SHOKAY – Using women’s fashion retail to make a difference in Western China

shokay

On this post I would like to take a look at a fun social enterprise started by former classmates and friends working in an area not many would traditionally think of when they think of social entrepreneurship – women’s fashion.  Well SHOKAY is exactly that, a women’s luxury fashion social enterprise and it is doing extremely well. It has received lots of recognition including being a finalist for the Cartier Women’s Initiative Award in 2009 and one of its founders has delivered a TED talk in Singapore.  More important its products are popular and have been featured in the likes of CouchCosmopolitan and Lifestyle magazines among others.

WHAT IS THE BUSINESS ABOUT? 

SHOKAY is a socially responsible lifestyle brand that sources yak fiber directly from Tibetan yak herders in Western China to produce high quality lifestyle products sold around the globe.  The SHOKAY products are sold at high-end women’s retail shops across Asia – Shanghai, Seoul, Taipei and Hong Kong as well as in parts of Europe Germany and Hungary for example.  They have also recently begun to sell some products online.

HOW DID IT START?  

The business was started in 2006 by two classmates from Harvard Kennedy School’s MPA/ID program who were interested in starting a business in the area of Social Entrepreneurship.  They went to western China to look for inspiration and they observed that the Tibetan herders who lived there were living in extreme poverty.  They recognized this as an opportunity since the yaks they herded produced cheese and wool which could fetch premium prices from vendors that sold lifestyle products in a socially responsible way.  After winning the social enterprise track of the HBS Business Plan Contest and a $20,000 start-up grant they decided not to look for work and focus fulltime on the budding business.  For more information on how SHOKAY started click here.

WHAT IS THE SOCIAL NEED IT ADDRESSES?

SHOKAY provides needed income generation opportunities for traditional Yak herders living in poverty in Western China’s Qinghai region by providing them with a new outlet to sell their wool at higher prices.  In addition SHOKAY sets aside 1% of all its revenues to support a community development program it created to support local development education and health projects.

WHAT IS THE BUSINESS MODEL?

SHOKAY essentially purchases raw materials (yak wool) at fair prices from local Tibetan Yak farmers in Western China and then converts the wool into high quality yarn products such as scarfs, handbags, necklaces, and other women’s accessories   This value addition of design and product development increases the wool value by up to 10x and thus it can fetch high prices in the retail market.  This makes the business highly profitable and successfully incorporates smallholder farmers into the global supply chain.

WHAT ARE SOME CONCERNS I SEE WITH THE MODEL?

  • Limits to Growth – This is a rather niche product and also very expensive I wonder how the business could grow and continue to maintain premium prices it needs to be a SE.  I guess it needs to go online which it is doing.  But by going online does this eventually become a commoditized industry? 
  • Consumer and economic cycles – I am no expert on fashion but my sense is that fashion in general is an industry where fads happen.  In one moment things like yaks wool could be popular and the next they are not.  In addition economic swings could change the dynamics of sales for such luxury goods.  So a challenge could be to make sure that the company can survive adverse shocks and continue to grow.  
  • Competition – I see pretty low barriers to entry for competitors to take the same concept and scale it.  Thus a key for SHOKAY is the distribution channel and the relationships they build with retailers who want to sell products.  Without those relationships they are wide open to competition.  Also are their superior more socially responsible substitutes that could drive sales away? 

WHAT DO YOU THINK?

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