Creating Shared Value in Hong Kong

Case Study of D2 Place
Creating shared value (CSV) has received increasing attention in Hong Kong in recently years. It is a business strategy, whereby companies create profits while creating positive value for the society, connecting business success with social and environmental progress. Corporations such as Nestlé and Unilever took the lead in developing a new competitive advantage by integrating CSV into their core business strategy.
Published on February 1, 2018
In Hong Kong, LAWSGROUP also successfully developed an innovative approach to create shared value for its business and young local entrepreneurs through revitalizing two industrial buildings into a design and cultural icon of the city, D2 Place.

D2 Place is the brain child of Bosco Law, Deputy Chairman and CEO of LAWSGROUP, and third generation of the Law family.

LAWSGROUP's business spans across apparel manufacturing, retailing and property and investment.
Local brands were crowded out

"It is often very difficult for Hong Kong brands to rent good retail space in large shopping malls because most of them are snatched up by international brands," said Bosco. His company's apparel brands also faced similar challenges.

When the Hong Kong government rolled out a revitalisation scheme in 2010 to support the redevelopment of old industrial buildings, Bosco took the opportunity to convert two industrial buildings owned by his company into office and retail complex, with the purpose of supporting the development of the local creative industry. Compared to the most common approach to redevelop industrial buildings into office buildings, the conversion into shopping malls involves a lot more complexities as amenities like escalators and drainage need to be added. Fortunately, Bosco's background in architecture helped him see beyond these challenges, and D2 Place One was opened in 2013, followed by D2 Place Two in 2016.

The name D2 Place stands for "Designer's Dream" as the shopping malls are positioned to support the development of local fashion and creative industry. Nowadays, D2 Place has become an icon of local culture and creativity, inspiring an increasingly vibrant neighbourhood for Cheung Sha Wan, where D2 Place is based.

From CSR to CSV

D2 Place did not start off as an initiative to create shared value through its business model; instead it resembles great corporate social responsibility initiative, whereby support was given through a charitable foundation, the Fashion Farm Foundation, founded by the company. Over time, Bosco and his team made use of the company's core competence in apparel design and retail operation to experiment and evolve a new business model that connects commercial success with its mission to support the development of creative industry in Hong Kong. Their conviction has now given Hong Kong a shining example of creating shared value (CSV) – doing good by doing well.

At its early days, D2 Place attempted to support local designers through Fashion Farm Foundation, offering support to promote local fashion design and to showcase outstanding young designers to the world. At the time, Bosco reckoned that space and concessionary rent were enough to support the development of local brands. However, it didn't fly as local brands often are little known, hence it was difficult to drive traffic to the mall and to these designers.

A crucial element that was often missing among local designers is the marketing expertise to let potential customers become aware of their presence. In light of this, D2 Place created the weekend markets as a platform for local designers and aspiring entrepreneurs to reach the public. At its start, the weekend markets only attracted attention from the fashion industry. However, as the markets began to include a wider variety of creative products such as handmade accessories and handicraft, popularity and traffic started to grow. The weekend markets successfully connected mainstream consumers with local designs, and soon grew into a prevalent trend in Hong Kong. In 2016, around 12,000 people visited the markets every weekend.

A four-phase model for entrepreneurship

In its five years' journey to experiment, to tune and fine-tune its approaches for supporting young aspiring entrepreneurs while managing the financial sustainability of the portfolio, D2 Place has developed a four-phase entrepreneurship model that empowers small businesses to grow and flourish.
Phase 1: Weekend markets

The weekend markets, regularly organised throughout the year, serve as a starting point for entrepreneurs to test their products in the real world. Here, entrepreneurs have opportunities to exchange ideas with their customers directly and collect feedbacks to enhance the competitiveness of their products.

Phase 2: Pop-up stores

If entrepreneurs wish to expand their businesses, they can move on to Stage 2 and pay a concessionary rent for one to three months to open pop-up stores in the mall. D2 Place will provide furniture and decorations to lower the set-up cost of the store. In 2016, 100 pop-up stores opened in the mall.

Phase 3: Kiosks

When entrepreneurs accumulated sufficient experience, they can progress to Stage 3 to open their own kiosks, which is an area in the mall with open shop layout, for a minimum rental period of one year. At this stage, owners will need to decorate their own shop, but D2 Place will provide operations and marketing support.

Phase 4: Shop/The Barn

At the final stage, business owners can choose one of the two forms of permanent shop lease: a shopfront in an enclosed shop layout, or join the consignment service at THE BARN, a lifestyle specialty shop, for less burden on operation and sales as well as more time on product development. D2 Place will continue to support on marketing to help businesses grow continuously.

Business success through meeting social needs

The case of D2 Place exemplifies the possibility of creating shared value for business and society in Hong Kong. Young entrepreneurs face a number of risks when they start a business: expensive rents in Hong Kong, lack of market exposure and experience in operating a business. Yet, D2 Place combines the core competencies of LAWSGROUP in retail and marketing together with a low barrier of entry and entrepreneurship support to meet the needs of young designers.

Shop owners are positive about D2 Place. "Unlike renting a shop in other malls where we seldom communicate with the property owner, D2 Place introduces clients to us. They don't just rent out a space." As these local brands continue to grow, D2 Place also benefitted from an average revenue growth of 20% per year through the profit-sharing scheme, achieving a win-win scenario.

D2 Place's unique positioning of focusing on local creativity also become its competitive advantage. Its weekend markets are particularly popular among young people, which brings much traffic to the malls. Apart from shopping malls, the government and NGOs also joined the trend to host weekend markets. All of these resulted in more and more discussions on how to support the local creative industry and entrepreneurship in society, in turn enabling young people to receive more support to unleash their creativity and entrepreneurial spirit.
D2 Place of LAWSGROUP recently snatched the Grand Award of the Business for Social Good Outstanding Award. The award is organised by Our Hong Kong Foundation, with the support of McKinsey & Company, GLG and Hong Kong Council of Social Service as its strategic partners. It aims to identify and recognise local companies which successfully exemplify creating shared value as a core strategy in the way they do business. Close to 500 CEOs of Hong Kong businesses, leaders of non-profit organisations, as well as business school students of local universities participated in the selection of the final winners of the award. It is a hope that the success of D2 Place will help to inspire more companies to create shared value by addressing society's needs and driving commercial success at the same time.

Natalie Chan
Director & Principal Sustainability Consultant, PIE Strategy Limited

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