Retail: Tesco Goes Online, Perry Ellis in New JV 零售：乐购推出网购，派瑞•艾力斯成立合资企业

By newsdoug on April 27, 2012

Perry Ellis chases China middle class Let’s start off this Friday before the long Labor Day weekend with a couple of retail items, one from British grocery giant Tesco (London: TSCO) in the online space and another from mainstream clothing maker Perry Ellis (Nasdaq: PERY), which is entering China with a new joint venture. The Tesco plan attests to the incredible popularity of buying things over the Internet in China. As an American living in China, I’ll be the first to say the growing Chinese fondness for buying things online is quite unlike anything I’ve ever seen in the west. Nearly anything can be ordered over the Internet these days, from a McDonalds (NYSE: MCD) hamburger to books, clothing and just about any other merchandise you can think of. Now Tesco will be adding grocery store items to that list, according to a media report citing a company spokeswoman. WalMart (NYSE: WMT) is also playing in the online grocery game through its investment in Yihaodian, while Carrefour (Paris: CA) is developing the space through a tie-up with a Thai partner. This kind of online service differs from many more traditional ones because deliveries take place very soon after an order is placed, and same-day delivery is essential. But the economics for this kind of initiative seem to work in China, thanks to its high population density and the fondness for shopping online to avoid the throngs of people and long lines at grocery stores. I would expect this kind of initiative to be quite successful if Tesco and other big names can execute their plans well, perhaps meaning trouble for smaller operators like Lianhua (HKEx: 980). The other retail news will see Perry Ellis form a joint venture with local partner China Outfitters (HKEx: 1146) to open new stores selling the US company’s Manhattan brand. (company announcement) The partnership will initially focus on big cities like Beijing and Shanghai, with the first store set to open by the end of this year. This tie-up looks a lot like another one announced last November by Gap (NYSE: GPS), another mainstream US retailer, which said it planned to have 15 stores in China by the end of its current fiscal year and 45 within a year of that. (previous post) The arrival of these more mid-range retailers reflects the emergence of a growing middle class in China, who like to enjoy higher quality products like fashionable clothing and pricey lattes from Starbucks (Nasdaq: SBUX) but don’t want to pay the big prices for luxury brands. Perry Ellis and the Gap are joining even bigger chains like H&M (Stockholm: HMb) and Uniqlo (Tokyo: 9983) in their China expansions, and I don’t really see any problems yet as this segment of the market is growing so quickly it can probably support quite a number of well-run players. Look for more similar mainstream foreign clothing chains to join this trend in the next couple of years, and also for possibly 1 or 2 to withdraw as they discover that a big market doesn’t necessarily guarantee success.

Bottom line: Tesco’s testing of online sales reflects the popularity of e-commerce in China, while Perry Ellis’ new joint venture reflects the big opportunity offered by a growing middle class.

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