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Tag: China

  • China on track for a more sustainable economic expansion

    China on track for a more sustainable economic expansion

    Investors world-over fear that China could record another worse-than-expected slowdown this year. Over the past two decades, annual GDP growth in China has averaged around an impressive 10 percent, underpinned mostly by investments, as well as exports. The IMF expects China to account for almost 18 per cent of world economic activity in 2016. Hence a bump in China’s economy can definitely not be ignored. A drop in China’s growth rate from an expansion of more than 10 per cent in 2010 to 6.3 per cent expected this year could directly knock-off about 0.75 percentage points off the global growth rate.

    The recent week’s turmoil in China has hit both stocks and currency markets, sending shock-waves through global financial markets. Stock indexes around the world have seen massive sell-offs, global markets have fallen by 7.1% since January 1st, their worst ever start to a year. The instability brings back to light China’s stock market crash and a surprise Yuan devaluation by Beijing in August 2015 which sparked a global rout, and wiped out trillions of U.S. dollars in value from Chinese equities.

    Some of China’s leading economic indicators, such as its manufacturing index and factory output, are indeed slowing. This is a rational slowdown which would deliver a healthier and more sustainable growth path. The emerging markets and the rest of the world may just have to the deal with the “new normal” of global growth as the Asian giant seeks a slower, but more sustainable, economic expansion.

    Markets will keep focus on China data-deluge, including the GDP, industrial production and retail sales due tomorrow. Expectations are for data to remain weak. Barclays forecasts Q4 GDP growth data to have slowed further to 6.6 % y/y (consensus: 6.9%) from 6.9% in Q3. Industrial production is likely to have moderated, (Barclays: +5.9%y/y; consensus: 6.0%), retail sales (+11%y/y) and fixed asset investment (+10.1%y/y).

    PBoC has strongly signaled a desire for near-term stability by keeping its USD/CNY fixings stable at about 6.56 over the past week. On Monday, the PBoC said they will start implementing RRR to some banks involved in the offshore yuan market, in a move that seemed intended to soak up additional liquidity. The spot market opened at 6.5800 per dollar on Monday and was trading at 6.5792 in early trade, 48 pips below the previous close and 0.31 percent away from the midpoint, which was set at 6.559. The offshore yuan was trading -0.18 percent away from the onshore spot at 6.591 per dollar, firmer than the previous day’s close of 6.6165.

     

  • Bossini profit decimated

    Bossini profit decimated

    Fast fashion retailer Bossini has warned shareholders its profit for the six months to December 31 will be down by between 80 and 90 per cent.

    Based on the comparable trading period to December 31, 2014, when Bossini reported a profit  of HK$665 million, that suggests a profit in the range of $66.5 million to $133 million.

    In a profit warning issued to the Hong Kong stock exchange, the company says the profit plunge “was mainly caused by the significant decrease in revenue and gross profit attributable to (i) less visitors and strong Hong Kong dollar which led to less consumption from them in Hong Kong and Macau, and (ii) weak local consumer sentiment, unseasonal warm winter weather and intensified competition in several core markets where the group operates”.

    “As the company is still in the course of preparing and finalising its interim results for the six months… the information… is only based on a preliminary assessment on the information currently available.”

    The full financial details, including the final Bossini profit, will be revealed in late February.

    While Bossini is not the first Hong Kong based retailer to warn of or report profit declines, most of the others are operating in the luxury end of the market, where sales of watches, jewellery and luxury fashion goods and apparel are down by up to 20 per cent year on year.

    But Bossini has no exposure to that market – its business is based on selling t-shirts and casual clothing at low price points.

    Data from GfK shows the number of Mainland Chinese visitors to Hong Kong in 2015 – up until November, at least – rose by 37 per cent. As previosuly reported by Inside Retail Asia, the issue for Hong Kong retailers is not that there are fewer tourists visiting the city – but there are fewer wealthy tourists visiting the city. So Bossini, and other retailers targeting the lower end of the market, are not managing to capture the imagination of the more profilgate shoppers now coming to the territory.

    Even more puzzling is that Bossini has been one of the few retail brands to stand out over the last 12 to 18 months as bucking the broader retail trend.

    In September, the company revealed its results for the year to June 30, reporting a mere one per cent decline in sales to HK$2.523 billion, and a three per cent decline in gross profit to HK$1.264 billion with gross margin down one per cent to 50 per cent. Profit attributable to shareholders fell nine per cent.

    “During the fiscal year 2014/15, despite facing challenging retail conditions in Hong Kong and Macau, its segmental business, which includes the export franchising operations, registered record-high sales with flat same-store sales growth for the directly managed stores,” the company said at the time.

