Macy’s Expands Reach with China E-Commerce Investment

Terry Lundgren
Terry Lundgren, chairman and CEO of Macy's Inc.
Getty Images.

Despite a general sluggish environment in department stores, Macy’s isn’t slowing down and is targeting new shoppers in two newly announced initiatives.

Today the retailer announced plans to develop and test e-commerce in China with Hong Kong–based Fung Retailing Ltd. The joint venture, in which Macy’s is the majority partner, aims to kick off at the tail end of 2015 and will be featured on Alibaba’s Tmall Global and will use Alipay for the primary way to pay.

Fung Retailing will help to handle the logistics of the Macy’s sales.

The joint venture will create the firm Macy’s China Ltd. based in Hong Kong. The firm will cost the retail giant $25 million, about 65 percent of which Macy’s will fund. By 2016 the firm expects e-commerce revenue in China to reach $50 million.

With a growing demand for new brands by shoppers in China, Macy’s executives are confident in the agreement.

“By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales. We have been closely following the development of the Chinese marketplace for many years and have learned that success requires that we have the right partners to help us navigate the unique needs and characteristics of consumers in China,” said Terry J. Lundgren, chairman and chief executive officer of Macy’s, Inc.

“We like Macy’s focus on online fulfillment, off-price, e-Comm China joint venture, & beauty but not likely near-term needle-movers,” said analyst Oliver Chen in an earnings note this morning.

Additionally, Macy’s announced a new development in downtown Brooklyn this morning. The company will team up with developer Tishman Speyer to help redevelop its Fulton Street space. The nine-story building will be transformed into a multiuse development over the next few years.

Macy’s will renovate and continue to manage the first four floors of the space and Tishman Speyer will develop the other floors into an office space. The developer also purchased Macy’s parking garage for future development. Construction starts next spring and is expected to be completed by 2018.

All together Macy’s makes $270 million that it will put toward the store renovation.