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Tag: China

  • Optical 88 struggles

    Optical 88 struggles

    Eyewear chain Optical 88 has suffered a 10.5 per cent slump in sales in the first half, with profit down 53.2 per cent.

    According to the trading announcement of its parent company Stelux International, sales reached HK$579.1 million and EBIT $18.0 million.

    The company says exchange rate fluctuations and the subdued Hong Kong and Macau markets contributed to the downturn, although the business remains profitable.

    In Hong Kong and Macau turnover decreased by 8.9 per cent and profit by 32.6 per cent, despite efforts in cutting operating costs (other than shop rentals) by around 7.4 per cent. “The turnover performance was impacted by the softened demand from local customers and tourists but gross profit margin remained healthy and stable,” Stelux said in its filing.

    In Mainland China, sales declined by a modest 5.3 per cent. The company says it is building on Optical 88’s professional and healthcare positioning, and will continue to expand the store network in Mainland China in the second half of this year. It aims to accelerate network expansion in the Southern and Southwest regions to further strengthen its market share, paving the way for further expansion into other parts of China.

    Optical 88’s turnover in Southeast Asia dropped by 17.8 per cent (or by 7.1 per cent on a constant currency basis), and a loss of $11.5 million was recorded.

    The introduction of GST in Malaysia in April caused turnover to slip in the first quarter, but the company made up the lost ground in the second quarter.

    Store consolidation and productivity enhancement measures in Singapore paid off this year, with the loss narrowing by 10.7 per cent to HK$7.5 million through reduced operating costs.

    The Thai operations are still profitable, but recorded a drop in turnover by 19.1 per cent caused by the significant decline in consumer confidence and purchasing power in Thailand.

    “Severe competition driven by widespread sales promotions in the market has also led to narrowed margin. The tough market is expected to continue in Thailand, and we will… close non performing shops and continue with our cost control measures, which have reduced our operating costs by 15.7 per cent in the first half,” said Stelux in its filing.

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  • Eslite China makes debut in Suzhou

    Eslite China makes debut in Suzhou

    Taiwanese bookstore operator Eslite Corporation has opened its first shop in Mainland China.

    The Eslite China store has opened in Suzhou in a high profile event featuring some of China’s most famous writers and artists, including Lin Hwai-min.

    Eslite has opened two stores in Hong Kong, redefining the nature of the bookshop in the territory.

    Featuring prominently in the store – which merges art and books with exhibitions and curated collections of gift lines, is a painting by Cai Guo-Qiang in Taipei in 2009, titled Day and Night.

    The Eslite Corporation operates 43 retail bookstores in Taiwan. The Chinese store is its third overseas.

    Despite the brand being new to the mainland, there is a surprisingly high level of local awareness, in part due to Chinese visiting the Hong Kong flagship stores.

  • Hong Kong retail sales figures released

    Hong Kong retail sales figures released

    At last: some “relative improvement” in retail sales data to encourage embattled retailers.

    Hong Kong retail sales in October fell three per cent year on year, provisionally estimated at $37.2 billion.

    A government spokesman said retail sales showed “some relative improvement in October, helped mainly by the visible growth in the sales of certain consumer durable goods amid the launch of new smartphone models”.

    “Yet the fall in the sales of jewellery, watches and clocks, and valuable gifts remained notable, reflecting the drag from the slowdown in tourist spending.”

    October’s fall was less than half the revised estimate of September’s sales which were down 6.3 per cent.

    Year to date sales are down 2.7 per cent on last year.

    After netting out the effect of price changes over the same period, the volume of total retail sales in October increased by 1.2 per cent from a year earlier. The revised estimate of the volume of total retail sales in September decreased by three per cent. For the first 10 months of 2015, retail sales rose 1.1 per cent in volume year-on-year.

    As expected, it was the jewellery, watches and clocks sector, the most valuable category, which fell the hardest – down 17 per cent in October. Apparel sales were down 5.7 per cent, electrical goods by 10.9 per cent, medicines and cosmetics by 2.4 per cent, Chinese drugs and herbs by 5.9 per cent, furniture by 4.2 per cent and department store sales by 2.2 per cent.

    Supermarket sales rose 1.5 per cent, food, alcohol and tobacco by 3.7 per cent and miscellaneous consumer durables by 36 per cent.

    “The outlook for retail sales will likely be still constrained by the lacklustre performance of inbound tourism. The possible impacts of the dimmer global economic outlook on local consumer sentiment also need to be watched over,” the spokesman said.

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  • Bosideng sales slumps

    Bosideng sales slumps

    Chinese down apparel brand Bosideng has seen sales revenue slump 10 per cent – and profit nearly halved in the first half year.

    Down apparel sales, which account for almost half the group’s turnover, fell 14.6 per cent.

    While Bosideng blamed its poor performance on “tremendous challenges” facing China’s apparel industry, there was one telling line in its interim report which suggests a deeper problem:

    “The increasing popularity of the Internet and online shopping that stimulated the proliferation of information, coupled with the speedy expansion of an increasing number of overseas brands in the PRC market, have not only offered more choices for consumers, but also made consumers more sensitive to product prices and styles.”

    “And styles”. Bosideng is having to face the reality that growing an apparel business so dependent on a functional, rather than fashionable, product range may have its limitations.

