Li & Fung teams up with Chinese retailers

Sourcing giant Li & Fung has formed a joint venture with two of China’s largest retail groups Bailian Group and Wangfujing Department Store Group as it looks to transform China’s retail industry through “enhancing supply chain efficiency”.

The strategic partnership, created in Shanghai’s free trade zone, will be called ‘JV’ and both Bailian Group and Wangfujing Department Stores will hold 40 percent each, while Li & Fung will own the remaining 20 percent.

The JV has been established to development and management of private labels and licensed brands, with Li & Fung providing expertise to design, source and produce the labels and licensed brands tailored to the requirements of Bailian Group and Wangfujing Department Store.

The deal also helps the Hong Kong-based company, whose customers include Marks and Spencer and Target, to extend its global supply chain and draw on demand from China’s growing middle class.

The move comes as Chinese multi-brand retailers look to differentiate themselves from competitors by creating their own private and proprietary brands in order to increase margins and improve customer loyalty, Li & Fung stated in a press release.

Li & Fung creates new venture with Bailian Group and Wangfujing Department Store Group

The JV venture will focus on the development of product categories including menswear, womenswear, children’s wear, as well as home products. It has an initial three year plan and it hopes to develop 1 to 3 private labels and up to 6 licensed brands, and this may involve the opening of up to 300 stores or shops-in-shop and, its partners hope, could realise up to one billion yuan in sales.

Li & Fung adds that in the long run, the JV aims to be at the forefront of a new breed of brand development and management companies “giving strong own-brand capabilities to traditional retailers”, which it hopes will contribute to the transformation and sustainable development of China’s retail industry.

Commenting on the venture, William Fung, group chairman of Li & Fung, said: “We are excited to join forces with two of China’s largest retail companies to bring forth the transformation of China’s retail industry. Through this strategic partnership, Li & Fung is able to extend the global supply chain into a substantial retail network that serves a large growing middle class in China.

“Through the introduction of private brands and exclusive brands, the joint venture will enable its retail partners to effectively increase its competitiveness by offering a different and cost effective product offering. The joint venture also aims to introduce globally sourced products that offer Chinese consumers a wider variety of foreign goods.”

Image: Li & Fung