5. 01 MISSION STATEMENT
02 WHY CHINA?
03 WHY NOVOMANIA?
04 HOW DO I DO BUSINESS?
05 ONE-STOP SHOPPING
06 FOLLOW-UP
AGENDA
6. CHINA’S RAPIDLY GROWING MARKET
• Total retail sales of consumer goods reached
12.5 trillion RMB (1.4 trillion EUR; 1.8 trillion
USD) in 2009, an increase of 15.5% YoY.
• In the first five months of 2010, total retail sales
climbed by 18.2% to 6 trillion RMB (695 billion
EUR; 881 billion USD).
• China’s retail sales are predominantly urban.
Urbanities comprised 46.6% of the total
population but contributed 67.9% of total retail
sales in 2009.
• Average per-capita disposable income for urban
households was 17,151 RMB in 2009, an increase
of 9.8% YoY.
• Retail sales for clothing increased by 20.8% in
2009 and 23.9% for the first five months of 2010.
WHY CHINA?
Source: National Bureau of Statistics, PRC
7. Note 1: CTR Market Research. The three drivers are High income, Female and Post 80’s generation
WHY CHINA?
THE “POST 80s URBAN YOUTH”
AN ATTRACTIVE RETAILING SEGMENT
• The “Post 80’s Generation,” under the age of
30, comprises 512 million people, of which
about 239 million live in urban cities.
• This group is becoming one of three major
consumption drivers in urban China.1
• Due to the one-child policy, urban youth in
China are generally only children, with financial
support from 6 adults – parents and two sets of
grandparents.
• The “Post 80’s Generation” also has the highest
income level and income growth among all age
groups.
• As a group, they are highly educated and willing
to spend money on differentiation and
individuality.
8. Source: CNNIC, 2009
THE “POST 80s URBAN YOUTH”
UNIQUE CONSUMPTION HABITS
• The “Post 80’s generation” prefers spending
more than saving and is more comfortable using
credit cards and purchasing online.
• The “Post 80’s generation” are very active
online and comfortable with online shopping.
– This group makes up most of the leading
Chinese B2C users.
– More than half of their friends are online
friends.
• They are brand-focused, tending to purchase
and consume products that express their
individuality and make a statement about who
they are – to their friends and to the world at
large.
• Young customers aspire to a certain “lifestyle”
and are open to influence and inspiration from
well-positioned brands of high quality and
utility.
WHY CHINA?
Source: MTV Circuits of Cool. 16 Country Qualitative & Quantitative. 2007
9. BROAD DEPARTMENT STORE FOOTPRINT BUT
LITTLE DIFFERENTIATION…
• Department stores have enjoyed a 30%
compounded annual growth rate from 2003 and
2008.
• The competitive landscape for department stores in
China is highly fragmented, with no significant
national leader.
• In the past, department store operators paid little
attention to differentiation and brand
management.
• The basic revenue streams for department stores
are quite similar, with nearly 70% of revenue
generated from store-in-store sales.
• Young and trendy brands as well as urban youth are
under-served by current department store players.
• The market is in need of youth-focused shopping
destinations that provide differentiated shopping
experiences.
WHY CHINA?
Source: National Bureau of Statistics of China, China Chain Store and
Franchise Association and Deloitte
Note 1: Average of Intime, Golden Eagle, New World Department Store and Parkson
Source: Financial reports from respective companies
THE OPPORTUNITY TO STAND OUT
10. SIGNIFICANT RETAIL PROPERTY SUPPLY
COMING ONLINE
WHY CHINA?
Source: NOVO Concepts
SUPPLY OF SHOPPING MALLS FROM
MAJOR DEVELOPERS, 2010-2012
• Over 180 shopping mall developments, with sizes ranging
from 100,000 sqm to 250,000 sqm are planned for the next 5
years, 80 of which will be completed within the next 3 years.
• More high quality, large shopping centers/malls are now
under construction or under way in many Tier 2 cities such as
Hangzhou, Chengdu, Nanjing, Shenyang, Wuhan, etc.
• To raise the reputation as well as to reduce vacany risk
of new shopping malls, developers are focused on
anchor/semi-anchor tenants to differentiate themselves.
• Malls are realizing the importance of having a dedicated
section to draw urban youth traffic and serve this
important segment.
11. 01 MISSION STATEMENT
02 WHY CHINA?
03 WHY NOVO MANIA?
04 HOW DO I DO BUSINESS?
05 ONE-STOP SHOPPING
06 FOLLOW-UP
AGENDA
12. ALMOST 8000 VISITORS IN 3 DAYS
MARCH 2010 TRADESHOW TAKEAWAYS
- WHO CAME?