    But there are signs it is adapting.

    The company said that as Mainland China’s economic growth slows the gap is narrowing between first and second-tier cities and rural areas. That has prompted national brands to switch their development mode from one that relies on store opening to swift response in various stages of business operation, “including branding, products, logistics and retail sales, so as to meet the expectations of the market and consumers”.

    “The group has actively explored and gradually shifted from the traditional wholesale business model to a retail model that draws closer to the market and the consumers. This allows the group to build a more solid business foundation for future development and to seek healthy and sustainable development.”

    The down business, by nature, is seasonal, with demand naturally higher in winter months, prompting offseason sales and promotional activity in the first half of the year. Part of the reason for the sales decline in the last half was an increase in the discounting to reduce inventory.

    Bosideng also stepped up its efforts to implement more stringent production and product plans.

    “Through in-depth analysis of retail statistics, the group was able to arrange the production of various product styles more accurately to avoid unnecessary inventories… For instance, two brands – Snow Flying and Bengen – developed minimal new styles, whereas Combo devoted all efforts in stock clearance this year and did not design new styles.”

    It has also commenced trial marketing, ranging some new styles in physical stores prior to finalising production and sales plans to test and understand the market reaction in order to avoid excess inventory.

    The company is also continuing to optimise its retail network, shutting down underperforming stores to enhance store quality: the number of outlets in the down apparel business – both self operated and third party – fell by a net 548 in the period, to 6051.

    Some stores which are usually shuttered over summer, or sub-let by third party distributors, were kept open as outlets to help reduce inventory. Bosideng supplied the product, the distributors met the overheads, saving the group distribution costs and adding sales channels for stock clearance.

    Bosideng is also shifting its focus away from department stores more towards shopping malls, reflecting changing lifestyles of Chinese consumers.

    This year, it has opened pop up stores for the first time in six prime shopping centres to assess potential to showcase new lines.

    “The pop up stores attracted customer flow with innovative displays and eye-catching designs. Various live events, performances and games were introduced to increase interaction with consumers, thus enhancing brand recognition. The pop-up stores were well received by the market, which not only successfully became talk of the town with widespread media coverage, but also drove the group’s local sales performance. The group believes that it will accelerate store opening in large-scale shopping malls in the long run to allow the retail network of the group to better satisfy the needs of the consumers.”

    Meanwhile, diversification away from down appears to be bearing fruit.

    During the period, revenue from Jessie brand increased by 18.8 per cent year on year to approximately RMB158.3 million. Following the adjustment of the brand’s retail network over the past two years, the net number of Jessie retail outlets increased by five to 216 this year. Jessie has been focusing on enhancing the profitability of self-operated stores and implementing refined management and further optimised product mix.

    In wholesale, Jessie optimised the ordering system at the trade fairs and increased the mix and match references and provided more guidelines to distributors so as to increase associated orders. “As a result, revenue from self-operated and wholesale business recorded a significant increase.”

    But revenue from its Mogao brand  decreased by 21.9 per cent year-on-year to approximately RMB128.2 million, largely due to a net reduction of 21 stores to 284 during the period. It also dropped its womenswear lines to focus purely on menswear, so the last period was essentially one of repositioning. Bosideng says the change was well received by distributors and this year it will step up branding efforts, especially on new media.

    Internationally, Bosideng’s London flagship store has accumulated “considerable retail experience and deeper understanding of the consumer preference of the local market”.

    “The London flagship store will… step up its efforts in expanding the popular down apparel series this year. Fully utilising its extensive resources in down apparel products, the group will assist the flagship store to further optimise the product mix so as to drive its sales and profitability.”

    For the record, Bosideng reported total sales revenue of RMB2,563.7 million, a gross profit margin down 11.3 percentage points to 36.1 per cent, its operating profit margin down by 5.6 percentage points to 5.2 per cent and a profit attributable to shareholders down 48.3 per cent to RMB130.7 million.

    In the year ahead, Bosideng says it will continue to reduce inventory and significantly reduce the development of traditional and basic styles to avoid overlapping with old stocks.

    “At the same time, the group will introduce more hi-tech fabrics in order to satisfy the growing demand for functional down apparel in the market, providing more value-for-money, high quality and trendy down apparel products to customers.”

  • Veeko International flourishes despite downturn

    Veeko International flourishes despite downturn

    While its peers suffer from Hong Kong’s lacklustre market, one retailer has achieved a stunning sales boost.

    Veeko International operates 82 Colourmix and one Morimor cosmetics stores and 155 fashion stores in Hong Kong, Macau, Taiwan, Singapore and Mainland China under the Veeko and Wanko brands.

    For the six months to September 30, Veeko International recorded a turnover of HK$1.066 billion – an increase of 23.6 per cent on the corresponding period of last year. Its cosmetics business increased sales by 33.7 per cent over the same period last year, accounting for 77.6 per cent of Veeko’s turnover. Sales in the fashion business slipped two per cent.

    Profit attributable to shareholders reached HK$41.488 million – up 14.9 per cent on last year, driven by a 56.2 per cent increase in profit from the cosmetics business. The fashion business, meanwhile, recorded a $2.68 million loss, a 133.6 per cent downturn on the profit of $7.97 million for the same period last year, largely due to exchange rate losses from overseas markets including Taiwan, Singapore and Mainland China. At constant exchange rates the division would have recorded a profit.

