A gap in Hong Kong’s retail landscape was filled last week when Victoria’s Secret finally opened one of its flagship stores in the city (Shanghai got one nearly 18 months ago). To drum up interest for its newest store – which spans 50,000 square feet in the heart of a busy shopping district – the lingerie giant sent two of its ‘angel’ models Martha Hunt and Josephine Skriver for a meet-and-greet with Hong Kong fans.
WiC paid the store a visit shortly after it opened and there was a lot to take in. With black walls, a mirrored staircase and a jumbo screen that plays Victoria’s Secret runway shows on a loop, the three-storey outlet sells everything from athletic wear and fragrances to the more ornate undergarments.
The sales staff were bubbly, constantly reminding shoppers that there was a special deal on selected products and offering to spray scent on female clients.
Victoria’s Secret already had a small outlet in Hong Kong, mostly selling perfumes. This is the first time the iconic fashion brand has brought the full array of its lingerie and womenswear to the territory.
Hong Kong remains a popular destination for Chinese tourists and the expansion comes at a time when Victoria’s Secret is looking to tap the China market as sales slow in the US. In June, L Brands, the lingerie maker’s Ohio-based parent, reported an unexpected drop in sales, which had some analysts declaring that the brand was increasingly out of step with what modern American consumers want.
But as it steps up its sales efforts in China it faces an unlikely source of competition: its former boss.
Sharen Jester Turney, who left the US lingerie firm in 2016 – after a decade at the helm – recently announced that she will become the chief strategic officer at China’s top lingerie maker Cosmo Lady. In her new role, Turney will oversee the Chinese company’s operational issues including mergers and acquisitions, as well as overseas expansion.
The hire shouldn’t come as a surprise. For years, Cosmo Lady has made plain it wants to be China’s own Victoria’s Secret. It frequently sent designers and its management team to Victoria Secret’s stores in the hope of learning from its more famed rival.
Much like Victoria’s Secret annual fashion gala, Cosmo Lady also hosts its own lingerie shows, often in its homebase of Dongguan.
“In the next five to 10 years, you will see a real Chinese lingerie show. You wouldn’t have to travel to the US for that, you will see it in China,” Cosmo Lady’s founder Zheng Yaonan told the Dongguan Times. “The lingerie show is one of the means to promote our brand.”
The problem, however, is that China’s underwear market is highly fragmented and brand loyalty is low. Although Cosmo Lady claims to be the nation’s market leader, its share is less than 5%. In contrast, Victoria’s Secret has a 20% share in its home market the US market and turnover that is 10 times that of Cosmo Lady, pointed out Dongguan Times.
Sales at the Hong Kong-listed Cosmo Lady have also been stagnant. The company reported revenue of Rmb4.5 billion in 2017, up less than 1% from a year earlier. Profits were better: rising 31% year-on-year to reach Rmb317 million ($47 million) during the same period.
The company currently boasts over 7,000 outlets around China, with the majority of the shops operated by franchisees.
The hiring of Turney suggests that Cosmo Lady now wants to look beyond China for sales. The company is already planning to expand in markets like Japan, Indonesia and Thailand, and the goal is to become a global brand.
It has also brought on board new strategic partners. Chinese conglomerate Fosun bought an 11.2% stake in Cosmo Lady for HK$600 million ($77 million) in May last year, valuing the company at about HK$5.4 billion.
Four months ago, Cosmo Lady sold another 5% of its enlarged capital to internet giant Tencent and e-commerce firms JD.com and Vipshop. The placement values the lingerie maker at nearly HK$10 billion ($1.27 billion).
The proceeds from the latest fundraising will be used to overhaul its sales and distribution channels and also as a war chest for potential acquisitions.
However, the first order of business for Turney is probably to upgrade Cosmo Lady’s range, said National Business Daily. Even though the company has tried repeatedly to move up-market, “its products still feel really unsophisticated,” the newspaper opined.
Turney will be aware the company has tried before to ditch the dowdy. Over the last few years, it has either sold or closed down some of its lower-end shops in third- and fourth-tier cities to maintain a focus on higher-end segments. It also acquired the domestic high-end underwear maker Ordifen back in 2015. But that brand’s sales represented just 3.6% of Cosmo Lady’s overall business.
A foreign deal might be afoot. However, it looks like buying La Perla, arguably the world’s most premium lingerie brand, is not on the cards. Cosmo Lady shareholder Fosun had been in exclusive talks to buy the Italian bra maker in December, according to website Business of Fashion, but pulled out of the negotiations.
Sapinda, the investment vehicle of German entrepreneur Lars Windhorst, then bought La Perla in February with a pledge to keep production in Europe.
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