We launch a new collection of menswear semi-annually, which we introduce to our third-party retailers at our sales fairs, where they then place orders for our new products. We use these orders, along with our internal sales forecasts for our self-operated retail points, to determine production schedules.

As our sales fair for the current Spring/Summer collections takes place in June/July and our fair for the Fall/Winter collections takes place in December/January in the year before the season, we enjoy a longer production planning period between the receipt of orders and the delivery of products to the retail points. The timing of our fairs also allows us to minimize our production costs by engaging third-party manufacturers during off-peak production periods, when they generally offer reduced prices.

In general, we operate a supply chain model which seeks to minimize production costs by outsourcing a large portion of our production to third-party manufacturers. We believe that this arrangement enables us to focus on our core strengths of brand selection, design and sales management, and minimizes the need for us to invest in establishing large-scale production facilities and their associated costs. Also, with our established relationships with a network of third-party manufacturers, we are able to identify and engage third-party manufacturers which best suit our production needs at any given time.

We also have our own production facilities in Dezhou, Shandong Province, which comprise two factories with an aggregate gross factory floor area of nearly 35,000 square meters and mainly manufacture trousers, one of our key products. Besides providing us with a primary production source, our production facilities enable us to formulate a manufacturing costs model to assess whether the prices offered by our third-party manufacturers are acceptable or need to be negotiated further. Thanks to our own production facilities and established relationships with our third-party manufacturers, we are able to ensure a consistent supply of products for our retail points.

Whether our products are manufactured directly by us or our third-party manufacturers, however, they all exhibit the same high level of quality that is critical to maintaining our reputation and brand image. This is because we employ stringent quality control protocols from the raw material stage to the final product stage. For example, we either supply our third-party manufacturers with quality raw materials that we ourselves have procured or recommend them to procure such materials from our preferred raw materials suppliers. Also, we prefer our third-party manufacturers to have appropriate quality control certifications, such as ISO 9001-2000. Finally, besides conducting our own inspections on a sampling basis, we require all our raw materials and products to be in compliance with quality control standards promulgated by the relevant PRC government institutions.