Grana is a new and highly disruptive online-only fashion startup based out of a 3,300 sqft warehouse in Hong Kong by Dutch and Australian Co-founders Pieter Wittgen and Luke Grana (whose name is behind the brand).
The company was founded last year “with the idea to rebuild the fast fashion model from the ground up”. Their focus is on quality fabrics, timeless basics and low prices.
Grana raised nearly US$1 million earlier this month in seed funding from Bluebell and a few angel investors, one of the largest luxury distributors in Asia which operates brands such as Jimmy Choo, Marc Jacobs and Paul Smith.
When Grana approached e27 to share their story, we didn’t want to pass up the offer. Read on for the first part of the chat.
Can you start by bringing us up to date on what you’re doing with Grana?
Grana: I’m Australian and I moved over to Hong Kong in October last year. I was really taken by the fashion industry and the rise of e-commerce for online sales growth. Before I moved over to Hong Kong, I gained some work experience at Zara and French Connection, and I was looking at the best location to set up a global distribution centre.
I looked at Singapore and America, but I think Hong Kong, in particular, is a global logistics hub, so the shipping infrastructure is very developed. It’s also a free tax port and a world sourcing city, so a lot of fabric mills and manufacturers have their head offices in Hong Kong. So I thought it was a really great location to set up a global distribution centre and ship direct to customers.
We had a warehouse in Kennedy Town, and wanted to run a beta trial to prove we could sell Peruvian Pima cotton t-shirts to our investors. Over a two-week period, we sold over 8,000 t-shirts and shipped them to eight countries. It was quite a fantastic result.
Earlier this month, we closed a US$1 million seed round from the Bluebell group and a few respected angel investors in Australia and Hong Kong. I invested about US$150K in the business and to get over to Hong Kong.
I met Pieter in February looking to become an investor in the business, which he did and then joined as Co-founder. That’s how we formed the partnership.
Can you speak a little about what Grana stands for as a brand?
Grana: There are three key areas. The fabric is most important to us and quality is key. We source our silk from Huzhou in China, which is the world’s best city for silk. The denim in our Japanese denim jeans, which are coming out next month, come from Japan.
We’ve got products coming out including Irish linen, English Oxford shirts, USA twill chinos, Mongolian cashmere, so it’s all about sourcing the best fabrics from the world’s best locations.
The second key part about Grana is that it’s all wardrobe essentials. We’re not creating the latest fashion trends, but it’s all good quality, basic clothing for a global market with good fabric and fit. That’s how we position our branding.
The third key part, which is where we think the disruptive part is, is our prices. We sell online only, we have no physical retail stores, and we deal directly with the best factories we can find. Everything comes directly into our Hong Kong warehouse, and then we ship direct to the customer with DHL Express, so we’re cutting out all the middle men.
We have a 50 per cent profit margin, so the t-shirts cost us US$6 and we retail them at US$12. The silk shirts cost us US$22, we retail them for US$45. The jeans cost us US$19 and we retail them for US$39.
We really believe in selling a high volume of clothing, and with the fabric quality being high and the price point being low, we really think we can achieve a volume of sales.
Wittgen: Clearly, we know that we’re in a competitive market, but we’re not trying to be a small niche brand focussing on luxury products. What we want to do is bring luxury products to the modern consumer — the customers that go to H&M or Zara.
When you’re young you like to follow the latest fashion trends, but you get to an age where you prefer to go back to the style that you like — the high quality, well-fitted basics that you can mix and match with your other wardrobe essentials.
A t-shirt at H&M might be cheaper than US$12, but it probably costs US$1-2 to make. We want to bring the same t-shirts that the luxury brands are selling, but at a price you can’t get at high fashion. I think there’s a big market for people who are tired of the quality you are getting from fashion outlets nowadays.
If you did have to compare yourselves to any current brands, what would that be?
Grana: I would say J. Crew on the product side. Their quality is high, but then again their prices are very high. So we believe we’re selling J.Crew quality at H&M prices.
We want to have a global appear. We’re based in Hong Kong, but we have a very close working relationship with DHL. At the moment, we’re shipping to five countries (Australia, New Zealand, Singapore, Hong Kong, and the US), and before the end of the year, we’ll be shipping to eight countries (including France, Italy, UK, Holland — the key markets in Europe). Then over next year, we’re going to open up to the whole global market.
Are you guys looking at China yet?
Grana: We’re definitely looking at China. Being in Hong Kong, there’s a lot of growth coming from China. At the moment we would need to create a Chinese version of our website, and we don’t have that yet — everything’s in English.
Wittgen: I think China as a market is really changing quite rapidly. Whereas a couple years ago, everybody saw China buying really cheap clothes, they’re now buying luxury brands. What we’re looking for is people who are both shopping high fashion and luxury, but want to find a balance in between on a price point.
In China, we do know those customers, but they’re not as concentrated as in developed markets. In Shanghai and Beijing, there would be a big audience for us, but there’s so much room to grow in the markets we’re currently focussing on — Australia, the US and Europe — that we don’t want to spread ourselves too thin.
Grana: The Chinese taxes are quite high, so that’s one of the things we need to look at next year when we enter China.
Do people still have qualms about buying clothes online versus in a brick-and-mortar store where they can try them on?
Grana: In the key markets that we’re targeting, e-commerce is really high. Some of the successful online-only brands such as Bonobos or Warby Parker coming out of America are doing really well.
The research that I looked at says current online sales is about five per cent of the global market, going to over 30 per cent in the next 20 years. So there’s going to be a gradual trend of selling more online. The other reason is the efficiencies that you get from operating online.
Wittgen: We know that getting sizing and fitting information is a bit more of a challenge than in a brick-and-mortar, so we are offering a live check on our website where customers can speak to one of our active sales people and within a minute we can get them to the right size. It’s about communication and having a very responsive customer service.
This allows us to remove doubts customers have about ordering online and it also builds a connection with the brand. We want to be connected to the customers, not in a corporate style but more personally.
Another thing I want to add is that we know there’s always a little bit of benefit to having a brick-and-mortar aspect to e-commerce, so what we’re doing next month is having a pop-up shop in Hong Kong for three days on Hollywood Road.
In Australia we’ll have an open box, which is like designing a shipping container in a shopping format. We’ll be going around Australia with our pop-up concepts so that people will be able to walk around the shop, feel the fabrics, and try the products on. We’ll never actually sell in the shop, but people can through our system buy in the shop and we’ll do next-day delivery in Australia.
This e27 exclusive with Grana’s Pieter Wittgen and Luke Grana continues in part 2.
Image credit: Pieter Wittgen and Luke Grana / Grana