    Veeko says it will continue to expand its Colourmix store network, having added six in the first half.

    A large part of the success of its cosmetics operations is an increase in the average sale from $358 per transaction for the same period last year to $377 per transaction for the current period, – a year-on-year increase of 5.3 per cent. The gross profit margin of cosmetics business for the

    period was relatively unchanged at 35.7 per cent.

    Veeko’s fashion store network was down by a net 19 stores due to a revision of its store networks in Singapore, China and Taiwan.

    Veeko says Hong Kong and Macau accounted for 78.8 per cent of the group’s total fashion retail turnover. Sales in the two territories rose 6.2 per cent year on year, but gross profit margin decreased by 1.7 percentage points to 71.8 per cent.

    Taiwan fashion sales fell 24.9 per cent, due to the closure of eight stores, leaving it with 25 in the market. But same store sales grew by 6.4 per cent.

    In Singapore, sales slumped 26.6 per cent, largely due to the closure of four stores, leaving it with just nine there. Same store sales in local currency slipped 2.6 per cent.

    And in China, turnover fell 19.4 per cent, due to a net reduction of 10 stores, leaving it with 41.

    Veeko says it expects the challenges faced by the retail business will continue during the next half year, with cautious consumption sentiments.

    “The group… believes that opportunities exist alongside with challenges. In an environment which is full of challenges, the best policy is to uplift our competitiveness and lay a good foundation for sustainable growth in the future by maintaining healthy growth of the core business in the long run.”

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  • Stimulus Does the Trick as Detroit Autos Surge in China

    Stimulus Does the Trick as Detroit Autos Surge in China

    Investors understand that General Motors generates the majority of its profit right here in the United States. However, GM sells more cars in China than in any other market, and it was worrisome for investors when new-vehicle sales slowed in China over the summer. Sales slowed to the point that it forced China’s government to dish out an incentive program that cut the purchase tax in half for consumers.

    How has that incentive program turned out? Looking at GM’s sales figures coming out of China for November, the program is working like a charm.

    By the numbers
    General Motors’ retail sales moved 14% higher to 346,671 units in November. If you’re keeping track, that’s good enough to pencil last month in as the automaker’s best November sales in China ever.

    “The market has been improving in the past two months,” said GM Executive Vice President and GM China President Matt Tsien, in a press release. “We are well positioned to achieve a strong finish to the year backed by newly launched models, including the Chevrolet LOVA RV, Buick Verano Hatchback and Buick Verano GS.”

    The vehicles responsible for driving General Motors’ sales in China higher last month weren’t a surprise. GM’s SUV sales soared 231% on an annual basis, powered by the Buick Envision and Baojun 560. Furthermore, the SUV segment accounted for 19% of GM’s sales in China last month, which was much higher than the 6.5% the segment represented a year ago.

    Looking at GM’s brands in China, Buick remains the automaker’s bright spot. Buick recorded its best-ever monthly sales in November as it exceeded 100,000 units for the second consecutive month. More specifically, Buick sales soared 45% year over year to nearly 108,000 units.

    GM’s luxury Cadillac lineup also posted healthy year-over-year sales gains of 57%, but with a far lower unit total of just under 8,000 units. Baojun sales jumped 100% on an annual basis to more than 58,000 units, and Chevrolet sales took an 11% dip year over year to 51,192 units in November.

    Through the first 11 months of 2015, retail sales from GM and its joint ventures increased 4.1% compared to the same time frame last year, to a total of 3.16 million units.

    GM isn’t the only success story
    While crosstown rival Ford Motor Company (NYSE: F) trails GM in vehicle sales by a long shot in China, it’s still making progress in a market it was late to enter. Ford’s sales totaled 106,283 during November, which was a 9% increase over last year’s November. Better yet, Ford’s sales in China are quickly approaching the 1 million mark for the year, totaling 990,356 sales through November.

    Ford’s gains were led by its Mondeo (Fusion), which posted a sales increase of 13% to 12,431 units compared to last year, as well as its Kuga (Escape) and Edge, which both sold more than 10,000 units last month in China.

    Here today, gone tomorrow?
    The major question facing investors in the automakers that operate in China is: Are these sales gains here to stay? It’s clear that after a slow summer of new-vehicle sales in China, the government’s stimulus program, which cuts the purchase tax from 10% to 5%, is definitely igniting sales. The good news is that this stimulus is slated to continue for the entirety of 2016.

    This is a development worth watching, because if sales remain accelerated, rather than only a temporary boost, it’ll be very positive news for investors of General Motors and other automakers hoping to fuel top- and bottom-line growth from its operations in China.

    The next billion-dollar iSecret
    The world’s biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn’t miss a beat: There’s a small company that’s powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early, in-the-know investors!

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  • Carrefour has opened its biggest store in Asia

    Carrefour has opened its biggest store in Asia

    Carrefour SA, a French retailer, as of late opened its biggest store in Asia in the Chinese capital, Beijing. The divulging comes as the firm plans to capitalize on the expanding interest for imported sustenance from medium-and top of the line customers.

    The two-story hypermarket is situated on the North Fourth Ring Road, adjoining the sprawling office of Swedish outfitting retailer Ikea. It houses more than 80 stores, including Uniqlo, Decathlon and the first-ever Baidu Concept Store.

