China’s Ruyi Group is Growing Fast, But Can They Conquer the Luxury Market?

Ruyi Group has been on a global shopping spree. Since 2010, it has been scooping up foreign brands and companies, perhaps hoping to become the Asian version of the LVMH Moët Hennessy-Louis Vuitton luxury conglomerate. This buying binge came with a hefty price tag of 4.6 billion but included strategic acquisitions like the French fashion house SMCP, the largest irrigation property in Australia (Cubbie Station), INVISTA (nylon, spandex, polyester, etc.), and heritage brands like Bally and Aquascutum. Given this, the group is proving that its focus goes far beyond collecting trophy assets and is instead focused on building a vertically integrated textile and fashion business. Despite high-profile acquisitions, Kelvin Ho, Chief Strategy Officer of Ruyi Group, told Jing Daily that “in the short-to-medium term, the Ruyi Group will focus on integrating existing brands to maximize synergies within our fully integrated business model. We will only consider acquiring labels that are profitable and have high growth potential.” Moreover, Ruyi’s overseas investments are in agreement with the Chinese government’s strategy of favoring the purchase of companies that can further improve the competitive advantages of China while putting the brakes on outbound investments that resemble big trophy acquisitions. This, however, hasn’t stopped the conglomerate from expanding its operations in Africa, where it has invested more than 2 billion in Nigeria, Egypt, and Mali, to ensure its cotton supply chain. Through this plan, the Ruyi Group is attempting to overcome supply risks, such as the cotton ban imposed by the U.S. on cotton products from Turkmenistan and Uzbekistan. Additionally, their recent strategic partnership with the consumer goods supply chain giant Fung Group is another example of the Ruyi Group searching for growth opportunities in emerging African markets. With an ever-expanding global footprint, the Ruyi Group must continue to improve efficiency and assimilate all of its internal business units. “Our strengths and footprint in Asia can create strong support," said Ho about the company’s brands, which enjoy exclusive and renowned brand identities of their own. For example, since their acquisition of SMCP in 2016, “[SMCP] has expanded to over 100 stores in about two dozen Chinese cities, and the brands had also increased online sales in China by 40 percent to 50 percent in 2018.” Simply put, the group has leveraged its strategic advantages and achieved market momentum by adopting a “lighter control model.” And while foreign firms who want to increase their presence in China struggle with distinctive barriers and pitfalls like the lack of reliable market research, ownership restrictions, and strict regulations, the Ruyi Group glides through these setbacks by thriving in a familiar environment. Furthermore, the group’s in-depth knowledge of the world’s fastest-growing segment — the Chinese consumer — gives it a major competitive advantage. And as a successful player, the Ruyi Group understands its own value. “With over 30 international fashion brands and over 5,800 shops, operating in 81 countries and regions, the Ruyi Group is dedicated to maintaining its leadership in China’s textile and apparel industry,” said Ho. “[the Ruyi Group aspires] to become a world-famous accessible luxury brand-holding group.” Perhaps this aspiration can be achieved without encountering potentially unpleasant ramifications, mainly because of the rising demand for affordable luxury brands in China. And while in the West, accessible luxury brands have been bleeding market share while the success of middle-segment brands is a new paradox of China: proof that upscale international brands need to rethink their strategy when approaching the Asian market. And as debt-ridden Chinese millennials have begun to turn to high-end consignment shops and mid-segment brands, the Ruyi Group sees an opening to build themselves a fashion empire. Qiu Yafu, Chairman of Ruyi Group, recently announced that they would focus more on middle-segment brands, seeing the potential for growth despite unfavorable economic conditions. By zooming in on the growing Chinese middle class, the Ruyi Group is trying to eliminate some of the risks that come with catering to the needs of wealthy millennials. It’s generally noted that the lack of consistency creates growing hurdles for high-end luxury brands, and companies like the Ruyi Group hope to weather these difficulties by appealing to the sensibilities of “mature” consumers. But even with so many successes, targeted efforts, and ambitious goals, the Ruyi Group is still chasing after LVMH’s luxury crown. Perhaps the purchase of a premium heritage brand like Dior, Hermès, or Burberry would help them, or maybe the luxury conglomerate can simply stay on course, add as needed, and wait to see what the future has in store.

China’s Ruyi Group is Growing Fast, But Can They Conquer the Luxury Market?

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Published April 30, 2019

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China’s Ruyi Group is Growing Fast, But Can They Conquer the Luxury Market?