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Macy’s seals China JV with Fung Retailing

Aug 14, 2015

New York, USA - JUNE 28th, 2014: The world famous department store Macy's in New York City.

Macy’s, the US department store giant, has created a free-standing joint venture with Hong Kong-based Fung Retailing to explore retailing opportunities in China.

The joint venture, to be called Macy’s China Limited, is 65 per cent owned by Macy’s and 35 per cent owned by Fung Retailing and will start with an eCommerce pilot.

For Macy’s, already a popular destination for Chinese-Americans and Chinese visitors to the US, the JV is expected to develop “significant new learnings on customer preferences and buying patterns within China”, the US company said in a statement.

No physical Macy’s stores are planned for China at this time, but may be considered in the future based on the company’s experience in its eCommerce pilot.

The two companies will begin selling online in China late this year, via Alibaba’s Tmall Global, with the business’ head office to be located in Hong Kong.

It will curate a Macy’s online merchandise assortment “especially for Chinese customers” and fulfill Tmall Global orders from Hong Kong through local logistics channels, including LF Logistics, an affiliate of Fung Retailing. Alipay will be a primary payment channel for Macy’s eCommerce offerings in China.

“Millions of Chinese have come to know and love Macy’s when they live in the US or travel to New York, San Francisco, Chicago and other American destinations,” said Terry J. Lundgren, chairman and CEO of Macy’s, Inc.

“By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales. We have been closely following the development of the Chinese marketplace for many years and have learned that success requires that we have the right partners to help us navigate the unique needs and characteristics of consumers in China,” he said.

“Fung Retailing has deep experience and expertise in Chinese retailing, and the Macy’s-Fung partnership will be instrumental to helping set up and operate our test.”

The Chinese Internet population of some 668 million is the driving force behind China’s eCommerce and online shopping boom, along with the rise of a middle class forecasted to number 630 million by 2022. Fung Retailing complements Macy’s leadership in US omnichannel retailing with its own retail and wholesale experience in Asia, where it has more than 3000 stores across a wide product range in various formats, including more than 1000 stores in China. In addition to accumulating invaluable on-the-ground experience of the product preferences and shopping habits of Chinese consumers, Fung Retailing has focused intensely in recent years on the application of technology to the Chinese retail market, in particular to omnichannel retailing.

Fung Retailing chairman Dr Victor K. Fung said he is confident the JV will be “fruitful and mutually beneficial”.

Fung Retailing executive director Sabrina Fung said the potential for growth is significant.

“While the Chinese online consumer is already one of the savviest in the world, there are untapped ‘white spaces’ to fill. There is demand for the quality and variety of power brands and authentic products associated with the world-famous name of Macy’s. Many Chinese are attracted to the American lifestyle, of which shopping at Macy’s is the ultimate symbol.”

Macy’s China Limited will be led by Kent Anderson, who will serve as MD. Anderson is a veteran Macy’s executive and long-time president of macys.com. Sabrina Fung will represent Fung Retailing’s interest on the board of the joint venture company.

Macy’s began selling into China and about 100 other countries with an edited assortment on macys.com in 2011. These goods are shipped to international customers from the US. In the upcoming eCommerce test, Macy’s China will ship to Chinese customers from inventories in Hong Kong, which is expected to improve speed, flexibility and pricing for the customer.

Macy’s China is expected to invest approximately $25 million in the operations of the joint venture over the next 18 months. Current plans call for Macy’s eCommerce sales of approximately $50 million in China in 2016. Future sales levels and investment, including potential stores, will be determined after evaluating Chinese shopping patterns and results in the initial eCommerce phase.

Source: insideretail.asia

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