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Destination east: House of Fraser's Chinese expansion

The new man at the helm of House of Fraser tells us about its imminent launch into China

House of Fraser’s new chief executive Nigel Oddy, who will make his 100th visit to China this year, believes the business is well placed to enter Asia with the proposition of a quintessential British department store and its Chinese owner Nanjing Cenbest at its side.

With 35 years’ experience in the industry, including setting up and running Marks & Spencer’s sourcing office in Hong Kong, Oddy is quick to underline what he first revealed to Drapers when he was confirmed as chief executive in February, that despite its Chinese ambitions and a raft of in-house promotions - including his own from chief operating officer - it remains business as usual for the 59-store chain.

“It is no sudden 360-degree turn,” he says. “And the pillars around which the business has been built over the last five or six years are not going to change; nor are the vision and values.
“Our vision is to treat every customer like a VIP. The pillars are about the development of our house brands, the growth of our international business, our premium brand positioning and the growth of our multichannel business. They may need some fine-tuning but they will continue to be the same.”

However, big plans are afoot. After retail group Nanjing Cenbest bought 89% of HoF parent company Highland Group Holdings for £480m last September, HoF’s first Chinese stores in Nanjing, Xuzhou and Chongqing will open in the next 18 months.

While some retailers have set their sights on the tier-one cities of Beijing and Shanghai, Oddy says HoF’s strategy is to become established in tier-two cities and municipalities before rolling out further.

Paul Alger, director of international business development at the UK Fashion & Textile Association, says: “It is interesting that HoF has chosen to go that way, but retailers may find that return per square foot is potentially higher in tier-two cities. It is a brave step but a logical one. The Chinese fashion market is very regional, so you can imagine companies will do nicely in more regional markets outside cities like Shanghai and Beijing.”

Mark Hedley, China business adviser at consultancy China-Britain Business Council, says: “Although many overseas retailers have chosen to focus on developed tier-one cities, increasingly tier-two and three cities are becoming more attractive due to rising levels of personal wealth and lower competition in those cities.”

However, he says competition is fierce in the Chinese department store market, and most tier-two and three cities have a wide number of stores operated by local and international players, such as Parkson, Golden Eagle and Wangfujing.

Oddy, who admits to only being able to say “hello”, “goodbye” and “thank you” in Mandarin, says HoF’s China stores will concentrate on the premium market, rather than luxury. “It is all about aspirational affordability,” he explains, confirming prices will be equivalent to those in the UK.

For brand partners already working with HoF, he says the opportunity “is the least risky way of moving to an overseas market.” The company will also look to work with a number of western brands it is not already working with in the UK, as well as some Chinese brands.

HoF sells to Chinese shoppers through its UK website (it is one of 130 countries the retailer ships to) but as yet does not have a dedicated Chinese language website. International sales are said to be small at present.

At the end of May, HoF will also extend its international footprint by opening a second store in Abu Dhabi with its franchise partner Retail Arabia, following the first store in October 2013.
Asked why he believes the Chinese venture will succeed, Oddy says: “We have taken on board other people’s lessons in terms of offer and sizing, and are doing our research [with an extensive research report carried out business management consultancy OC&C].

“We are not just one brand, we have 1,500 within our stable, and we have a Chinese owner so therefore a Chinese partner with real estate and a number of other department stores. Our landlord is our owner, which will make things easier.”

The first three cities
Nanjing

·         Location: East China, provincial capital of Jiangsu province

·         Population: 8.25 million in 2012

Chongqing

·         Location: Southwest China

·         Population: 29.45 million in 2012

Xuzhou

·         Location: East China, in Jiangsu province

·         Population:  9.76 million in 2012

Source: China-Britain Business Council

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