Administration & Management

Attempting to Introduce China to Individuals  With A Wish to make Career in International, trade, business and Governance

THIS COULD BE BEAUTIFUL

While most industries trend downwards in the wake of the global financial crisis, demand for designer apparel and accessories in the world’s third-largest economy is expected to grow 7% this year. According to global consulting firm Bain & Co., the sector will expand faster than any market in the world — with the possible exception of Brazil — until at least 2012.

Club Beautiful is one of many ideas that have surfaced to tap into the growing pool of upwardly mobile young Chinese with the aim of handing the demographic to advertisers on a plate. The social network, brainchild of Jesper Lodhal (above), 34, and co-founder Christian Rajkai, 39, unabashedly trumpets its desire to connect stylish people together so they can judge and be judged: it is the web-based sibling of the trendy cafes that line Fifth Avenue in New York or Oxford Street in London.

“We want to make people more beautiful and stylish. The first step is to create a community for those people to share ideas,” says Lodhal. “We are focused on the connections between people who want to become better looking or who want to share their fashion and style.”

According to the company, their audience is split between “style leaders” — the primary market — and “image seekers,” who look for some of their idols’ stardust to rub off on them. “The interesting point is that [your reception] is based not so much on your natural beauty but the effort you make,” says Lodhal. “In China, the saying goes that beauty is 30% nature and 70% nurture.”

While anyone can join Club Beautiful, the network specifically targets 20 to 35-year-olds that hold steady jobs and, in Lodhal’s words, “spend a lot of time on their appearance.” They are further encouraged to spend time on their looks by Club Beautiful, with other users able to vote on their pictures − higher scores give access to better looking people and higher profile events.

“Once you’re in, you can sign up to see who likes you, and how the opposite gender rates your profile and your pictures,” says Lodhal. “If you want to be influential you can build up your activity level, your experience in beauty and style, which you do through voting on other people and sharing style information.”

There is a certain amount of vain gloriousness attached to the concept, and it might not be one that would gain cultural acceptance in many Western markets. However, the 80s generation of Chinese consumers are distinctive because of their unashamed desire to stand out from a particularly large crowd. Around 60,000 of them have signed up to Club Beautiful since its inception last year, as well as a few thousand expats − enough to attract funding from a handful of angel investors and American IT outsourcing company Symbio Group.

While the company cut its staff of 22 down to around 12 after the economic downturn, the retained employees are, according to Lodhal, desperate to make a success of the venture because they feel excited to be part of such a pioneering project. The website has been up for just over a year, and last month was relaunched with a facelift and fresh features after Lodhal dispatched his management team into the shopping malls of Beijing and Shanghai, as well as gathering feedback from a series of focus groups.

“What we found was that the style leaders don’t connect with Kaixinwang (which offers a normal social networking service and simple internet gaming) because they see [the gaming] as a waste of time,” says Lodhal. “Users were also having trouble identifying [other] stylish people on other social networking sites. If you go to Kaixinwang then you have to browse through around 50% of profiles that are fake or partly fake.” Club Beautiful solves this problem by sending members a unique code, which they must take a picture of themselves with in order to be verified by the site’s content managers.

Ensuring the site is populated by real people adds significant value, not least because they can be guided towards real world venues and products that generate revenue. Users have the option to create events, and to screen who is invited by their classification. Events are currently entirely user-generated but Lodhal is aware of the potential for tie-ups with sponsors and clubs in the future, with current events including hook-ups at KTV and clubs like Lan and Coco Banana in Beijing.

The new content is entirely in Chinese, though an English version of the update is in the pipeline. “One of the better decisions I have made was to remove Westerners (including me) as the driving force behind product management,” Lodhal says. “Since I did, development speed doubled and user feedback improved dramatically.”

The site is, as yet, uncluttered by advertising, as Lodhal and his team are keen to avoid alienating users by forcing products down their throats that they may or may not necessarily wish to buy.

It is a risky ploy, but one that is part of a longer-term development strategy. “We are focusing on growing users; we need to add value to the database,” Lodhal says. “Then we’ll focus on stickiness and keeping people on the site. Step three is the revenue phase where we will, sometime in the next year, embark on a new venture capital round.”

Lodhal is waiting for his user base to reach a critical mass before investing in a serious marketing campaign. Obtaining a sufficient “viral factor,” as Lodhal calls it, is key to ensuring there is enough awareness of the site to maximize the benefits of an advertising drive. However, playing the long game in China carries additional risk because there are countless other entrepreneurs waiting in the wings to hijack a good idea and exploit it. While the country’s intellectual property protection laws have made considerable progress in recent years, the brouhaha in the more tightly regulated US market over who created Facebook’s original code should be enough to prompt developers of even the most niche products to bind their target audience as quickly as possible.

The company is considering a number of revenue models; from micropayments in order to acquire other users’ feedback, to pay-at-the-door events. “Then there are of course the advertisers,” Lodhal says raising his eyebrows. “There are some smart targeted advertising models out there − some of the style leaders can endorse products, for example. If I have an idol on Club Beautiful and he likes the Omega brand − I like Omega as well now.”

They are also open to the idea of a profit-sharing agreement with a site like Taobao who could directly sell products owned and showcased by Club Beautiful users.

The problem for the company is that it evidently does not have a clear idea of how it is going to make money. While existing funds may be plentiful — Lodhal would not disclose his investment capital but the lack of urgency over securing an income stream suggests he is not short of a buck or two — the company will have trouble attracting capital in the future unless it can demonstrate a functioning and successful revenue model.

Lodhal is adamant that no-one else is pioneering his idea in China, and that very few, if any, are attempting it elsewhere. Yet there is an existing website, P1, that plays upon a slightly different but related idea. Their website is the social networking equivalent of the Freemasons – potential members must convince the site’s operators that they are trendy enough to enroll, or obtain one of the restricted number of invites from the site’s 500,000 existing users. The site is emblazoned with ads from brands like Bentley and Versace.

Club Beautiful’s decision to shun direct advertising may very well have been motivated by the need to offer users a reason to steer clear of potential competitors. The network is catering to some of the world’s most sought-after consumers and it is important to make them feel special and influential or they might take their business elsewhere. However, implementing the type of viral advertising model Lodhal is toying with is easier said than done, and it is hard to envisage a high-end brand warming to the idea when the company has yet to demonstrate that its idea works any better than direct advertising.

Lodhal knows that success is not guaranteed: “It’s all untested, but it’s such a big market out there,” he says. The company is well worth keeping an eye on, but the longer it operates at a loss the harder it will be to convince investors, advertisers and sponsors that beauty truly is everything.

Always Yours — As Usual—— Saurabh Singh, India