Retail in Asia

In Markets

Macy’s forms JV with Fung Retailing to explore China market

US department store chain Macy’s is going to start selling in China late this year through an online store on Alibaba Group’s Tmall Global – a premiere marketplace that connects overseas branded retailers to Chinese consumers, it said on Wednesday.

Macy’s has formed a free-standing joint venture (JV) with Hong Kong-based Fung Retailing Limited – a privately-held enterprise – to explore opportunities in China, one of the world’s largest and fastest-growing consumer marketplaces.

The joint venture, which is 65 percent owned by Macy’s and 35 percent owned by Fung Retailing, is expected to develop significant new learnings on customer preferences and buying patterns within China.

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 fulfil Tmall Global orders from Hong Kong through local logistics channels, including LF Logistics, an affiliate of Fung Retailing. Alipay will be a primary payment platform 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 CEO 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," he added.

The US premier retailer has had initial success in partnering over the past year with Alibaba on various projects, including accepting Alipay on and conducting a special promotion during Black Friday 2014, according to Peter Sachse, Macy’s chief innovation and business development officer.

"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," said Sachse.

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 US omnichannel retailing with its own retail and wholesale experience in Asia, where it has over 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.

"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," said Sabrina Fung, Fung Retailing’s Executive Director. "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 managing director. Anderson is a veteran Macy’s executive and long-time president of Sabrina 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 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.

There’s no physical Macy’s stores planned for China at the moment. However, the US retailer said it may consider opening physical stores in the future based on the experience in its e-commerce pilot.