The Chinese Company Quietly Becoming a Major Luxury Retailer

You may not know much about Hemei Group, but the Shenzhen-listed Chinese company is quickly capturing a huge portion of the luxury retail market in China. Hemei is the authorized China distributor of luxury labels including Giorgio Armani, Dolce & Gabbana, Hogan, and Furla. And now it’s expanding into e-tail.

The Electrical Meter Factory That Could

Hemei Group was founded in Shenzhen in 1994 under the name Haoningda Instruments Company. It began as a factory that specialized in designing and making electrical metering systems. The company went public on the Shenzhen Stock Exchange in 2010.

As the Chinese government set out policies to help the economy evolve beyond low-wage manufacturing, Hemei Group started to venture into the consumer and retail sector. It first acquired a jewelry brand in 2013, and officially renamed itself as Hemei in 2016 to reposition the company as a retail service provider.

Last year was especially transformative for Hemei. The company acquired several local companies and, in doing so, gained the distribution rights for many international luxury brands.

According to an official statement, Hemei Group raised its stake in Shanghai Oulan International Trade Limited and appointed Yu Yang, the founder of Oulan to be the President of Hemei Commercial Company, a subsidiary of Hemei Group.

Oulan was the first authorized distributor of Armani in mainland China, and has set up more than 80 Armani stores, including those in high-end department stores, in major Chinese cities including Shanghai, Suzhou, Hangzhou, and Nanjing. Oulan also has a close relationship with MCM, Jil Sander, Dsquared 2 and Furla.

Further expanding its luxury retail network, Hemei Group acquired Wenzhou Chonggao Department Store in September last year. Since 1996, Chonggao has been among the most renowned Chinese distributors of luxury brands. The acquisition gave Hemei the China distribution rights for Hogan, Dolce & Gabbana, Hugo Boss and Versace Collection in second-tier cities including Wenzhou, Wuxi, Changsha, and Wuhan.

An Omnichannel Eco-system

Entering 2018, Hemei Group has begun to connect its offline retail assets to online businesses. On January 11, 2018, Hemei Group announced that it will acquire Shangpin e-commerce group, a leading authorized e-tailer of designer and contemporary fashion brands.

The acquisition of Shangpin.com will provide Hemei Group with a sophisticated luxury and fashion e-commerce platform and a mature customer base of 30 million registered users who can currently purchase over 600 international brands on Shangpin.com.

Local media site Jiemian reported that the acquisition would not affect the current online operation of Shangpin.com. But Hemei Group will be able to optimize its supply chain and facilitate the expansion of Shangpin’s offline stores.

Challenging the Established Players

Hemei Group’s ambition in the fashion industry is further demonstrated by the release of the men’s fashion magazine Style China, in collaboration with the Italian publication group RCS, last December. In repositioning itself from a manufacturer to a retailer, Hemei also appointed Chinese supermodel Huang Chaoyan as its brand ambassador earlier last year.

According to industry professionals, Hemei’s commercial pattern has a multitude of advantages that make it a potent competitor.

“The business model that Hemei has been forming in the high-end luxury retail sector is quite unique in terms of its approach to brand recruitment,” said Zhu Jun, a retail stock analyst at Haitong Securities.

In comparison with Tencent, Alibaba and JD.com’s great efforts to draw luxury brands to their luxury sites, Zhu said that Hemei’s effective acquisition of the distribution rights of luxury brands could be a huge asset. Chinese consumers are likely to have less counterfeiting concerns about Hemei given its direct business relationship with brands, Zhu said.

Meanwhile, Hemei’s offline network is much more advanced than many other players in the luxury retail space. According to the public information available on the company’s official site, Hemei has business partnerships with more than 150 commercial properties, which include many renowned high-end department stores such as SKP Mall and Yintai Centre in Beijing, Plaza 66 in Shanghai, and Taikoo in Guangzhou.

According to Wang Lei, CEO of Hemei Group, the company aims to be a dominant player that facilitates the distribution of international luxury brands in China against the backdrop of the Chinese government’s call to upgrade the country’s consumption structure.

“Hemei hopes to provide a comprehensive service to international brands and Chinese consumers, accelerating the consumption upgrade and connecting foreign and domestic brands,” said Wang. “We ultimately wish to enhance the quality of goods that Chinese consumers can purchase at home.”

With their new e-commerce platforms, cashier-less stores and VR experiences, Alibaba, JD.com and Tencent look set to transform the luxury market in China. Meanwhile, Hemei is plying a steady trade with those who still prefer department stores.

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