    “The operations in mainland China, Taiwan and Singapore all experienced improvements in segment results, resulting from the continuously improving shop productivity and stringent cost control measures. Mainland China segment achieved six per cent same-store sales growth and also recorded nine consecutive quarters of positive same-store gross profit growth. Taiwan segment saw a same-store sales growth of seven per cent, representing seven consecutive quarters of positive same-store sales growth.”

    In the half year to December 31, 2014, Bossini reported a revenue increase of four per cent year-on-year to HK$1,319 million (then US$170,056,190) and gross profit for the period under review was HK$665 million (then US$85,737,200).

  • Tiffany struggles as Mainlanders baulk

    Tiffany struggles as Mainlanders baulk

    If Tiffany was hoping for some holiday respite following a year of negative numbers it will be sorely disappointed by its latest results.

    Indeed, the pace of decline has actually accelerated since the third quarter, which covered the three months up until the end of October. Given the significant opportunity that the holiday season affords this is a worrying outcome.

    Reported in US dollars, worldwide net sales of $961 million were 6 per cent lower than the prior year.

    Despite some solid growth in China and Japan – the latter coming off weak comparatives – the poor numbers out of Hong Kong, which has suffered from a decline in visitors from the Chinese mainland, pulled down the regional result.

    In the Asia-Pacific region, on a constant-exchange-rate basis total sales and comparable store sales declined 6 per cent and 9 per cent, respectively. A continuation of strong sales growth in China was more than offset by significant weakness in Hong Kong and Singapore, with varying performance in other markets. Reported in US dollars, total sales of $187 million were 11 per cent below the prior year.

    In Japan, on a constant-exchange-rate basis total sales increased 12 per cent and comparable store sales rose 10 per cent, reflecting higher sales to local customers and foreign tourists. Reported in US dollars, total sales rose 9 per cent to $123 million.

    Globally, as it did throughout 2015, Tiffany has pinned the blame for its sales declines on the strong dollar. There is truth in such an assertion, although it is not the whole truth. This is evidenced by the fact that even on a constant currency basis worldwide sales still fell by 3 per cent in total and by 5 per cent in comparable terms. Clearly, there are forces other than fluctuating exchange rates at play.

    The Americas is a case in point. Although the magnitude of the sales decline in the region was broadly similar to that posted last quarter, it still represents a marked deterioration in trade. The claim that tourist spending on jewellery in key locations like New York was down thanks to an unfavorable exchange rate has some validity, even if it sits somewhat uncomfortably with MasterCard data that shows 2015 was a record year for international visitor spending in the Big Apple. However, sales were not just down at Tiffany’s stores in tourist destinations, they were down across most of the US.

    One of the factors at play, at least in the US, is a shift in holiday purchasing. Prior to the economic downturn of 2008 the period between Thanksgiving and Christmas was key for jewellery buying. Today, while it remains the most important single period for purchasing, it accounts for a much smaller share of annual sales than it once did. Jewellery is no longer at the top of the Christmas list. For a brand like Tiffany, where lavish gifting is an important driver of buying, such a trend is distinctly unhelpful.

    As important as this factor may be, it is exacerbated by the more competitive environment for jewellery and the rise of other brands. Against this backdrop Tiffany has lost some of its relevance, especially to more moderate spending shoppers. The company has tried to arrest this development with new collections such as Tiffany T, but the results to date have been lacklustre.

    These brand issues are somewhat less relevant to the Asian markets where Tiffany is still seen as a hallmark of fine jewellery.

    The consequence of a weak holiday period is that final quarter profits will now come in lower than previous guidance.

    Tiffany is ending its fiscal year with very little sparkle.

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  • Netflix on brink of being global TV powerhouse

    Netflix on brink of being global TV powerhouse

    Netflix has added a record 5.59 million subscribers across the fourth and final quarter of its fiscal year, putting it within touching distance of 75 million subscribers.

    Such impressive growth is, primarily, the result of a global rollout that has seen international subscriptions almost double over the past two years.

    That global drive has, however, taken its toll on the company’s bottom line. Associated development, marketing and expansion costs have taken a chunk out of profits, pushing the international segment to a $333 million loss for the full fiscal year –  one of the worst ever performances. This, in turn, deflated final year net income by 54 per cent over the prior year.

    Despite the lower profit outcome, we concur with Netflix’s view that such a deterioration should be seen as an investment that will, over the longer term, pay dividends. The fact that the company now has a global footprint in all countries bar China is a significant achievement, and one that provides it with enormous potential for growth.

    Such a global focus is especially necessary given the slowdown in Netflix’s home market, where subscription growth in the fourth quarter was at its lowest for several years. This is hardly surprising given the company’s past success and its relative maturity, but it does underline the necessity to look firmly beyond the shores of the US for future growth.

    Despite the slowdown, the US operation remains the prime driver of profit and for the first time ever made a contribution of over a billion for the full fiscal year. While it is unlikely that this profit will be diluted in the near term, increased competition in the market does mean Netflix will have to fight increasingly hard to maintain its share.

