories it uses.
Grana concedes “fashion has a bad reputation” for exploitation but is confident his firm does not use child labor, adding independent safety audits of production will begin this year.
“I don’t want to copy anything from the traditional model,” he finally says. “We are doing things differently.”