Cincinnati-based retail giant Macy’s Inc. is expanding its Chinese e-commerce presence with a new joint venture. Macy’s has formed a joint venture with Hong Kong-based Fung Retailing Ltd. to sell Macy’s merchandise on Alibaba Group’s Tmall Global online marketplace.
The joint venture, Macy’s China Ltd., is owned 65 percent by Macy’s and 35 percent by Fung and based in Hong Kong. It plans to pilot Chinese e-commerce in late 2015. The joint venture will invest about $25 million in Macy’s China Ltd., with Macy’s contributing 65 percent and Fung 35 percent. China has an Internet-using population of 668 million and its rising middle class is expected to reach 630 million by 2022. Macy’s expects Chinese e-commerce sales to reach $50 million in 2016.
No physical Macy’s stores are planned for China, but the company said it may consider that in the future based on the results of the e-commerce pilot.
“Our game plan is to start small and use the test-and-learn approach as we move forward,” Macy’s chief financial officer Karen Hoguet said in a call with investors. “We also believe by increasing the presence of Macy’s in China, we will increase our business here as well, both with the Chinese tourists and Chinese residents.”
Macy’s first began e-commerce in China in 2011, selling an edited assortment of merchandise on macys.com and shipping from the U.S. Macy’s China Ltd. will warehouse and ship from Hong Kong, which it expects will improve speed, flexibility and pricing. The joint venture will be led by Kent Anderson, who will serve as managing director. He previously served as Macy’s president of innovation since February and prior to that was president of macys.com.
“As is always the case with Macy’s, we will test and learn as we progress and grow our business in China. We will take one step at a time,” Peter Sachse, Macy’s chief of innovation and business development officer said in a news release. “We intend to be a long-term player in this region of the world, and that requires we understand the customer so we can deliver an online shopping experience that Chinese shoppers will appreciate, value and love.”
Macy’s also announced Wednesday that it plans on redeveloping its Brooklyn store with Tishman Speyer. Under the agreement, Macy’s will continue to operate the first four floors of its existing nine-floor retail location and Tishman Speyer will pay the company $170 million for the remainder of the location, which it plans to redevelop into office space. Macy’s will receive an additional $100 million over the next three years to renovate the Brooklyn store.
Hoguet told investors that two new stores will be opening in the fall: a Bloomingdale’s in Honolulu and a Macy’s in Puerto Rico. Macy’s made those announcements alongside its second quarter 2015 earnings. The company reported earnings of 64 cents per diluted share compared with 80 cents per diluted share in the second quarter of 2014. That missed analysts’ estimates of 76 cents per share.
Sales fell to $6.1 billion for the quarter, down from an expected $6.23 billion. Macy’s profit for the quarter was $217 million, down from $292 million in the same quarter last year. Macy’s operates 885 stores in 45 states, the District of Columbia, Dubai, Guam and Puerto Rico under the Macy’s, Bloomingdale’s, Boomingdale’s Outlet and Bluemercury brands.