    On this front there are three reasons to be optimistic. The first is the growing trend among consumers to ‘cut the cable’ and stop subscribing to cable TV packages; this represents a significant saving that can more than cover the costs of Netflix and other streaming services.

    The second is that the threat from Amazon is, in our view, overplayed. Many consumers will happily subscribe to both Amazon and Netflix because the former is seen as a more rounded service with a range of benefits, rather than as just another streaming service.

    The third factor is the high quality content development in which Netflix is engaging. Series like House of Cards and Making a Murderer are key to persuading existing customers to maintain their subscriptions and new customers to buy into the service.

    If Netflix can hold its US position and grow its international operations into profitable territory it will become a truly global powerhouse of the modern age of television.

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  • 100th store for Toys R Us China

    100th store for Toys R Us China

    Toy and baby products retailer Toys R Us has opened its 100th store in China.

    Ten years after entering the market, the US-based chain has its milestone outlet in the APM Shopping Mall in Wang Fu Jing, Beijing.

    During the past year, Toys R Us China has opened 27 stores across the nation.

    “International expansion, particularly throughout China and Southeast Asia, continues to be an important part of our long-term growth strategy,” says chairman/CEO Dave Brandon, who was at the Beijing opening ceremony. He notes an increasing demand in this market for quality children’s products and family entertainment experiences.

    Opening its first store in China in 2006, the company now has outlets in 44 cities, and plans to open another 30 stores this year.

    As part of the grand opening in Beijing, families were invited to meet such popular mascots as Balala Emma, Barbie, Geoffrey the Giraffe, Ninjago Kai and Ultraman. The store showcases the latest in “retailtainment”, digital technology and customer interaction. Customers can use a 70in. digital screen at the store entrance to browse through promotional items, make purchases, take “selfies” with special photo frames, play games and join the company’s Star Card loyalty program.

    Beijing’s store also features exclusive products not available elsewhere in the market, and throughout the APM mall are several new features sponsored by Toys R Us.

    Founded more than 65 years ago with headquarters in Wayne, New Jersey, Toys R Us formed a joint venture in 2011 with its licence partner in China and Southeast Asia, Fung Retailing. It took a 70 per cent interest in Fung Retailing’s stores in Brunei, China, Hong Kong, Malaysia, Singapore, Taiwan and Thailand.

    Toys R Us also has a T-mall Store in China, launching its eCommerce website in 2012. It also has a mobile-optimised website in China. Toys R Us has 1 million WeChat followers, with 80 per cent of them joining the Star Card membership program.

    As well as 863 outlets in the US and Puerto Rico, the company has more than 755 international stores and more than 250 licensed stores in 38 countries. In Asia, there are more than 400 stores in Brunei, Hong Kong, Japan, Malaysia, Singapore, Thailand, Taiwan as well as mainland China. There are also licensed stores in Korea, Macau and The Philippines.

  • Chengdu IFS challenge to Hong Kong

    Chengdu IFS challenge to Hong Kong

    To mark its second anniversary, Chengdu IFS has launched the “All In Here – World Fashion Tour” to introduce the south-west China city’s latest initiative to be part of the global fashion scene – and a direct challenge to Hong Kong’s Harbour City on Canton Rd.

    A key event of the Jinjiang Shopping Festival, the tour was organised by the Chengdu municipal government and Jinjiang district government in a move toward transforming the city into an international travel and shopping destination. It has been supported by trade representatives from France, Italy and Switzerland as well as Elle magazine.

    Chengdu IFS opened in 2014, and with its architecture, brand collections and international-standard management has become a landmark in the city. As the first major world-class, high-end mixed development in urban Chengdu, it brings together about 300 top brands, 90 of which are new to the region. Multi-level flagship stores featuring international brands line Hongxing Road as part of the 530 metre. ‘International Fashion Walk’”.

    Chengdu’s city fathers announced an action plan in July to build Chengdu into an international shoppers’ paradise as a key element of its development as a new first-tier city. Officiating at the launch ceremony of the “All In Here – World Fashion Tour” were Chengu Business Committee deputy-director Wen Feng, Jinjiang district deputy-head Wu Wenhui, Wharf Holdings vice-chairman Doreen Lee Yuk Fong and Wharf China Estates GM Christina Hau.

    Speakers also included Italy’s consul-general Sergio Maffettone, France’s consul-general Olivier Vaysset, Milan’s general director of creative programs Alessandro Pollio Salimbeni, Swiss Chinese Chamber of Commerce GM Rolf Studer, and Elle China publisher Chris Hu.

    Taking on a carnival atmosphere, the opening brought together art, fashion, tradition and style with performances including a mid-air fashion show, a parade of orchestral musicians and a VIP gala dinner at the Niccolo by Marco Polo. Guests at the dinner were surprised when Hong Kong artiste Carina Lau wore her own Anirac creations to present the brand’s first-ever catwalk show.

