Western retailers find nation’s e-commerce market ‘irresistible’
China’s e-commerce market is proving irresistible to Western retailers, including the giant Macy’s Inc, which is investing $15 million in the Chinese online seller VIPStore Co in a venture also supported by the investment arm of the US-based chip maker Intel Corp.
Besides acquiring a minority stake in VIPStore, Macy’s will begin selling private-label merchandise in China next spring on Omei.com, a website that is operated by VIPStore and sells Western luxury and fashion goods.
Macy’s, in announcing its deal with Intel Capital on May 23, said this is its first foray into a foreign market. Another division of the company, the high-end retailer Bloomingdale’s, operates two stores in Dubai.
In China, the value of e-commerce sales this year is expected to reach $169 billion, according to a recent forecast by Zia Daniell Wigder, an analyst with Forrester Research. The value of online sales in the Asia-Pacific region, the biggest market for such transactions, is likely to reach $356 billion in 2016, the report said.
The deal with VIPStore will give Macy’s a means of learning more about Chinese consumers’ shopping habits and preferences, said Terry Lundgren, Macy’s chairman and chief executive officer.
“Our relationship with VIPStore will allow us to gain additional experience in the fast-growing Chinese market, and to better understand how consumers across China interact with Macy’s and the products we sell,” he said.
Founded in 2009, VIPStore is one of the leading online retailers of luxury brands in China. It also operates Jiapin.com, which sells high-end goods at a discount for certain periods of time.
The Macy’s section on Omei.com will offer its INC brand of women’s and men’s apparel before adding other private labels owned by Macy’s.
Jon Bond, VIPStore’s head of business development, called the move “a smart way to introduce Macy’s biggest selling brand in the US” to the Chinese market.
“It will be the only way to buy the INC brand in China,” he said.
Macy’s now offers international shipping on Macys.com to customers in China and more than 100 other countries. Orders placed on Omei.com, though, will be shipped to customers through one of VIPStore’s three warehouses in China and thus won’t be subject to the country’s import duties and tariffs.
“Omei.com is in Chinese,” said Jim Sluzewski, a Macy’s spokesman. “If somebody is uncomfortable with English, they can’t buy from Macys.com, which is only available in English.”
Bond said no prices have yet been set for the INC products that will be sold through Omei.com, but that those will “broadly reflect their US prices”. Omei.com offers at least 40 other brands such as BCBG, Rebecca Minkoff, Guess, Calvin Klein and Italia Independent.
Sluzewski said many Chinese tourists have visited prominent Macy’s stores at New York’s Herald Square, Union Square in San Francisco and South Coast Plaza in Southern California. The retailer is a household name in China, largely thanks to the Macy’s Thanksgiving Day Parade, which is broadcast internationally each November, and the holiday movie Miracle on 34th Street, which was set at the company’s Herald Square store.
“This program will be an opportunity for us to learn about our Chinese customers,” the spokesman said. “China is a large and growing market. We are in it for the long term.”
Despite the country’s position at the top of the regional e-commerce market, only 40 percent of Chinese Internet users make online purchases. That’s in contrast to Japan, where 69 percent of users buy goods online, and Australia, where 58 percent do.
Macy’s entry into China follows the Dallas-based Neiman Marcus Group Inc’s announcement in March that it would acquire a $28-million stake in Glamour Sales Holdings Ltd, an operator of a Chinese fashion website. The deal will allow Neiman to tap domestic demand for luxury goods without sinking cash into stores.
While the prospect of selling goods online in China appeals to many global retailers, some consumers say Macy’s faces obstacles in its attempt to do so.
Lily Tong, a native of Shanghai who now lives in New Jersey, said her Chinese friends haven’t heard of INC.
“Chinese people prefer brands they are familiar with,” said Zoe Chan, a 25-year-old from Chongqing who recently graduated from the University of Southern California’s business school.
“They won’t buy it unless it’s recommended by their friends.”
Chan, who studied the management of luxury brands in France for her undergraduate degree, said Macy’s must gain a better understanding of local preferences if it is to enter the Chinese market.
“Zara works with local designers to develop a line of products catered to local tastes,” said Chan, referring to the mid-range “fast fashion” line of Spain’s Inditex SA. “That’s why it is so successful.”
Having opened 30 stores in China last year, Zara has been expanding its online business and plans to start a website in the country later this year.
Also, Macy’s may face stiff competition from other retailers of affordable clothing that have a physical presence in China.
Sweden’s Hennes & Mauritz AB, which does business as H&M, has been well-received since it entered China in 2007. The David Beckham-brand bodywear and underwear sold at H&M have also proved successful, and the company now has 64 stores mostly in large Chinese cities.
Karl-Johan Persson, H&M CEO, told the Wall Street Journal in December that the retailer will open more stores in China than any other country in this year. That plan is partly the result of sluggish buying in Europe and the US, he said, while acknowledging that the competition in China is becoming stiffer.
Forever 21, already a popular brand among young US women, plans to gain a presence in China by opening its first Shanghai and Beijing stores this year. It recently began operating a six-story outlet in Hong Kong’s Causeway Bay.
Chinese customers who prefer to try on apparel and shoes before buying them might be reluctant to shop at Macy’s if the retailer can only be found online in the country. In China, most retailers don’t allow goods to be returned or exchanged.
“Some of my friends won’t buy clothes or shoes online until they go to a store to try them on,” Tong said. “Afterward, they’ll buy them online because of the discounts. Also, many of the websites offer low shipping fees, about 6 to 10 yuan ($1 to $1.60).”
Company officials said Omei.com offers returns and exchanges without charging a fee. Goods can be returned within seven days of their delivery and can be exchanged within eight to 15 days.
“It’s hard to say if Macy’s will be successful or not,” said Qiu Chenyi, a 25-year-old from Shanghai who works for the advertising agency Y&R in New York.
“Online shoppers don’t act the same way in China as they do in the US. (Chinese consumers) don’t really trust online websites.”
Some Chinese shoppers may look askance at the “Made in China” label affixed to some INC products.
“Why would Chinese people buy something made in China?” Tong said. “From their point of view, something made in China is not special. They want something imported.”
Sun Wenxiao, a PhD student at Central Michigan University, has a different view.
“I think Macy’s has good-quality products,” she said. “I don’t care whether they’re made in the US or China, as long as the quality is good.”
Source: China Daily