Aug 13, 2015
As Macy's eyes China, some see need for more focus at home
Aug 13, 2015
Macy's plan to open a virtual store on Alibaba offers a cheap way into China, but as the latest in a long list of initiatives to spur growth it could spread management thin.
On Wednesday, Macy's said it has formed a joint venture in China with Hong Kong-based Fung Retailing, that will start by selling products on Alibaba Group's Tmall Global marketplace.
The deal comes in the wake of Macy's plans to open off-price stores in the United States that will sell clearance products, start new stores that will sell luxury beauty products, and offer same-day delivery services in more U.S. markets than Amazon.
The China venture takes Macy's focus outside the United States, where the company has almost all its operations.
Sterne Agee CRT Research analysts wrote in a note that China and other strategies, including the plans for discount stores and to sell beauty products, muddy a clear strategy and raise the risk profile of the business.
"What was once a clean retail story has become far more complex (and controversial) with negative comps and an assortment of unproven sales drivers," they wrote.
Macy's chief executive, Terry Lundgren, said the joint venture with Fung Retailing offers a controlled way to build gradually. It will invest $25 million in the next 18 months.
"The best idea is to test multiple things as opposed to putting all of your eggs in one basket," Lundgren said in an interview. "Which(ever) of these platforms works the best, that's where we'll invest aggressively."
Virtual storefronts are becoming a preferred route for U.S. retailers to enter China cheaply. Several early entrants including Home Depot and Best Buy left the country after building stores that failed to take off.
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