WHY NOVO MANIA?
15. MARCH 2011 TRADESHOW HIGHLIGHTS
• Who are we expecting to attend?
– 3000+ potential retail buyers, distributors,
agents & merchandisers
– 2500+ department stores, chains, shopping
malls & multi-brands from all over China
– 500+ media resources
– Numerous leading influencers in the fashion
trade
• Who are we expecting to exhibit?
– Leading international brands from Europe and
the US
– Select brands from Asia (e.g. Japan, China,
Korea)
• Sponsorship opportunities
– Partnerships with multinational companies
with complementary products and services
• Strategic partners
– Live performances from local dance studios
and artists
– Food provided by trendy Shanghai eateries
WHY NOVO MANIA?
16. 01 MISSION STATEMENT
02 WHY CHINA?
03 WHY NOVO MANIA?
04 HOW DO I DO BUSINESS?
05 ONE-STOP SHOPPING
06 FOLLOW-UP
AGENDA
17. DIFFERENT WAYS TO DO BUSINESS IN CHINA
• Wholly-Owned Foreign Entity (WOFE)
- WOFEs are limited-liability corporations organized by
foreign nationals and capitalized with foreign funds.
Involvement of a mainland Chinese investor is not
required, unlike most other investment vehicles. .
• Franchising
- An alternative to building 'chain stores' that are
company-owned to distribute goods and avoid
investment and liability over a chain. The franchisee
is said to have a greater incentive than a direct
employee because he or she has a direct stake in the
business.
• Licensing
- A licensor may grant permission to a licensee to
distribute products under a trademark. With such a
license, the licensee may use the trademark without
fear of a claim of trademark infringement by the
licensor.
• Joint Venture (JV)
- Equity Joint Venture (EJV) – EJVs are incorporated in both
Chinese and in English, with limited liability. Prior to China’s
entry into WTO, and the creation of the WOFE, EJVs
predominated. In the EJV mode, the partners share profits,
losses and risk in equal proportion to their respective
contributions to the venture’s registered capital. These
escalate upwardly in the same proportion as the increase in
registered capital.
- Co-operative Joint Ventures (CJV) - CJVs may have a limited
structure or unlimited structure. Limited - the foreign
investor provides the majority of funds and technology and
the Chinese party provides land, buildings, equipment, etc.
However, there are no minimum limits on the foreign partner
which allows him to be a minority shareholder. Unlimited -
partnership where the parties jointly incur unlimited liability
for the debts of the enterprise.
HOW DO I DO BUSINESS?
DIFFERENT OWNERSHIP
STRUCTURES TO CHOOSE FROM
18. Distribution
model
•Owned store
•Shanghai
headquarters
•JV
experience in
Japan, Korea
•Owned stores in BJ/SH;
began franchising
•Provided franchisees
basic training
•Regulations limited
further expansion
•Started looking for
partner
•Owned stores in BJ/SH/Dalian;
franchisees in Tier 2 & 3 cities
•Signed JV with China Resource
(Esprit took 49% share)
•Established franchisee as strategic
partner
– On-site management support
– Close performance monitoring
•Owned stores in
BJ/SH/Dalian
•Bought back
underperforming
franchised stores in
Nanjing &
Guangzhou
Footprint •BJ/SH
•Prime
locations
•Major BJ/SH presence
•Entered 6 Tier 2 cities
with franchisees
•Entered Dalian with own stores
•Presence in 86 Tier 2 & 3 cities
•Present in ~107 cities
across Tier 1, 2, 3 & 4
cities
CAGR
(98-07)
0
10%
Entry Establishment Partnership National roll-out
Established
JV with CRE
Began local
partner search
500
1500
2500
3500
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
(93-98)
CAGR
37%
ESPRIT’S CHINA BUILD-OUT (RMB MILLIONS)
CASE STUDY
19. 01 MISSION STATEMENT
02 WHY CHINA?
03 WHY NOVO MANIA?
04 HOW DO I DO BUSINESS?
05 ONE-STOP SHOPPING
06 FOLLOW-UP
AGENDA
20. THE NOVOMANIA TOOLKIT
• NOVO MANIA Global Support Team
• Business tools
– Government workshops and lectures
Registration of companies
Tags
Taxes
Customs and Clearance
– Tracker service for booth attendees
– Translation service
• Logistical tools
– Shipping
– Booth setup
– Rentals
• Promotional tools
– Advertising space
– Fashion shows
– Models and talent
• Consulting services
– Market analysis and Novo Tour
– China Tier 2 & 3 City Tour
ONE-STOP SHOPPING