    The Carrefour Beijing outlet, which is spread over a territory of 71,380 square meters, offers more than 40,000 items, 15 percent of which are foreign things.

    Serving as the French retailer’s twentieth store in the city, the hypermarket likewise has 800 free parking spots, 15 electric charging stations for transport transports, and five underground charging stations for electric autos.

    “We are concentrating on imported nourishment items as there has been an ocean change in the sustenance inclinations of Chinese purchaser,” Laurent Olszewski, local chief for the North-West China district at Carrefour, said. “It is very unique in relation to what I saw when I first came to China in 1995.”

    “Chinese buyers need to take a stab at everything,” he included, refering to imported French salt and Australian meat as samples. Olszewski additionally shared that Carrefour is growing its e-trade business in 2016. The firm will concentrate on its Web-based administrations by January one year from now in the wake of completing their work on their Tianjin-based logistics focus.

    As per specialists, this move of Carrefour is an approach to acquire shoppers fitting in with the high-pay class.

  • High-end retailers in China no longer have the luxury of time

    High-end retailers in China no longer have the luxury of time

    In the heart of Guangzhou’s Yuexiu district, the shopping centre La Perle is a symbol of luxury living in the southern mainland city.

    The high-end shopping mall, which opened in January 2004, has long been the first stop for many international brands seeking to conquer China market.

    But times are changing. A few weeks ago, La Perle lost one of its biggest tenants. Louis Vuitton. The French luxury retailer closed its store on the ground floor saying it would not renew its expired lease.

    This followed the shutting down of the two other LV stores – in the northeastern city of Harbin and the western city of Urumqi.

    The brand said the closures were part of a marketing strategy adjustment by headquarters.

    It’s a strategy that appears to have been taken on by many other international luxury brands.

    Following ten years’ aggressive expansion in China, they have been shrinking their physical presence in the nation to adapt to a cooling market plagued by a slowing economy, an ongoing anti-corruption campaign and Chinese buyers’ increasing overseas purchases.

    The Fortune Character Institute, a Shanghai-based market research unit, forecasts mainland luxury sales to grow 3 per cent to US$25.8 billion this year, much slower than the 11 per cent in the recovering global market.

    A study by the institute found that although Chinese shoppers consumed 46 per cent of luxury goods around the world, their purchases in their home market accounted for only 10 per cent of global sales, falling from 11 per cent in 2012 and 13 per cent in 2013.

    The sluggish growth is reflected in the expansion plans of luxury brands. They are opening fewer new stores and closing more.

    During the past two years, Burberry closed four stores on the mainland, Coach shut two, Hermes one, Armani five, and Prada went from 49 to 33.

    Regina Yang, of real estate consultancy Knight Frank Shanghai, said store consolidation would continue, especially in smaller cities.

    “Now the luxury brands do not need two or three outlets in one city. Those having three outlets will be cut to one,” said Yang.

    The situation is no better in Hong Kong, which relies heavily on mainland shoppers’ spending.

    In August, TAG Heuer, the expensive watch brand under LVMH, closed its Causeway Bay store while Coach closed its flagship store in Central due to high rent pressure and a falling number of mainland tourists.

    Store openings are no longer a major way for international luxury brands to expand in the China market

    Zhou Ting, Fortune Character Institute

    “Store openings are no longer a major way for international luxury brands to expand in the China market. Over the next two years we expect these brands to close even more stores than before,” said Zhou Ting, director of the Fortune Character Institute.

    “But if you think luxury brands are taking a totally defensive strategy in China, you would be wrong. The closures are only a small part of a thorough strategy adjustment they are undertaking in China.”

    While closing smaller and underperforming outlets, the top brands are investing more resources to upgrade and expand other stores and are even venturing into different industries to attract local shoppers. Considering Chinese buyers’ preference to shop online, they are also building e-commerce channels and closing price gaps between China and foreign markets to retain their consumption locally.

    “In the past, foreign luxury retailers had treated the China market like a money printer. They were busy opening stores to cover more cities. But their customer services and shopping experience were far from good compared to their stores in Europe. Now they have to pay a big cost for it,” said Zhou.

    The first batch of luxury brands entered into China in the 1990s. Most of them set up stores in five-star hotels and high-end department stores in big cities, targeting foreign businessmen, overseas Chinese and government officials.

    In 2004, as the Chinese government loosened restrictions on foreign retailers, luxury brands that had previously relied on local distributors started to engage in direct sales and expand into shopping malls.

    In the past, foreign luxury retailers had treated the China market like a money printer

    Zhou Ting, Fortune Character Institute

    The golden era came around 2009 and 2010 as a rising number of affluent Chinese consumers started to spend on high-end leather goods and jewellery, making the country the fastest-growing luxury market in the world.

    Encouraged by the fast growth and huge potential in the China market, luxury retailers rushed to open stores. Global consultancy Bain & Co estimated that the 15 top luxury brands it surveyed had opened more than 80 new shops during the first eight months of 2010.

    Meanwhile, the big brands’ aggressive expansion was also partly promoted by the increase in shopping mall construction.

    “Developers in second and third tier cities lured big brands as anchor tenants by offering them very flexible leasing terms,” said Kenith Kong, director and head of retail service at real estate agency DTZ/Cushman Wakefield China.