    Since its “I Am Here” promotion in 2014, Chengdu IFS has increased its turnover and traffic flow by 50 per cent. The number of VIP members doubles last year, with sales up 50 per cent. As the first of five IFS projects in which Wharf Holdings has invested RMB 46 billion (US$6.9 billion), Chengdu IFS has set a solid foundation for the development of Chongqing IFS, scheduled to open next year as a boutique version of Harbour City, and also Changsha IFS, which will be the largest of the group.

    Featuring panda sculptures as an external feature, Chengdu IFS has become a benchmark for urban fashion as well as a favourite spot for young people to meet.

  • China’s overseas luxury spending shifting to the web

    China’s overseas luxury spending shifting to the web

    Changes in spending on luxury goods by mainland Chinese consumers might dictate a revamp in how luxury retailers do business in that market. More shoppers than ever are buying overseas because items are more expensive in China, according to Bain’s 2015 China Luxury Market Study.

    Overall luxury spending by Chinese consumers in 2015 fell 2% to 113 billion yuan ($17.2 billion), driven by falling sales of watches, men’s wear and leather goods. Overseas luxury purchases grew 10%, especially in Japan, where their spending increased more than 200%, but also in South Korea, Europe and Australia, thanks to favorable exchange rates and competitive pricing. Meanwhile, luxury spending of mainland Chinese in Hong Kong and Macau fell 25%.

    Because of crackdowns by the Chinese government designed to tighten imports and bring spending back, including new rules discouraging the use of personal shoppers, or “Daigou” who make duty-free purchases overseas for their Chinese customers, more Chinese are buying their luxury goods via websites and mobile sites instead. “Buying overseas has been a trend for years, but destinations have changed,” Bain partner and report author Bruno Lannes said in a statement.

    In 2014 and 2015, brands with strong fashion heritage and track record of original designs did better in the Chinese market. And, while transitions in China’s economy are causing some turmoil in markets and worry among investors, the general environment for luxury retailers will remain more or less the same—though the still-rising middle class will continue to become more sophisticated about luxury brands, Bain says. Global pricing will become more important, the report notes.

    Luxury brands should strengthen digital platform building and digital content creation, with an emphasis on localization to reflect local market preferences, Bain says. Nearly 80% of survey respondents said they get their luxury brand information from the internet or apps, and 60% said social media sites Weibo and WeChat are their source for that information. That’s why brands on average spend 35%—and growing—of their marketing budget on digital.

    Luxury brands must also emphasize youth and fashion to turn the heads of the next generation of luxury customers in China, Bain said. This year and forward, there will be even more of a focus on “exclusivity” in product design and store footprint, according to the report.

    Some changes are already underway. Luxury retailers in China, for example, have begun streamlining their approach to brick-and-mortar in the country, with a greater focus on fewer, larger and better located stores. Many brands have realized the need to regain a sense of exclusivity, which was marred by too many stores, according to the report.

    “Despite persistent macro, economic and industry challenges in China, all hope is not lost for luxury brands,” said Lannes. “There are plenty of growth opportunities for those with more exclusive and fashion collections, digital platform engagement and digital content creation, as well as with pricing that encourages Chinese consumers to spend locally.”

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  • Vegetables prices increases threefold in China

    Vegetables prices increases threefold in China

    Severe cold weather affecting in Southern China throughout the weekend as residents are racing to stock up on the essential foods and vegetables so they’ll have the capacity to stay at home in the following couple of days, causing some chaos to local authorities. Pictures from stores across the nation appeared in social media that shows big crowd and empty shelves.

    Ahead of snowmageddon, the price of essentials tripled at supermarket stores.  In some part of the country the cost of pork has surged from 14 yuan for each 600 grams to 19 yuan, while the costs of vegetables have tripled from 5 yuan for every 500 grams to 15 yuan.

    The Local Authorities called residents to relax and stop hoarding. But to little benefit with the coming days forecasted to be the coldest winter in 35 years with the temperature in Shanghai’s urban territories will plunged to minus 7 while it could get as low as less 10 in rural regions.

    The National Meteorological Center forecasts that temperatures will soon dive by as much as 13 degrees across the nation. Even Hainan isn’t getting away from this cool wave with temperatures anticipated that would go down to a comfortable 13 degrees.

    As of now, the frosty climate is bringing about a few issues in Shanghai where two water channels have braked and many long- distance transports have been canceled. Shanghai occupants are reminded to store some water in basins and wrap up outside water channels with fabric.

