CINCINNATI -
Macy's, Inc. announced it has formed a free-standing joint venture with Hong
Kong-based Fung Retailing Limited (a privately-held enterprise) to explore
retailing in China, one of the world's largest and fastest-growing consumer
marketplaces.
The joint venture, which is 65%
owned by Macy's and 35% owned by Fung Retailing, will start with an e-commerce
pilot. For Macy's, already a popular destination for Chinese-Americans and
Chinese visitors to the United States, the joint venture is expected to develop
significant new learnings on customer preferences and buying patterns within
China.
Under the joint venture, Macy's
plans to begin selling in China in late 2015 through an e-commerce presence on
Alibaba Group's Tmall Global, their premiere marketplace that connects overseas
branded retailers to Chinese consumers. To be based in Hong Kong and called
Macy's China Limited, the Macy's-Fung joint venture 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 e-commerce offerings in China.
"Millions of Chinese have come to
know and love Macy's when they live in the United States or travel to New York,
San Francisco, Chicago and other American destinations. 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," said Terry
J. Lundgren, chairman and chief executive officer of Macy's, Inc. "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."
Peter Sachse, Macy's, Inc. chief
innovation and business development officer, said, "We have had initial success
in partnering over the past year with Alibaba on various projects, including
accepting Alipay on macys.com and conducting a special promotion during Black
Friday 2014. We believe that, through the joint venture, Macy's online presence
on Tmall Global will give us insight that will serve us well in evaluating
future international initiatives."
The Chinese Internet population of
some 668 million is the driving force behind China's e-commerce 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 U.S.
omnichannel retailing with its own retail and wholesale experience in Asia,
where it has more than 3,000 stores across a wide product range in various
formats, including more than 1,000 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's Chairman Dr. Victor
K. Fung said he was delighted with the formation of the joint venture. "Macy's
is not only a premier retailer in the States but also a frontrunner in
omnichannel retailing. I am confident that the joint venture will be fruitful
and mutually beneficial."
Fung Retailing's Executive Director
Ms. Sabrina Fung added: "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," Ms. Fung said. "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 is one of the most iconic
brands in the world, and we are honored they have chosen us as their exclusive
partner to grow their business in China," said Daniel Zhang, chief executive
officer of Alibaba Group. "Macy's exclusive Tmall Global flagship store is a
major win for consumers across China. It reinforces Tmall Global's status as the
premiere solution for brands and retailers in their strategic online presence
and direct engagement with customers in China."
Macy's China Limited will be led by
Kent Anderson, who will serve as managing director. Anderson is a veteran
Macy's, Inc. executive and long-time president of macys.com. Ms. Fung will
represent Fung Retailing's interest on the board of the joint venture company.
"As is always the case with Macy's,
we will test and learn as we progress and grow our business in China. We will
take one step at a time," Sachse said. "We intend to be a long-term player in
this region of the world, and that requires we understand the customer so we can
deliver an online shopping experience that Chinese shoppers will appreciate,
value and love."
Macy's began selling overseas 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 United States.
In the upcoming e-commerce test, Macy's China Limited will ship to Chinese
customers from inventories in Hong Kong, which is expected to improve speed,
flexibility and pricing for the customer.
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 e-commerce pilot.
Macy's China Limited is expected to
invest approximately $25 million in the operations of the joint venture over the
next 18 months, of which Macy's, Inc. will fund 65%. Macy's, Inc. expects no
material impact on its earnings in fiscal 2015. Current plans call for Macy's
e-commerce 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 e-commerce
phase.
About Fung Retailing Limited
The retailing businesses of
privately-held Fung Retailing Limited extend from Greater China to Korea,
Singapore, Malaysia, Thailand, and the Philippines through a combined network of
over 3,000 stores. They include stores operated separately and independently by
publicly-listed Convenience Retail Asia Limited and Trinity Limited, as well as
the privately-held Branded Lifestyle Holdings Limited, Fung Kids (Holdings)
Limited, Toys "R" Us (Asia) Limited, Suhyang Networks Company Limited and UCCAL
Fashion Group. Fung Retailing employs over 18,000 staff, and its turnover
exceeded US$1.8 billion in 2014. LF Logistics is a subsidiary of Li & Fung
Limited.
About Macy's, Inc.
Macy's, Inc., with corporate offices
in Cincinnati and New York, is one of the nation's premier retailers, with
fiscal 2014 sales of $28.105 billion. The company operates about 885 stores in
45 states, the District of Columbia, Guam and Puerto Rico under the names of
Macy's, Bloomingdale's, Bloomingdale's Outlet and Bluemercury, as well as the
macys.com, bloomingdales.com and bluemercury.com websites. Bloomingdale's in
Dubai is operated by Al Tayer Group LLC under a license agreement.