Macy's Looks to Cash In on the Chinese Market
Macy's (NYS: M) is set to join forces with Chinese e-commerce site omei.com as it looks to grab a sizable share of the growing online market in that country. The retailer hopes to sell its private label products to consumers in China through the website.
In touch with Chinese consumers
Ohio-based Macy's has also acquired a stake in omei.com's parent company VIPStore Co. by making a $15 million investment. However, it is not alone in doing so; Intel's venture capital provider Intel Capital too, has acquired a stake in the Chinese e-commerce firm.
Through the deal with VIPStore, Macy's is hoping to gain experience in the fast-growing Chinese online market, and the deal should help it understand Chinese consumers better and how receptive they are to Macy's offerings. The retailer is slated to roll out a collection of I.N.C. women's and men's fashions next year. The rest of its brands will follow soon after.
Chinese online boom
The parent company of Bloomingdale, however, is not the first U.S. retailer to take such a step. I had earlier spoken about Wal-Mart's (NYS: WMT) move to increase its stake in Chinese e-commerce firm Yihaodian to a commanding 51%. You might be wondering why these retailers are rushing to hop on the Chinese online market bandwagon. The reason, as I've stated before, is that nearly 173 million people in China shop online -- a number that is expected to grow even more. According to the Boston Consulting Group, the Chinese e-commerce market will become the largest online market by 2015 as it reaches a staggering $360 million -- nearly three times of what it is at present.
Coming back to Macy's, it's fresh off a strong quarter during which profits jumped 38%, helped by a 33.7% rise in online sales. Macy's has, in fact, outperformed its peers in the U.S. as well. During its recent earnings release, the company said it was benefiting from peer J.C. Penney's (NYS: JCP) "non-promotional price streamlining" by gaining more customers. Penney's, on the other hand, posted a loss as sales fell by 20.1%.
Given Macy's strong performance and the strength of its online sales, surely, the move to enter the Chinese online market couldn't have come at a better time.
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At the time this article was published Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.