  • China’s LeEco to enter Indian market with flagship Le Max and Le 1s smartphones

    China’s LeEco to enter Indian market with flagship Le Max and Le 1s smartphones

    LeEco, the Chinese entertainment giant formerly known as Letv, is bidding to become a top brand in India’s fast-growing smartphone market with the release of two handsets next month through leading online retail partner Flipkart.

    Its 6.3-inch flagship Le Max will go on sale on February 16, two weeks after the 5.5-inch mid-range Le 1s becomes available to whet consumers’ appetites. LeEco said that due to limited supply it will initially provide just 60,000 units of the Le 1s. Both will only be available online.

    “India is our new destination, our top priority and new home to all our smart products,” said Mok Tsui-tin, chief executive for LeEco Asia-Pacific, at a launch event in Gurgaon in Haryana state earlier this week.

    Addressing a crowd of about 1,000 in the city, located just south of New Delhi, Mok said India has the largest young population in the world, which will drive the switch from traditional feature phones to smartphones.

    Atul Jain, chief operating officer of smart electronics business for LeEco India, presented the two handsets to the enthusiastic crowd.

    Jain is a former senior vice president at Samsung Electronics’ South West Asia regional headquarters.

    Both phones will be sold exclusively at leading online retailer Flipkart, which it claimed to be the largest online retailer in India.

    “Every one in five smartphones sold in India today is from Flipkart,” said Ankit Nagori, chief business officer of Flipkart.

    LeEco announced deals with Eros International, a major Indian film production and distribution company that posted annual revenue of more than US$230 million in 2014, to run its content on LeEco’s website.

    It also partnered with US-based streaming content provider YuppTV, which mainly provides local Indian content.

    LeEco said content from both companies would be available during the second quarter of 2016.

    Le Max and Le 1s were both released in China in 2015. LeEco said it sells smartphones at prices below cost, a tactic to attract more subscribers to its streaming service.

    The retail prices in India are close to those in China. The Le Max will cost 32,999 rupees (US$485) for a model with 64GB memory and 35,999 rupess for the 128GB version. The Le 1s will retail for 10,999 rupees.

    The company will also build a research centre in Bangalore, India’s technology centre, later this year. Mok said LeEco plans to recruit around 1,000 local staff to support the localization of LeEco’s product.

    “As our businesses and operations are landing in the country, [this] will require a large number of talented staff,” said Mok.

    LeEco will also bring its smart television to India this year along with a wide array of products such as a virtual reality headset, smart bicycle and other accessories , according to its spokesperson.

    LeEco is one of many Chinese smartphone makers entering the emerging South Asian market and is likely to face competition with its peers. China’s computer maker Lenovo and popular smartphone maker Xiaomi are already top brands in India.

    According to Flipkart, Motorola’s Moto G is the most popular smartphone on the shopping site. The brand is owned by China’s Lenovo Group. Xiaomi’s Redmi Prime and Lenovo brand’s K3 note occupy second and third place.

    LeEco runs a major streaming website in China and also sells smartphones and TVs. It earned nearly 4 billion yuan (US$607.7 million) in the third quarter of 2015, representing more than 100 per cent growth from the same period last year.

    The company announced this month another partnership with electric car start-up Faraday Future, which is building a US$10 billion factory in the US, its home market.

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  • Where Chinese tourists are spending their shopping dollar

    Where Chinese tourists are spending their shopping dollar

    Mainland China has become one of the main global suppliers of tourists, and that has been paying dividends for retailers globally.

    But as the Chinese are roaming further afield, Hong Kong and Macau retails have seen their sales dropping.

    A fresh analysis from international market research company GFK shows China had 109 million outbound tourists last year… and they spent US$229 billion in retail stores. These statistics consolidate China as one of the main global sources of tourists, both in terms of number of trips and money spent while travelling internationally.

    “At the same time, there have been profound changes in the behaviour of the typical Chinese traveller, with millennials firmly established as the core drivers of spending,” says GFK.

    Because of its cultural similarity, accessibility and lower travel costs, Hong Hong was the preferred destination for Chinese tourists up until 2013. Shopping was a big motivation for visiting. However, since 2014, says the report, more Chinese tourists have been opting for other destinations offering historical and cultural experiences – as well as shopping.

    Air travel and accommodation statistics show that at the start of November, the top five favourite destinations for Chinese travellers were South Korea (visits up 112 per cent since 2011), Thailand (up 263 per cent), Japan (up 157 per cent) and Taiwan (up 54 per cent. Surprisingly, given its loss of retail sales, Hong Kong had 37 per cent more Chinese visitors. This is explained by the new emerging middle class – consumers who do not have enough disposable income to travel further abroad, nor to spend on high-end purchases.

    Europe is the most popular destination outside Asia for Chinese tourists, with 97 per cent more visits in the past four years. This is followed by North America (up 151 per cent) and the Middle East (up 177 per cent).

