Chinais fast becoming an important hub for leading retailers given the growing luxury market in the country. As any economy grows, it develops a certain class of customers that prefer branded products, and major retailers are looking to capitalize on this opportunity to get a foothold in China. Therefore, the leading retailers are making their smart move to expand through e-commerce in China.
In a bid to expand in China, leading retailer Macy’s Inc (M) announced its intention to tap the growing Chinese market via an online deal. The company will start retailing its private brand assortment through a China-based e-commerce site ‘omei.com.'
The Macy’s section in omei.com will start retailing I.N.C. men’s and women’s fashion apparels in spring 2013. Customers placing orders via omei.com will get their purchase delivered locally through Macy’s services in China and the orders placed via macys.com by Chinese customers will be delivered through the company’s services in the United States.
The e-commerce site is operated by VIPStore Co. Ltd, in which Macy’s has made an equity investment of $15 million. As a result, Macy’s now holds a minority stake in the China-based company. Other venture capitalists, including Intel Capital, have also put in some money.
We consider the deal significant because it will also assist in understanding consumer behavior with regard to Macy’s products.
VIPStore considers the deal to be advantageous as they will trade with one of the leading U.S. retailers, which is likely to help them gain experience and enhance customer satisfaction.
Macy’s, which operates 840 departmental stores and runs two online sites: macys.com and bloomingdale.com started trading online in more than 100 nations, including China through a deal with an international e-commerce provider FiftyOne.
Conclusion
In an attempt to increase sales, profitability and cash flows, Macy’s has been taking steps such as the integration of operations, consolidation of divisions as well as development of e-commerce business and online order fulfillment centers.
Macy’s has sustained focus on price optimization, inventory management, merchandise planning and private label offering, which positions it to drive traffic, meet customer demand and improve in-store shopping experience.
Therefore, we retain our long term Outperform recommendation on Macy’s. However, Macy’s, which faces stiff competition from J. C. Penney Company Inc.(JCP), carries a Zacks #3 Rank that translates into a short-term Hold rating for the next 1-3 months.
PENNEY (JC) INC (JCP): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
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