Mind the gap: Hong Kong’s Grana nabs $1M to sell simple fashion with a luxury feel

Hong Kong isn’t known as an ecommerce hub, but one startup is hoping to leverage a few of the city’s overlooked bright points and build the next big online fashion brand. Founded by two expats, Grana sells luxury-quality garments at Uniqlo price points, and it just secured US$1 million in funding.

Chief of operations Pieter Wittgen and CEO Luke Grana tell Tech in Asia that no less than 20 investors participated in the seed round. Big names include the Sazerac Group, which Grana describes as a group of Hong Kong-based angels, and Bluebell Group, an Asian distributor for luxury retail brands including Dior and Agnes B.

For Grana, Bluebell’s support marks an early validation for a quite risky proposition. The company sources top-notch fabrics – silk from China, woven cotton from Peru, denim from Japan – commissions production for in-house designs, and stores them in its own warehouse in Hong Kong. It then sells them online at prices well-below those of the luxury brands it claims to compete with.

“If you look at traditional retail, big fashion brands work with distributors and they’ll import products to local countries,” says Wittgen. “They’ll have local warehouses in those countries and then they’ll have physical retail stores with high rent and high wages. So a T-shirt that costs US$6 to make will be sold for US$50 in a luxury store. By keeping our team in Hong Kong, working directly with fabric mills, and selling online, our t-shirts cost US$6 to land in Hong Kong, and we retail them at US$12 online.”

Of course, the challenge of Grana’s business model lies in attaining volume. Its margins are low and it can’t charge a premium for brand clout. As a result, it has to sell to as many consumers as possible, rather than fall back on well-to-do customers with money to spend. The company hopes that its modest designs, coupled with some browbeating of the “good quality, low price” concept, will help drive sales. Parse through the apparel on Grana’s website, and you’ll notice that the clothes have a generic, one-style-fits all look. That’s on purpose.

“We really believe in the Uniqlo style of business, where there’s a focus on the fabric quality and the fit,” says Luke Grana. “Our target market is quite broad. It’s ages 20 to 50, and we do that for a reason. We make clothing for everyone. A white T-shirt from us will look good on a hipster designer as it would on a french architect in a blazer. We believe we can provide high volume sales over the long term with a wide target audience and global shipping.”

The Grana team sees its location from Hong Kong as central to achieving its goals. For one thing, among the new crop of online-first fashion brands like Bonobos, most only ship to the US. The cofounders hope to bank on the city’s reputation as a global logistics hub in order to keep shipping costs low. “It’s cheaper for us to ship from Hong Kong to Melbourne than from Sydney to Melbourne,” says Luke Grana. The team is currently sending packages to New Zealand, Australia, Hong Kong, Singapore, and the US, and claims that Europe is coming soon.

See: 14 online fashion stores for Hong Kong shoppers

Hong Kong also remains a fashion hub for Asia, and arguably the world – if not for designers, then definitely for shoppers. “Hong Kong is fashion, and we are a fashion brand,” says Luke. “There are so many designers and so many merchants. Everyone here has their head Asia offices here.”

With seed funding secured, the Grana team is focusing its energies towards spreading the word. In addition to Facebook marketing and referral campaigns, the team is setting up pop-up stores in Hong Kong and Australia in hopes of attracting potential customers.