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Macy’s Forms Joint Venture with Fung Retailing to Test E-Commerce in China

Macy’s wants to explore e-retailing in China as the country’s 668 million-strong Internet population fuels an e-commerce boom there, and the department store has tapped Fung Retailing Limited to aid in the effort.

On Wednesday Macy’s said it formed a free-standing joint venture with the Hong Kong-based privately-held entity and a member of the Fung Group to start an e-commerce pilot. Macy’s will retain 65 percent ownership of the joint venture and Fung Retailing will own the remaining 35 percent.

Macy’s has already amassed a following of Chinese-American shoppers and Chinese visitors to the U.S., but the pilot is expected to provide the retailer greater insight into customer preferences and buying patterns in China.

As part of the new venture, called Macy’s China Limited, Macy’s will start selling in the Asian nation late this year through Alibaba Group’s Tmall Global platform, which connects overseas branded retailers to Chinese consumers.

The Macy’s-Fung venture will curate Macy’s online merchandise assortment specifically for Chinese consumers, orders will be fulfilled through local logistics channels and Alibaba’s Alipay will be a primary payment channel for Macy’s offerings.

“By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales. We have been closely following the development of the Chinese marketplace for many years and have learned that success requires that we have the right partners to help us navigate the unique needs and characteristics of consumers in China,” Terry J. Lundgren, Macy’s, Inc. chairman and CEO said, adding that Fung Retailing is that partner.

Macy’s said Fung Retailing compliments its leadership in the omnichannel space with its own omnichannel focus and its retail and wholesale experience in Asia where it has more than 3,000 stores across multiple product ranges, at least 1,000 of which are in China.

“The potential for growth is significant. While the Chinese online consumer is already one of the savviest in the world, there are untapped ‘white spaces’ to fill,” Fung Retailing’s executive director Sabrina Fung said. “There is demand for the quality and variety of power brands and authentic products associated with the world-famous name of Macy’s. Many Chinese are attracted to the American lifestyle, of which shopping at Macy’s is the ultimate symbol.”

Kent Anderson, longtime president of macys.com, will lead Macy’s China Limited as managing director.

The two companies expect to invest roughly $25 million (65 percent of which Macy’s will fund) to operate the joint venture over the next 18 months. Macy’s said it doesn’t expect any material impact on its fiscal 2015 earnings as a result of the endeavor.

Plans for Macy’s e-commerce sales should hover right around $50 million in China in 2016. The retailer has no plans for physical stores in the country at this time, but indicated the concept could be considered based on the e-commerce pilot.

“As is always the case with Macy’s, we will test and learn as we progress and grow our business in China. We will take one step at a time,” Peter Sachse, Macy’s, Inc. chief innovation and business development officer, said. “We intend to be a long-term player in this region of the world, and that requires we understand the customer so we can deliver an online shopping experience that Chinese shoppers will appreciate, value and love.”

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