Macy’s, Inc. has formed a free-standing joint venture with Hong Kong-based Fung Retailing Limited 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 ecommerce pilot. For Macy’s, 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 exclusive ecommerce presence on Alibaba Group’s Tmall Global. 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,” said Terry 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.”
Macy’s has had a partnership over the past year with Alibaba on various projects, including accepting Alipay on macys.com and conducting a special promotion during Black Friday 2014.
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.
“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,” Peter Sachse, Macy’s, Inc. chief innovation and business development officer, 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 ecommerce 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 percent. Macy’s, Inc. expects no material impact on its earnings in fiscal 2015.
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.