There are five common mistakes Chinese groups make with European brands they have bought. Mistakes that, hopefully, will not be repeated in the future by those that hope to be successful. China, a protagonist in the luxury market, lacks a conglomerate able to compete with Western giants. Starting from 1987, when Dickson Poon Group located in Hong Kong bought French company ST Dupont, Chinese investors have tried similar operations often. Yet, they often didn’t reach the sought-after goals. The last case is that of Gieves & Hawkes, one of the oldest tailoring companies around (controlled by Trinity), which will soon be liquidated if a buyer doesn’t step forward. Trinity is part of Shandong Ruy, aspiring “Chinese LVMH”, a conglomerate that was never able to close the deal on Bally and that is losing SMCP.
The five most common mistakes
- “Chinese groups often buy struggling brands that need to turn page – explains segment expert Mario Ortelli to South China Mornig Post-. They look for brands to buy at a good price, but in doing so raise the bar as fare as the brands’ management goes.
- Chinese companies are ill-equipped when it comes to leading European brands during retail crisis, from investments in the digital channel to the pandemic.
- “Lack of experience in the segment and little added value in their contribution – says Luca Solca, analyst at Bernstein –. This leads brands to take poor decisions and managers to leave”.
- No patience. “Chinese investors have money but lack patience. They demand a return on the investment after 3 years”, says Jiang Er Qiong, founder of Shang Xia,to Jing Daily.
- The investor often trusts in the Chinese marketplace but… “Chinese consumers are very sophisticated – continues Ortelli -. The brand must first have history in Europe, before it can explore opportunities in China”.
- The exception: the exception to the rule is Lanvin Group, created by Fosun Fashion Group.
Additionally, there is also Mulberry, which is held by majority shareholder Challice Limited, a company owned by the Ong Beng Seng family and Christina Ong.
In photo, look Maje (SMCP)