In the Spirit of Fashion With labels such as Armani, Valentino and Prada, Italy has been known around the world for luxury goods and fashion design since the 11th century, with the city of Milan being the epicentre of fashion in the country. In 2009, Milan was named the "fashion capital of the world" by the Global Language Monitor and over the following years has continued to be classed as an important fashion capital, along with London, Paris and New York City. Florence, an Italian city located halfway between Milan and Rome, is also well known for the many labels and fashion houses contained within its borders; in fact, until the 1960s, Florence had been the fashion capital of Italy. The birthplace of Gucci and Roberto Cavalli, Florence is poised to become the world's fifth style hub, according to Vogue magazine. Spirito is a casual clothing label founded in Florence in 1983 by Christian Palero. A relatively young label by Italian standards, Spirito is noted for its patchwork design, flamboyant prints, innovative graffiti art and asymmetric styles and is currently sold throughout Europe. Last year, the company's sales topped EUR 24.5 million, and as of December last year, they employed 476 people throughout the continent in shops, warehouses, production houses and offices. Mr. Palero heads the company and employs a team of executives responsible for all facets of the business, including expansion and revenue generation. The brand has done extremely well over the past two years, and the business development team has been looking for new opportunities abroad.

Navigating a New Market At the same time, the fashion market in China has exploded. Due to the increase in middle and upper income families and the influx of international goods as a result of increased trade, Chinese buyers are enthusiastically joining the fashion frenzy that began in the new millennium. As a result of this increased market activity, Spirito had been researching ways to enter the Chinese market and had identified TMall Global, a Chinese online company that operates similarly to Amazon, as an attractive option for its company to break into China. EasySell is an official TMall Global Partner. As part of its service offerings, EasySell will manage the application process, registration process, e-commerce and web design for the new online store. As per Chinese market regulations, the seller is required to have a means of shipping and receiving goods from within China and offer an in-country return policy to customers. In addition, any company operating within China must register a company in the country. As part of their

agreement, EasySell will introduce Spirito to reputable warehousing contacts, assist with gaining the appropriate registration, licences and permits, and provide guidance on adapting packaging and labelling to sell clothing and accessories in China. Confident it had found the best method of entering the Chinese market, the Spirito business development team completed the market entry plan and proceeded to move forward with EasySell. After negotiating and signing a lengthy contract, EasySell began the application process and Spirito started interviewing potential warehousing and shipping options. Having found a suitable warehousing partner that would also handle shipping and receiving within China, the Spirito team was excited. Its brand would launch in China within weeks. Challenges, Solutions, Success After working out the details with the new warehousing partner, the company launched its online Chinese store in March, after the Chinese New Year was over and before the popular spring festivals began. The launch yielded an incredibly successful first day, with 86 units sold. The second day there were 97 sales and the third day there were 125. The Spirito team was ecstatic and the EasySell team was extremely pleased at the results. By the second week, however, a challenge arose. Merchandise returns were not arriving at the warehouse for some unknown reason. There had been seven returns processed via the website on the second day, but none of the merchandise had made its way back to the warehouse. Upon further investigation, not a single return had reached the warehouse to date. The warehouse manager called his contact at Spirito to inform her of the situation, and Spirito, in turn, called EasySell, who reviewed the process and realized there was an error in the return address on the webpage. The EasySell tech responsible for maintaining the page corrected the address and let all stakeholders know it was done via an urgent email. From that point forward, the company saw continued success growing its presence online in the Chinese market using TMall Global. The team was happy with the way things had gone and felt it had chosen reliable partners when selecting EasySell and its warehousing partner. When faced with a challenge, these partners had reacted quickly and with Spirito's best interests in mind. Going forward, Spirito would like to discuss options for the warehouse manager to be in direct contact with the EasySell representatives. This would increase process efficiency, especially when challenges arose. On the other hand, it would also expose Spirito to greater risk. They would have to proceed with caution.

Learning Outcomes This case study relates to the following learning outcomes from the module Implementation of Market Entry Strategies in the course International Market Entry Strategies: Manage direct and indirect exporting through positive working relationships using a good financial model. Negotiate contracts and partnering agreements for all modes of market entry while ensuring cultural sensitivity. Monitor international partner performance on a regular basis, including managing ongoing relationships and developing strategies for resolving possible conflicts.

1. List at least four areas Spirito would have researched before contracting EasySell as a third- party intermediary to assist with gaining entry to the Chinese market.

2. What are some of the potential disadvantages of Spirito using TMall's online service to sell its clothing brand in China? 3. What are three strategies Spirito could use to prevent the potentially negative consequences that can arise when hiring a third-party intermediary? 4. At the end of the case, the Spirito team identified a new challenge: the need to facilitate direct communication between EasySell and the warehousing partner. What is the best solution to this challenge? Identify any associated risks that may come from implementing this solution and provide suggestions to mitigate the risks