    A watershed for China’s luxury market came in 2013. Late that year, Beijing embarked on a long-term anti-corruption campaign and banned government officials from giving or receiving gifts. Such expenditure had previously been a major driver of domestic luxury consumption.

    More recently, the rapid growth of overseas purchases has also been worrying top-end retailers.

    Chinese consumers, who are travelling overseas more often, now spend more than 70 per cent of their luxury budgets in Europe, North America, Japan and other countries where the prices are lower, options are greater, and services better.

    The demand has even created a booming “daigou” or personal shopper industry, in which the daigou makes a living by purchasing products from overseas and selling them to buyers at home at a profit.

    All such developments are forcing luxury retailers to reappraise their business models.

    “We have noticed an upward trend on the portion of large stores opened by luxury brands in recent years,” said Frank Chen, research head of global real estate agency CBRE.

    The company observed that three quarters of renovations by luxury stores that took place between January 2013 and July 2015 in eight major cities were expansions.

    It also said the proportion of luxury stores with floor areas of more than 800 square metres climbed to 22 per cent in 2014 from 18 per cent a year earlier.

    “Larger sizes means luxury retailers can display more products and add more functions in their physical stores. Increasingly, they are displaying categories which were previously given little emphasis, such as shoes, household items, cosmetics and children’s apparel,” said Chen.

    In February, Louis Vuitton unveiled its newly upgraded store in the China World Mall in Beijing. The 3,000-square-metre shop not only offers various tailor-made services, it hosts a bookstore, an arts exhibition room and a Chinese tea zone.

    On July 31, the French luxury brand opened a new store on the bank of the West Lake scenic area in Hangzhou City, Zhejiang province, to tap the growing tourism market.

    Also taking an innovative approach in reaching out to local customers is Italian label Gucci. The brand opened a restaurant, 1921 Gucci, in Shanghai’s iAPM shopping mall.

    French fashion house Versace opened a cafe in one of Shanghai’s most expensive malls, Grand Gateway 66, which also hosts Burberry’s first beauty salon.

    Meanwhile, Hermes, Armani, and Dolce & Gabbana are expected to introduce their restaurants and cafes to China, providing a new engine for revenue growth.

    Such strategies create new forms of profitability based on experience-oriented consumption

    Frank Chen, CBRE

    “Such strategies create new forms of profitability based on experience-oriented consumption, as well as an additional sales opportunities for physical goods by attracting more shoppers to spend more time in their places,” Chen said.

    While reducing their physical presences, luxury retailers are embracing e-commerce despite their concerns that online channels cannot emulate the physical shopping experience.

    However, Chinese consumers’ increasing reliance on online shopping, especially on their mobile phones, has convinced brands to launch shopping sites or form partnerships with e-commerce firms.

    In October, Cartier launched its China shopping site. One month earlier, high-end brand Coach reopened its online store on T-mall.com three years after closing it.

    Other brands such as Burberry and Tag Heuer are working with local e-commerce giants like T-mall of Alibaba and JD.com to provide online selling services in addition to their own official shopping sites.

    “Many luxury brands have begun to close the retailing price gaps between China and other markets. One of their purposes is also to establish a comprehensive global pricing system and prepare for their future online expansion,” Zhou Ting said.

  • Yahoo co-founder joins Didi Kuaidi as adviser

    Yahoo co-founder joins Didi Kuaidi as adviser

    Didi Kuaidi has appointed Yahoo co-founder Jerry Yang as a senior adviser to the ride-hailing app firm as it battles Uber Technologies for market share in China.

    Mr Yang, an independent director of  Alibaba Group which backs Didi Kuaidi, will also be an observer on the board, the company said in a statement yesterday.

    Mr Yang’s new positions at Didi Kuaidi add another link in the web of relations between the Chinese ride-hailing company and its investors, Alibaba and Japan’s SoftBank Group Corp.

    Mr Yang, Alibaba founder and executive chairman Jack Ma and SoftBank CEO Masayoshi Son all sit on the board of Alibaba.

    SoftBank was also an early investor in both Yahoo and the Chinese e-commerce behemoth, and the three men maintain close ties.

    Their “bromance” has now been extended to Didi Kuaidi, the biggest ride-hailing rival to Uber.

    SoftBank also owns stakes in other ride-hailing services that have forged a global anti-Uber alliance, namely India’s Ola and South-east Asia’s GrabTaxi. Didi Kuaidi and Alibaba also own stakes in the US arm of this faction, Lyft.

    Meanwhile, in Jakarta yesterday, Uber said it has received the green light to operate in the Indonesian capital after giving assurances that it would comply with local tax rules and other requirements.

    Jakarta police had earlier this year deemed the US car-hailing service illegal, saying its drivers did not pay the correct taxes and the company did not have the licence needed to operate as a form of public transport.

    In a statement, Uber said it is working with the office of the city’s governor, Mr Basuki “Ahok” Tjahaja Purnama, and Indonesia’s investment coordinating board to establish itself as a legal entity in Indonesia, pay taxes, have adequate insurance and ensure its “partner vehicles” undergo regular inspection.