    “China’s tourists remain strategic to Hong Kong and its businesses, as other destinations are jumping ahead in winning their favour,” says GFK global head of travel and hospitality Laurens van den Oever.

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  • Alibaba Lunar New Year retail blitz planned

    Alibaba Lunar New Year retail blitz planned

    Alibaba plans to piggyback on the biggest celebration on the Chinese calendar – Lunar New Year – in the hopes of establishing another e-shopping tradition.

    Set to start in mid-January in the run-up to Chinese New Year, which falls on February 8 this year, theAlibaba Lunar New Year blitz – dubbed Ali Chinese New Year Shopping Festival – will have a different (and arguably less feverish) feel to it compared with the sprawling and competitive 11.11 sale, according to Alibaba.

    The company says its goal for the event is to use eCommerce to encourage two-way trade between China’s urban and rural areas, featuring discounted holiday products for the home, gifts, clothing and particularly food and agricultural products, in keeping with the spirit of a time when family members come together once a year for a celebratory feast.

    “Chinese New Year is the most significant celebration through the year and is a time to maintain traditions,” said Alibaba Group CEO Daniel Zhang at a recent kick-off event.

    By hosting the sale, “we aim to enable rural customers to access an extensive range of New Year goods from home and abroad, while making agriculture products from rural China more available among urban customers.”

    To that end, the event will be promoted heavily by Rural Taobao, an arm of Alibaba Group which focuses on rural eCommerce, as well as main Alibaba shopping marketplaces Taobao Marketplace,Tmall.com and Juhuasuan. During the sale, Alibaba will for the first time bring more than 500 premium overseas brands to China’s hinterlands via Rural Taobao, which facilitates online shopping and home delivery through more than 10,000 rural service centers in villages across China. Rural customers in some villages will be able to buy foods from 25 countries, including American crawfish, Alaska black cod, Russian king crab, Canadian lobster, Australian beefsteak, French wine and British tea.

    Meanwhile, Alibaba’s cross-border shopping channel, Tmall Global, will work with eight country pavilions (online shops offering national specialty products) and eight major supermarkets, department stores and duty-free shops to provide quality goods from around the world. International retailers including Macy’s, Costco, Metro and King Power will join the promotion.

    Alibaba Group executive chairman Jack Ma said the festival is geared not only to offer rural Chinese a chance to buy merchandise that is unavailable in their local shops. It is also meant to boost regional economies by helping farmers generate more income by selling their produce directly to consumers over the Internet.

    “The 11.11 Shopping Festival is designed for netizens,” Ma explained, “while the Chinese New Year Shopping Festival is created for farmers.”

    During the sale, Alibaba will promote local specialties from farmlands and pastures to urban online shoppers looking for healthy foods. Juhuasuan, Alibaba’s flash sales platform, has stored 150 tons of Jinhua ham, 100 tons of beef from Inner Mongolia, four million organic eggs, 10 million packs of Cantonese sausages, 50,000 kilograms of pork from the Dabie Mountains, and 30,000 grain-fed hens from Shuanglian in Hubei province.

    In addition to facilitating rural-urban commerce, Alibaba is using the sale to showcase innovations in O2O eCommerce and financial technology. For example, Rural Taobao developed a mobile app so that migrant workers unable to return home for the holiday can use their smartphones to purchase gifts for faraway parents and loved ones.

    Tmall Global recently partnered with the Tianjin Free-trade Zone to open a brick-and-mortar store near Beijing where customers can check out a wide range of products, from snacks to cosmetics, available from overseas merchants and order them by scanning QR codes using their phones. Built to facilitate cross-border eCommerce, the “Alibaba experience center” will offer special discounts during the CNY sale.

    Alibaba e-payments affiliate Alipay is again putting a high-tech spin on the Chinese New Year practice of giving red envelopes stuffed with cash to friends and family. Alipay this year is the exclusive partner of China’s Spring Festival Gala, an annual TV program hosted by CCTV that is watched by millions. During the show, viewers armed with the Alipay app will be able to receive virtual red packets distributed by Alipay and participating merchants. Alipay said it has landed more than 100 corporate sponsors, including taxi-hailing firm Didi and handset maker Huawei.

    Advance sales for the Ali Chinese New Year Shopping Festival are set to start January 14. The actual shopping festival will begin January 17 and will last for five days.

    Other Festival initiatives include:

    • Alibaba in cooperation with local governments has chartered trains to provide free transportation to migrant workers to return home for the holiday. The trains will run from Guangzhou to Guiyang and from Shanghai to Xi’an.
    • Alibaba will organize free Chinese opera performances in rural communities.
    • The company will provide assistance to 13,000 rural service center managers so they can host 10,000 New Year’s Eve dinners for the elderly, left-behind children and disabled people.
    • Taobao Marketplace is featuring “time-honored brands” that are widely recognized in China for their connection to Chinese New Year and staying power through generations. Mobile Taobao plans to launch related location-based services to help users find nearby stores carrying these brands.
    • Alitrip, Alibaba’s online travel service platform, has designed several tour routes along which tourists can experience folk customs such as floating lotus-shaped lanterns on rivers in the city of Lijiang in Yunnan Province.
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  • Lewis Road Creamery eyes China as potential export market

    Lewis Road Creamery eyes China as potential export market

    Lewis Road Creamery will make a final decision this year whether to export fresh organic milk into China’s Shanghai.

