By Tiffany Ap
with contributions from Amanda Kaiser
 on August 23, 2015

Luen Thai’s Willie Tan knows exactly what kind of brand he wants to bring to Asia: a mass consumer label with turnover of about $1.5 billion annually, that also ranks in the top five of its category in a major market like the U.S.

“I am not the Louis Vuitton guy,” said the executive, who is spearheading Luen Thai’s retail business. “I’m a guy who would love to go from first-tier cities down to third- and fourth-tier cities [in China].”

Back in 2007, Luen Thai inked a deal to distribute the Skechers brand in China and Southeast Asia, marking the group’s first foray into the world of retail. Since then, Luen Thai has built up the brand’s retail network, which will count about 1,000 stores by the end of the year. He said Skechers’ same-store sales growth hit the high double-digits last year and online sales have tripled compared to a year ago. The Skechers business is housed in the privately held Luen Thai Enterprises, rather than the publicly listed Luen Thai Holdings Ltd. Luen Thai is now banking on striking similar deals with other brands and hopes to become a formidable player in Asian retail.

Tan, a son of Luen Thai founder Tan Siu Lin, said the company expects to reveal two deals with other brands by next spring and add another two by 2018. Retail accounts for about $300 million of the Tan family’s entire portfolio of businesses. But Willie estimates that revenue from retail could account for as much as $1 billion during the next five to 10 years as Luen Thai adds new brands to its retail portfolio.

Jason Tan, who oversees Luen Thai’s Skechers apparel division as well as its Adidas business, stressed the importance of pushing the company into retail because Luen Thai does not expect its manufacturing business to post aggressive growth in the years to come. At the same time, he was candid about the challenges that lie ahead. “I always say, just because we know how to make it, it doesn’t necessarily mean we know how to sell it. It’s a totally different business and it requires a completely different skill set,” said Jason, who is part of the third generation of the family — he is the son of Luen Thai chief executive officer Henry Tan, the eldest son of Siu Lin. “Even though from manufacturing and from in the U.S., the majority of sales in China are through franchisees or self-operated stores — though he believes that with the family’s decades of experience in the region and Luen Thai’s manufacturing capabilities, they should be able to navigate the market.

“Many of the brands that come to China try to expand, but they are having a hard time because the costs of operation in China are very high,” Willie said. “To find the balance has been quite challenging from many global brands. A lot of people think they know China, but not many people do.

“Eventually, we want to develop an integrated supply chain to develop a short lead time and strong replenishment program. We hope that we can follow a Belle [International] model, a Zara model,” Willie continued, adding that most of Luen Thai’s manufacturing is based in China, which should give the company an advantage on shorter lead times to get products in the store. “It takes a lot of effort to launch a brand in China and Southeast Asia. It’s not a game of how many brands we have, but how large the brand is going to be.”

Willie said Luen Thai turned its attention to retail about two years ago. While
Luen Thai’s core manufacturing business was feeling the pressure from thinning margins, the Skechers retail expansion was going well. He said he hopes Skechers will follow the path taken by other established global sporting giants.

“Our network is basically following Nike and Adidas, to place our stores where they are located — and they each have 6,000 stores in China,” he said. “Our sell-through ranking in department stores in the sport category is in the top four. It’s usually Nike, Adidas, [then] either us or New Balance.”

While Nike and Adidas are performance-based, Skechers dominates the walk- ing-shoe market in China, he said.

“[Chinese consumers] walk a lot more than Westerners,” Willie said. “It has to be comfortable and durable and [to] fit the weather. The pricing also has to be affordable. We don’t sell cheap shoes but affordable [ones].”

In terms of e-commerce, Luen Thai is selling the brand on major platforms like Tmall, JD.com and VIP.com. The company plans to open another 500 to 700 bricks-and-mortar Skechers stores in the coming year on top of the 1,000 it will have by yearend. While that number might seem large, he insisted it’s modest in a country as populous as China.

“We’ve been very selective where we open our stores,” Willie said. “Every city in China is huge.”

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