    “Previously there was tremendous regulatory ambiguity,” Uber spokesman Karun Arya said. “Governor Ahok has now provided clear direction for Uber in terms of specific requirements for Uber and other ride-sharing platforms to operate and thrive in Jakarta.”

    Uber has registered with Indonesia’s investment coordinating board as a technology or Web company, Mr Arya added. There was no immediate comment from the Jakarta governor’s office.

    In Indonesia, Uber also operates in Bali and Bandung.

    Privately owned Uber has grown aggressively worldwide with its matchmaker service for drivers and passengers, but a lack of regulation for the relatively new business model has brought it to the attention of the authorities.

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  • City Chain to close stores

    City Chain to close stores

    Hong Kong headquartered watch retailer City Chain plans to close more stores as sales slid 12.1 per cent and profits crashed by 86.4 per cent in the first half year to just HK$15.7 million.

    Parent Stelux says turnover was “sluggish” in Hong Kong, Macau and Southeast Asia, with a narrowed gross margin. But inventory reduced by 16 per cent compared with the end of March.

    The City Chain Group operates stores in Hong Kong, Macau, Mainland China, Singapore, Thailand and Malaysia together with online stores at City Chain Tmall and Titus Tmall. Turnover for the six months to September 30 was $957.9 million.

    “We are rationalising our store portfolio based on shop profitability when considering shop renewal or relocation to achieve lower rental to turnover ratios,” the company said, without providing any indication of how many stores are likely to be culled.

    Already stores have been closed in Singapore and Thailand.

    Sales in Hong Kong and Macau fell 14.2 per cent to $646.6 million due to reduced tourist spending, shop consolidation measures and a high comparable base last year, when the group achieved record breaking monthly sales. That triggered a 56.5 per cent drop in pre-tax earnings to $67.9 million.

    “A combination of factors, namely, a decrease in turnover, narrowed gross profit margin due to stock rationalisation and the time lag in containing operating costs such as shop rentals led to the decline. Operating costs other than shop rentals decreased by around eight per cent despite inflationary pressure. The group continues to tighten operating expenses to adapt to existing turnover levels to improve performance,” Stelux said in its earnings statement.

    It was a rosier picture in Mainland China, now considered “a key market” for the group, which is pursuing a long term growth strategy there.

    First half sales rose 11.2 per cent to $113.2 million despite the slowing economy, driven mostly by positive same store sales growth especially in the Eastern (around 27 per cent) and Southwest regions (around 40 per cent).

    “Due to aggressive price cuts by competitors and a change in stock management strategy, gross profit margins came under pressure. Stock clearance initiatives have proven successful and we are on track towards maintaining a healthier and more competitive inventory balance. Losses, standing at $28.6 million, remained similar to that of last year since most of the uplift in sales was offset by the drop in gross profit margin. Notably, the loss posted by existing operations in Northern China fell by around 57 per cent compared to the same period last year due to restructuring efforts taken in Quarter 2,” the company said.

    “We expect to accelerate network expansion, increasing penetration in regions where we have a presence, and also setting up in multiple second and third tier cities where we do not yet have a presence to achieve economies of scale.”

    Southeast Asian first half sales were adversely affected by weakening economic fundamentals, with poor consumer sentiment and weak local currencies. Turnover dropped by 15.7 per cent to $198.1 million. But in local currency terms, turnover dropped by just four per cent.

    The Southeast Asian operations recorded a loss of $23.6 million, but a large part of that was attributed to the sharp depreciation of the Malaysian ringgit. On an exchange neutral basis the loss would have been $13.2 million, compared with $12.5 million during the same period last year.

    “The retail sector in Malaysia was severely affected by the introduction of GST in April 2015 and the depreciation of Malaysian ringgit. Despite this, turnover in local currency terms remained stable due to successful restructuring and re-merchandising measures adopted.

    “In Singapore, store consolidation and productivity enhancement measures have been very successful and we have seen sales per shop month improving significantly by 22.5 per cent and at the same time operating costs have fallen by 19.6 per cent. This has helped to narrow the loss by 33.6 per cent to $8.3 million.

    “The unstable political situation in Thailand and high household debt ratio has resulted in very low consumer confidence which has continued to fall since January 2015. Due to this, our Thai operations, posted a 24.2 per cent (FX neutral: 18.8 per cent) decline in turnover. We have implemented aggressive store consolidation measures with over 10 non-performing stores closed, and these store consolidation efforts will continue in the second half. Cost control measures were also implemented reducing our operating costs by 22 per cent.”

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  • Asia driving L’Oreal growth despite market turbulence

    Asia driving L’Oreal growth despite market turbulence

    Asia is driving huge growth for cosmetics giant L’Oreal, despite a slowdown in Hong Kong.

    At the end of September, L’Oréal posted growth of 4.4 per cent on a like-for-like basis – and 21.9 per cent based on reported figures as the company expands its retail network and wholesale operations in the region.

    Kiehl’s, Yves Saint Laurent and Giorgio Armani contributed to dynamic growth of the L’Oreal Luxe division, despite the context of slower third-quarter growth in Hong Kong and Travel Retail Asia.

    The Consumer Products Division is performing well in India, Australia and Thailand. In China, growth at L’Oreal Paris is accelerating, while Magic is undergoing a transitional period. The Active Cosmetics Division is growing strongly, thanks to the success of La Roche-Posay, L’Oreal reported in its quarterly filing.