    The premium dairy brand company is also planning to release a number of product extensions and has already moved beyond dairy products into baked goods.

    Lewis Road had 340% growth in retail sales to $40 million of its butter, cream, organic milk, and flavoured milk products during 2015 – the year founder Peter Cullinane calls “the chocolate milk frenzy.”

    His big decisions this year include whether to get serious about exporting and how far to extend the product range beyond dairy. For the past couple of months the company has been trialling sales of Lewis Road Bakery premium kibbled grain bread in 12 Auckland retail outlets.

    Mr Cullinane says the company is exporting small amounts of butter to Australia and has been investigating a wider move, in particular fresh organic milk to Shanghai. Other markets under consideration include Australia, the UK, and the US, though he thinks the latter may be beyond the company’s current reach.

    One of the advantages of being a small operator under a majority owner is the company he founded in 2011 can make decisions more quickly than some of its larger rivals, Mr Cullinane says. “When we do [export], we will do it quickly.”

    But he thinks New Zealand companies are too focused on export, forgetting the local market.

    “We will export when we are doing New Zealand really well,” he says.

    The company’s phenomenal growth in chocolate milk sales, which on launch in 2014 saw queues in supermarkets and security guards overseeing allocation, has abated from 48% between the last quarter of 2014 and the first quarter of 2015 to more normal levels.

    “It was a once-in-a-blue-moon phenomenon,” he says. “But it was an extraordinary boost to the business.”

    Two million litres of chocolate milk were sold last year, with retail sales still a respectable $5.5 million in the fourth quarter of 2015. Discounted bottles have been spotted on sale of late, which Mr Cullinane attributes to an ordering glitch.

    Vanilla and coffee flavours were introduced when it extended flavoured milk into the South Island in October and he says other flavours will be added this year: think strawberry with real fruit.

    Other dairy brand extensions are planned in coming months, which Mr Cullinane prefers to keep under wraps for now but the cream range will have sour cream and crème fraiche added at some point.

    The company’s organic milk sales continue to grow despite increased competition, with Goodman Fielder releasing its own range of three premium organic milks under the Puhoi Valley brand last year and Fonterra launching Anchor Organic last May.

    At the time, Mr Cullinane labelled Goodman’s move “pathetic plagiarism” but has now mellowed to “all competition is good.”

    “The impact it will have is more a slowing down of growth,” he says. “It took us a long while to get well-established and others will struggle to catch up. We have a good head start.”

    Lewis Road holds half of the domestic organic dairy market, which has seen significant growth in the past two years, providing the bulk of increases in fresh milk sales.

    Problems with lack of supply during the dry season mid-2014 were avoided last year following the setting up of the Organic Dairy Hub farmer collective, which has long-term supply contracts at a premium price with the brand’s processor, Green Valley Dairies.

    Mr Cullinane says two key things he was mulling this year were “bringing the farmers market to the supermarket” with fresh premium products such as bread and honey, and meeting “customer demand for products that have more and better ingredients put back in.”

    He received a staff gift this Christmas – a bell that will sit on his desk. It’s an idea originating from the Guinness brewery company where staff ring the bell when things start going off track, he says.

    “Some products we will get wrong…that’s the price of experimentation, you just have to do it and hopefully nothing will be too wrong.”

    (BusinessDesk)

  • Mihaibao Brings Luxury Brands to China

    Mihaibao Brings Luxury Brands to China

    Luxury retail tech start-up Mihaibao is looking to disrupt how Chinese consumers shop for luxury goods and how Western brands reach Chinese markets. And investors are certainly taking notice.

    Although still in a beta testing phase, the company is making waves due in part to the big-name participants in its $1.6 million seed round. Investors at this stage include Alibaba angel investor and former CTO John Wu, the UK Government and Royal Family, PayPal and more.

    “Chinese people are obsessed with Western luxury goods,” said Mihaibao co-founder Jacqueline Lam. “But on international websites, Chinese customers are dealing with language barriers, multiple shipping fees, and foreign currencies and payments.”

    Mihaibao co-founder Jacqueline Lam.Mihaibao co-founder Jacqueline Lam.

    Furthermore, while Western brands are eager to tap the Chinese market, “many do not understand the Chinese culture, shopping behaviour and trends, making China a high-risk investment,” said Lam.

