Buoyed by interest in its products from Chinese customers who shop while visiting the United States, Macy’s Inc. will expand its e-commerce presence in China.
The retail chain, No. 7 in the Internet Retailer 2015 Top 500 Guide, plans to open an e-commerce pilot in the fall on Alibaba Group Holding Ltd.’s web shopping portal Tmall.com through Macy’s China Limited. Macy’s will own 65% of the Hong Kong-based venture, with Fung Retailing Limited owning the remaining 35%. Macy’s is investing $16.3 million in the program. Fung Retailing owns and operates stores throughout China and the Asia Pacific region.
On Macy’s Q2 2015 earnings call today, chief financial officer Karen Hoguet told analysts that Macy’s would have limited offerings and keep the products in Hong Kong.
“The idea would be to have the goods housed in China at some point and see how much of the website we need to modify to fit the consumer in China,” she said, according to a transcript of the call from Seeking Alpha.
The new venture will have a familiar face at the helm. Kent Anderson, who has served as president of Macys.com, was named the project’s managing director.
“We have been closely following the development of the Chinese marketplace for many years and have learned that success requires that we have the right partners to help us navigate the unique needs and characteristics of consumers in China,” CEO Terry Lundgren said in a statement. “By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales.”
This isn’t the first time Macy’s and Alibaba have joined forces. In November, Macy’s was one of a handful of American retailers to participate in Alibaba’s Black Friday in China promotion. During the promotion, Macy’s accepted payments through Alibaba’s PayPal-like Alipay ePass, which makes it easier for Chinese shoppers to buy online from retailers abroad.
Macy’s, which has been selling online in China since 2011 through its flagship Macys.com, projects $50 million in online sales in China next year.
“We have had initial success in partnering over the past year with Alibaba on various projects, including accepting Alipay on Macys.com and conducting a special promotion during Black Friday 2014,” chief innovation officer Peter Sachse said. “We believe that, through the joint venture, Macy’s online presence on Tmall Global will give us insight that will serve us well in evaluating future international initiatives.”
The company is excited about its newest venture but said it is proceeding with caution. “We’re not going into this thinking we know all the answers, and that’s why we’re taking sort of a test and learn approach because we know the Chinese consumer is different both in terms of merchandized taste but also how they interact online,” Hoguet told analysts.
For the second quarter ended Aug. 1, Macy’s, which does not break out online sales, reported:
- Net sales of $6.104 billion, down 2.6% from $6.267 billion during the same time last year.
- Net income of $217 million, compared to $292 million.
- Comparable sales down 2.1% year over year.
For the first six months of fiscal 2015, Macy’s reported:
- Net sales of $12.336 billion, down 1.7% from $12.546 billion during the same time last year.
- Net income of $410 million, compared to $516 million.
- Comparable sales down 1.4% year over year.