    Jean-Paul Agon, chairman and CEO, said at the end of September, the group’s reported growth is strong, at 13.2 per cent, still supported by a positive currency effect.

    “Despite a global context that is still volatile, we are confident for the year end. The beauty market remains dynamic. In each Division, our brands are pushing forward with successes such as Maybelline and NYX in the Consumer Products Division, Yves Saint Laurent, Kiehl’s and Urban Decay at L’Oréal Luxe, Redken in the Professional Products Division and La Roche-Posay at Active Cosmetics,” he said.

    “Finally, the acceleration of our digital transformation is making us stronger, in particular with the rapid increase (40 per cent) of our eCommerce sales which should significantly exceed 1 billion euros this year.

    “We are confirming our ambition to outperform once again the beauty market in 2015 and to achieve significant growth in both sales and profits.”

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  • China November Auto Sales Surge 18% as Tax Cut Bolsters Demand

    China November Auto Sales Surge 18% as Tax Cut Bolsters Demand

    An unseasonably cold November and heavy smog prompted Chinese consumers to step up their vehicle purchases, driving automobile sales to their biggest gain in nine months and underlining the challenge the government faces in controlling air pollution.

    SUVs continued to be the most popular choice last month, followed by minivans, while sedan sales fell, according to the China Passenger Car Association. Total retail sales of passenger vehicles rose 18 percent last month to 2.02 million, the fastest increase since February.

    “Adverse weather conditions played a role in November’s strong sales showing,” according to the association in a presentation accompanying the sales statistics. “The unusual cold was followed by off-the-charts smog levels. Those with children are more inclined to buy cars, given the perception that the air inside a vehicle is cleaner.”

    A correlation between auto sales and smog levels adds to the challenge that China faces in cleaning up its dirty air. A surge in car ownership in the past decade has been cited, together with coal-fired power plants, as leading contributors to air pollution, prompting the government to impose vehicle registration quotas in major cities and promote emission-free electric vehicles. Even so, the government slashed a purchase tax in October to protect economic growth after auto demand slowed in the first nine months.

    “It is ironic that the smog is making people more interested to buy cars,” said Jochen Siebert, Shanghai-based managing director at JSC Automotive Consulting. “It’s funny but it’s logic that we probably won’t understand.”

    Air Pollution

    Thick smog covered Beijing and much of north China last month in what the official Xinhua News Agency labeled the worst period of air pollution this year, with levels of the most harmful PM2.5 particulates registering beyond what is considered hazardous to human health.

    The smog has yet to abate. Beijing raised a red alert to warn of the dangers associated with extreme pollution levels Monday, the first time the alarm has been raised to its highest level since introduction of an emergency air-pollution response system in 2013. The warning prompted the city government to order schools and some factories to shut and about half of the cars off the roads.

    Still, some analysts see the tax cut and discounts by automakers as the primary driver for November’s surge in sales. The government in October cut a 10 percent purchase tax by half for vehicles with engines with displacements that are 1.6 liters or smaller.

    “I don’t believe pollution is a factor, as there was pollution in previous years,” said Yale Zhang, Shanghai-based managing director at Autoforesight Shanghai Co. “It’s the purchase tax cuts that made sales go up so much.”

    Great Wall Motor Co., the country’s largest SUV maker, is benefiting from the resurgent demand. Sales of its sport utility vehicles, many of which qualify for the tax cut, surged 25 percent in November from a year earlier.

  • India is now Alibaba Group’s second largest market

    India is now Alibaba Group’s second largest market

    For Alibaba.com, the business-to-business arm of the world’s largest e-retailer Alibaba Group India is the second largest market globally.

    “India is the second most important market for Alibaba globally, next only to China for us,” said Timothy Leung, head of global business development, Alibaba. The business-to-business subsidiary of Alibaba Group launched an online platform to provide Indian small and medium enterprises (SMEs) access to global counterparts.

    “India is at a critical point at present and from here we will see sharp upswing in ecommerce. We are very excited in building this consortium for SMEs,”he added.

    The company has 4.5 million registered users from India, with the country accounting for the second-highest paid users on the platform after China. SMEs in India can also avail assistance in terms of financing, logistics (domestic and cross-border), inspections and certifications, technology and SME trade-linked education on this platform. The Chinese company has partnered with enterprises such as ICICI Bank, Kotak Mahindra Bank, Crisil Rating, Tally, Capital Float, Jeena, SGS and Mypacco to help Indian SMEs expand their business.

    “There are at similarities in our experience in Chinese and India markets in terms of population size, kind of SMEs and also the core path in the ecommerce. We are also looking at our experience in the past in China and match it with what is happening in India,” added Leung.

    Citing similarities with the Chinese market Leung said that in China, B2B side of the business spearheaded the growth for Alibaba. The company through its B2B platform brought buyers and suppliers together and then ventured into supporting different aspects of the ecosystem.

    “That’s what we trying to build here. Other than matching buyers and supplier we are trying to develop the ecosystem,” Leung said.

    On the consumer side of the business also the Chinese major and its financial arm Ant Financial have picked up stakes Indian ecommerce companies Paytm and Snapdeal. Founder Jack Ma was in India three times in one year and also met the prime minister.

