Fortunes Of Kenneth Chan, Department Store In Spring, China

In China, many well-known enterprises are willing to show their influence in the city: landmark headquarters building, street named by brand, huge employment population and GDP contribution rate, which constitute a unique commercial landscape in many cities of China, and to some extent shape the pride of the latter.

In the past 20 years, Kenneth Chan has successfully packaged the fashion brand hidden in Xiamen into a luxury life label. Now, he also wants to become a super integrator in China's high-end department stores.

In China, many well-known enterprises are willing to show their influence in the city: landmark headquarters building, street named by brand, huge employment population and GDP contribution rate, which constitute a unique commercial landscape in many cities of China, and to some extent shape the pride of the latter.

But in Xiamen, the earliest coastal open city in China, you can hardly find the signs of Kenneth Chan and the baozi brand he owns.

For a long time, Chen successfully put baozi into an internationally recognized fashion brand with "mistaken belief" in the eyes of Chinese consumers, and envied the curse of luxury brand "made in China".

This brand, founded by a Canadian in 1961, is located in Xiamen after 1989.

The center of Chen's vast commercial empire is in a shabby alley in the Jimei District of Xiamen. There is only a five story building decorated with bland and no signs. You don't feel any connection with fashion.

Many of the English words were marked on the door of several glass conference rooms. Chen was named after these strange words: Fuchsia (Dou Hong), Ebony (Hei Tan), Gardenia (Zhi Zihua), Hibiscus (Mu Jin) and so on.

Only a conference room covered with black curtains on the first floor revealed the secret of baozi. The wall was pasted with posters. The handwriting was "the fashion wardrobe of Hollywood stars".

The entire factory area is full of vigilant security guards.

The reason why this is worth visiting is not only that baozi has become one of the top three brands of luxury brands in China, a survey by AC Nelson, but also a low profile secret Kenneth Chan is trying to become the first strong integrator in China's department stores.

The Pcd Stores Group Ltd, which was held by the Chen family's 00331.HK, was listed in Hongkong in December 15th last year. It has 17 department stores in China with an annual sales volume of more than 2 billion 600 million yuan. Its brands include not only department stores in spring, but also famous famous shopping centers.

Kenneth Chan, a 62 year old man, is reminiscent of the role played by Steve McQueen in the The Thomas Crown Affair, while Claudine in the camera smokes cigar comfortably, and says, "once I made it, I could do it once more," McQueen said.

Chen sees the chance that Chinese shopping methods are evolving, from the spiritless state shopping malls, small sales outlets to large supermarkets, high-end department stores and super shopping centers.

Although China's department store industry has developed, it still seems to be in the spring and Autumn period. Almost no regional market leader has established a nationwide sales network and influence.

Chen's Spring Department stores are mostly located in China's two or three tier cities. In Taiyuan, Qingdao, Changchun, Nanning, Zunyi and Liupanshui, the spring department stores, such as Armani (Armani), Burberry (Burberry), Cartire (Cartier), Zegna (Ermenegildo Zegna), Hugo Boss, and many other high-end international brands, seem to be the source of the high-end lifestyle of the new rich consumers.

These new rich people in China's two or three line cities who have long been thirsty for fashion, jewelry and handbags in Paris, Tokyo and Hongkong have no less purchasing power than consumers in the first tier cities.

Ren Rong, chief executive officer of Hongkong real estate investor Harvest Capital Partners Ltd, said that the shopping mall in China's two or three tier cities will become a lucrative property market in the mainland market in the next 10 to 15 years.

Chen Qizong, President of Hongkong Hang Lung estate recently said that shopping malls in big cities are his favorite investment targets, and all provincial capitals will become good investment locations.

With the success of baozi, investors and analysts believe that Kenneth Chan may be one of China's best known consumers of fashionable consumption.

Chen's initiative and patience impressed Yu Wei, chairman of the board of directors of Victoria venture capital group (China) Limited.

"He is successful enough, but he can still be satisfied."

In the interview with Global Entrepreneur, I like to comment on Chen.

Kenneth Chan's wealth trajectory has always been a mystery.

He claims that he only accepts interviews from the western media. Besides facing investors, he also tries to avoid appearing in any public occasion, including the opening of any new store in spring department store.

The reason for such a low profile is probably to avoid exposing the fact that baozi is actually a "made in China" luxury brand.

People only know that Kenneth Chan completed his university studies in Canada and became a citizen of that country.

He and his brother set up a contract processing enterprise in 1975, called Etac Sales Ltd., to do foundry for baozi.

In 1989, the founder of baozi decided to retire, and the Chen family decided to buy it.

In 1993, Kenneth Chan returned to China and set up a base in Xiamen to promote baozi brand in China.

Chen's wife and sister Tia Cibani (Tia Cibani) presented a detailed business plan to Kenneth Chan, including the brand new name from baozi 1961 to its global logo.

When Kenneth Chan recalls the situation of China's advanced clothing market, he said, "every consumer is a blank sheet of paper."

Chen also seized another opportunity.