    While many luxury brands have launched bricks-and-mortar stores in China, the taxes and mark-ups are high and the ranges often limited. Many such stores have been forced to slash prices, according to Bloomberg, due in part to online competition. China also has a massive ‘grey market’ for luxury goods fuelled by shopping agents who make a living moving Western luxury goods into China and reselling them.

    All of this means that there is massive demand in China for luxury goods but no real simple or satisfactory way of connecting consumers with the brands they want. And that is what Lam and Mihaibao are trying to do.

    Mihaibao is essentially a tech company. It has partnered with more than 200 Western luxury brands — including the likes of Chanel, Dolce & Gabbana, Gucci, Jimmy Choo, Valentino and many more — which are featured on the Mihaibao website. Shoppers pick what they want from the website and Mihaibao calculates prices and shipping costs via live currency conversion and deals with any tax or customs issues, for a percentage of the sale.

    As a tech company, Mihaibao is also focusing on its data capabilities, which it’s using to analyse key trends in the Chinese market to help its brands bring the right products to Chinese consumers.

    “Not only can we tailor the Chinese shopper’s experience but we can also help brands target the people that have created demand for a particular product — we know how the Chinese shopper thinks,” Lam told CNN.

    Together with streamlining the shopping process for Chinese consumers, Mihaibao is also working to establish consumer trust with buying luxury Western goods online. Many consumers have trust issues with major marketplaces, like China’s Tmall, which often sell counterfeit luxury goods side-by-side with the real thing.

    Whether Mihaibao can bridge the gap between Western luxury brands and eager Chinese consumers remains to be seen. But this young start-up’s powerful backers are certainly making people sit up and take notice.

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  • Sales lose sparkle for Luk Fook

    Sales lose sparkle for Luk Fook

    In the face of a continuing sluggish market, Hong Kong-based Luk Fook Jewellery posted a 25 per cent drop in overall sales in the three months to December 31 against the previous two quarters.

    Its same-store sales growth (SSSG) for mainland China was down 10 per cent, despite its gemset jewellery products gaining 2 per cent grown. The SSSG of the Hong Kong and Macau market dropped 26 per cent.

    As at December 31, the group had 159 self-managed shops – 96 in China, 47 in Hong Kong, 10 in Macau and six overseas, one being established in Toronto, Canada, in the current quarter. There were 1260 licensed shops in China with one in Korea. Altogether, there were 1420 Luk Fook shops worldwide, including 1356 in China and outlets in Australia and the US.

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  • Starbucks China plans massive expansion

    Starbucks China plans massive expansion

    Starbucks China is planning to open a further 1400 cafes by 2019, the company has revealed.

    Currently, the US headquartered coffee giant has about 2000 locations in 100 Chinese cities – and it uses Alibaba’s Tmall to sell giftcards and coupons to Chinese customers, at the same time boosting its brandawareness and appeal.

    Starbucks said its Tmall Global virtual store collected 300,000 registered fans in the past month and launched a “social gifting” feature that allows users to send those cards and coupons to friends and family through the Tmall platform. On top of its digital push, Starbucks said it was aiming to boost its overall store count to 3400 by 2019.

    “As Starbucks’ second largest and fastest-growing market globally, China represents the most important and exciting opportunity ahead of us,” Schultz said.

    The news followed a milestone meeting between Starbucks CEO Howard Schultz and Alibaba founder Jack Ma who said afterwards they sought to “redefine the roles and responsibilities of a for-profit public company, one that invests in its people, giving back to the local communities in meaningful ways, and creating unique developmental opportunities for the youths of today.”

    Alibaba and Starbucks share a similar vision, according to the two businessmen: building a company that’s doing more than just generating profits.

    During a speech in Chengdu at an annual Starbucks event celebrating the company’s Chinese employees, Ma emphasised the point by highlighting the important role that young people play at both companies. At Alibaba, the average employee age is 26, while at Starbucks it’s 26.

    “Alibaba hopes to work together with Starbucks to create even more opportunities to develop Chinese youth because they are our future,” Ma said at the Starbucks China Partner-Family Forum, sharing the stage with famed Starbucks CEO Howard Schultz. “All of you at today’s event represent China’s future.”

    The China Partner Family Forum celebrates Starbucks’ 30,000 Chinese employees, reinforcing the company’s commitment to what it calls “conscious capitalism.” The goal is to boost company productivity by enhancing the work experience for those employees.

    Starbucks launched its Tmall Global, store in December. The platform allows foreign companies to sell into China without having a physical presence in the country. Already major brands such as Costco, Macy’s and Nike, Japan’s Uniqlo and Germany’s Metro Group operate stores on the platform. Some of these companies, including Nike and Metro Group, do have physical stores in China, but they are selling through Tmall Global because the continued growth of eCommerce gives them another way of reaching consumers.

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