    The recently launched initiative, known as SMILE, hopes to connect Indian manufacturers with quality Chinese suppliers on Alibaba.com, provide Indian sellers the trading support and facilitate the global sales of Indian products through the platform.

    Talking about the fast growing ecommerce industry in the country, Leung said that 16 years ago when Alibaba started China went from becoming a no-internet country to one of the most advanced ecommerce ecosystems in the world. India is at much advanced stage and growing at a very fast rate when compared to China of those times.

  • Amazon Fire tablet hits China

    Amazon Fire tablet hits China

    Amazon has launched its first ever tablet in the Chinese market. The online retail giant has made the Amazon Fire tablet available in China. It initially launched in the West back in September with an eye-catching £50 price tag.

    With a price of 499 RMB, the Amazon Fire is pretty much identically priced in this new market.

    Amazon has had to find a new search engine partner for the China launch. Google is unable to operate in the country, so Amazon is partnering with top Chinese search engine Baidu to help power its tablet.

    Baidu will also provide apps through its 91Wireless Android app store, as well as online video through iQiyi – China’s second biggest online video service.

    Amazon doesn’t enjoy anything like the same market position as it enjoys in the US and UK over in China. It’s online retail business is well behind such local giants as Alibaba and JD.com.

    It will be interesting, then, to see how the Amazon Fire tablet fares in China – especially as its low price is nothing special in a market filled with affordable, decent-quality Android tablets.

    Still, the extensive backing of China’s top search engine should at least start the Amazon Fire tablet off on something like a level playing field.

     

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  • Blackmores cuts the ribbon on Bondi store amid mad China scramble

    Blackmores cuts the ribbon on Bondi store amid mad China scramble

    Blackmores chairman Marcus Blackmore admits he had no idea just how much the opening up of China would turbocharge sales of his company’s vitamins, creams and supplements.

    The ASX-listed natural health business has been showered with awards this year while booming sales have seen the stock light up the local sharemarket.

    Around 80 per cent of our products are sold through pharmacy in Australia and they give fantastic advice.

    Christine Holgate, Blackmores

    Shares in Blackmores, of which Mr Blackmore owns 24.5 per cent, have surged from $32 in January to around $189, giving the company a market value in excess of $3 billion.

    “It has been an unbelievable year,” Mr Blackmore told Fairfax Media at the unveiling of the company’s first retail store in Australia.

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    “It is beyond any expectations. We’ve been in China for four years but we had no concept of what China would deliver.”

    At a recent dinner in Shanghai Mr Blackmore met a man from Guangzhou who runs three hospitals treating 20,000 people a day with traditional Chinese medicine.

    He said that China’s long history of using traditional medicines means customers in that market are much easier to win over.

    “Chinese people have a very clear understanding of the philosophical values of natural health,” he said.

    Blackmores floated on the ASX 30 years ago, and for most of that time the company sold 3000 tubs of vitamin E cream a month. In November 2015 the company sold 800,000 tubs of vitamin E cream.

    For the three months to September 30, Blackmores reported a 64.7 per cent increase in sales to $162.2 million and a 161.5 per cent increase in profit to $22.6 million.

    Mr Blackmore said “things come in threes” and the opening of Blackmore’s first Australian retail store at Bondi Junction Westfield caps off the trifecta.

    The other two things brightening the vitamin king’s mood happened last week.

    Last Thursday Blackmores boss Christine Holgate was named chief executive of the year by CEO Magazine, and on Friday federal trade minister Andrew Robb awarded Blackmores the health and biotechnology exporter of the year award.

    New store boosts connection

    Ms Holgate said the Bondi store is not about building a retail presence across Australia but is intended to help connect with Blackmores customers.

    “We are not going to become retailers, we partner with pharmacy. Around 80 per cent of our products are sold through pharmacy in Australia and they give fantastic advice,” she said.

    “What this allows to do is to bring our products and our therapies much closer to the consumer and enables us to listen to the consumer and better understand their health needs.”

    While Ms Holgate is trying to deepen ties with her local customers, the big issue she has is satisfying voracious Asian consumers.

    In the past six months Blackmores has increased it production capacity by 60 per cent. The company has hired 100 extra people but has now run out of office space.

    In November, which Mr Blackmore believes was “probably a record month”, Blackmores produced 2.7 million bottles of product. It will have capacity to produce 4.2 million bottles a month in April next year.

    “The things that keep me awake at night are: availability of raw materials, availability of raw materials, and availability of raw materials,” Ms Holgate said.

    In some product lines there is a natural brake on boosting production immediately. For example, evening primrose oil, a market dominated by Blackmores, comes from a plant harvested once a year.

    In other cases Blackmores is constrained by its strict quality criteria.

    Ms Holgate is loath to put the brand name at risk by compromising even slightly on quality.

    “I’m sure I could give you a lot more sales, but not at the quality levels we want,” she said.

    Last month Blackmores inked a joint-venture deal with dairy group Bega Cheese to supply infant formula and other nutritional products to Asia, opening a range of new opportunities for both companies.

    Ms Holgate said the company actually uses a dairy rival, New Zealand’s Fonterra, as a case study for an internal quality workshop.

    Fonterra has been embroiled in a number of dairy food scandals including the 2009 melamine crisis in China and the false botulism alert, which prompted a massive product recall, in 2013.

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