After 1992, China began to allow foreign commercial enterprises to enter the Chinese market. Pinault Printemps Redoute (PPR) began to expand its business in China.

In November 1998, Baozi joint venture with PPR to set up Printemps China Department Store (Paris PCDS).

In June 2006, PPR divest Paris spring department store and sell it to Italy Borletti group.

How to deliver the remaining Chinese business has become a suspense.

It is not clear how Kenneth Chan made a deal with PPR in the process, but since then, Chen Xianran has obtained the ownership and the right to use brand of Paris spring department store in several Chinese shopping malls, and has begun to expand.

From the second half of 2006 to the listing of department stores in spring, Kenneth Chan added 12 branches through direct holding or input management, expanding the territory to a number of China's two or three line cities outside Xiamen, and a new department store empire began to take shape.

In 2007, through the acquisition of Seth group, spring department store will be the Beijing sate shopping center.

By the end of 2007 and September 2008, when the global financial crisis broke out, the spring department store's two listing in Hong Kong failed to do so, which triggered a lawsuit involving Citigroup fund's demand for liquidated shares and the recovery of HK $296 million in arrears.

None of these have prevented Kenneth Chan from creating a dream of "treasure posture" of China's high-end department stores.

In this market, every consumer is also like a blank sheet of paper, and the existing department stores are hard to do.

The problem is that reliable professional retail real estate developers are few.

The developer's solution is very simple, or it can rent the property to department stores or large supermarkets for a long time, or to sell them to investors and individual operators.

Many times, developers do not even know what the shops have been built before they are completed.

One of the most direct and effective methods is segmented sale, which brings satisfactory results to the rapid sale of the developers and capital reflux, but it is a disaster for the department store industry. Due to the lack of integrated management and the inherent defects of the design, many dream shopping centers are soon desolated.

Around 2000, Kenneth Chan had fallen over in Chengdu. He had rents twenty thousand square meters of Chengdu New Times Square. Due to the mistake of property management and location, Chengdu Paris spring department store was declared dead within six months, and thousands of suppliers withdrew.

Chen has learned a lesson from the importance of controlling property resources in the department store industry.

As a matter of fact, it is also true that the most difficult problem facing high-end chain stores is that they require huge capital accumulation, but the payback period is longer. Because the sites are mostly leased rather than owned, their operation is highly influenced by property interference.

Generally speaking, an ideal business project usually takes three years to break even.

One of the most direct dilemmas comes from changes in the property leasing contract. Although the owner will start to spend two or three years of free use or extremely low management price, once the business is booming or the contract expires, the property will usually pick up department stores again.

This has led to the fact that the market has been plagued by low-quality shopping center projects in the city, and a large number of funds are perplexing the quality projects.

Although many high-end brand retail stores have landed in China, so far, there are few unique department stores nationwide.

The high-end department stores in Beijing, Shanghai and other first tier cities are facing competition from overseas counterparts. Because of the existence of import duties, the prices of high-end goods on the mainland are usually 20% to 30% higher than those in Hongkong, and some high-end customers are more accustomed to shopping in Hongkong.

Lu Xingtai, former general manager of Qingdao department store in spring, has carefully studied the financial samples of 16 department stores. In the first half of 2009, the growth rate was only three, with a decrease of 40%.

"The department store industry must eventually shift to high-end brands, and the most important thing is to improve shopping experience and customer service to attract the high consumption ability of the affluent."

Lu told Global Entrepreneur.

The owners of Chinese department stores have the background of real estate developers, they care more about short-term interests, and management is not professional, while brands want to consider long-term interests and enjoy management dividends once and for all.

The department store operator of the lease contract is in a crevice.

"Managing effective department stores is rare."

He Bin, general manager of Kiton, China's top men's wear brand, told Global Entrepreneur in Italy.

Though hundreds of stores are inspecting every year, there are few shops that can make up their minds.

He admitted that some real estate developers entrusted the international third party Property Management Company to conduct property trusteeship, but there were few property management personnel that could make people appear.

"Some facilities were very good at the beginning. In less than a year, they were in a mess."

He said.

The spring store's prescription is to control the heavy assets of the property.

Spring Department Store Nanning shop is not its own development property, but the main store of Nanning aviation international city MALL.

At that time, developers took the initiative to find Chen, the two sides hit it off.

But in spring, department stores are not eager for success. Generally speaking, Chen is most concerned about whether the conditions are favorable and whether there is a blank market opportunity.

Nanning department store in spring is positioned as an international leisure leisure boutique. The reason is that spring department stores found that the local department stores in Nanning are relatively simple, either pure luxury goods or pure mass department stores, and lack of intermediate zone, but local consumers prefer the shopping environment of fashion and leisure, while the concept of luxury dress is desalinated.

In view of the level of consumption in Nanning, spring has targeted the low-end series of high-end brands, such as Armani cowboy series, Zegna sports brand and BOSS leisure series.

"Generally speaking, spring stores don't take the initiative to talk about real estate projects, but are used to finding the right brand.

Although it takes a lot of energy to ask for a good word, we will still find it. "

One insider said.