LONDON — The virtual world has cast its spell on Adrian Cheng, the billionaire entrepreneur who has taken a “significant” stake in Moda Operandi as part of his quest to acquire digital lifestyle brands and platforms that speak specifically to Millennials and Gen Z.
Cheng took the stake through two of his vehicles, K11 Investment and C Ventures, the latter of which was unveiled here in October. Apax Digital has also taken part in the $165 million investment, which Moda will use to expand its international business, with a particular focus on the Asian and Middle Eastern markets.
An announcement is expected today.
“The way the fashion industry works has largely stayed unchanged for decades, yet with e-commerce, we’re seeing many disruptive business models that answer the future needs of the sophisticated Millennials,” Cheng said. “Moda Operandi is clearly one of them, and it perfectly adds to the global ecosystem that C Ventures is building.”
He called the site’s business model, which is based around digital trunk shows, off-the-runway ordering and in-season sales, “unique and cutting edge” and said its curated customer experience spoke to shoppers’ growing appetite for bespoke luxury.
The terms of the deal were not disclosed, and Cheng’s spokesperson declined to detail the size of K11 and C Ventures stake. Cheng will become a member of the Moda Operandi board and will be a hands-on partner, the spokesperson said.
He joins Fidelity Investments, Advance Publications, New Atlantic Ventures, LVMH Moët Hennessy Louis Vuitton, and other investors in the company, which had raised $60 million during its latest round of funding in 2015. It has yet to turn a profit.
Although Moda was born as a pure online business in 2010, it has been building out its network of brick-and-mortar showrooms that act as appointment-only, VIP spaces for clients who want extra attention.
Cheng said there is a significant appetite among the BAT generation — kids growing up in a world of Internet giants like Alibaba — for fresh and unique fashion pieces as a means of self-expression, and argued that Moda Operandi can meet that demand at the click of a button.
The BAT generation makes up close to half of China’s population of 427 million Millennials and 235 million Gen Zs, which is bigger than the working populations of the U.S. and Western Europe combined.
Clive Ng, cofounder of C Ventures with Cheng, said that by joining C Ventures’ growing ecosystem, Moda will have “the opportunity and a global platform to connect it to the Asian and Chinese luxury markets.”
Cheng’s and Ng’s vision appears to dovetail with that of Moda. In April, chief executive officer Deborah Nicodemus said the e-tailer has been planning for a surge in Millennial customers and wants to cater to their needs.
“By 2020, more than 50 percent of the workforce population will be Millennial and we really need to understand what it is they want, and what they are interested in. We know that they want to have an intimate relationship with the retailer, that they want to participate and have a meaningful experience,” she told WWD’s Retail 20/20 summit in London.
Cheng said the investment would add depth to C Ventures’ network of brands in the fashion, creative media and art sectors and also allow for cross-platform collaboration opportunities with K11, Cheng’s group of business, cultural, technological and charitable enterprises.
The Moda investment marks yet another move in the mating dance between Chinese investors and Western digital brands in fashion and retail.
In June, JD.com, China’s second-largest e-commerce company, sank $397 million into the fashion and luxury platform Farfetch.com. Later that month, shares in Yoox Net-a-porter Group spiked nearly 9 percent on market chatter that Alibaba was interested in taking a stake in the fashion e-commerce giant, although the market furor died almost as quickly as it began.
C Ventures has already taken stakes in companies such as Armarium, which offers luxury rentals right off the runway; Not Just a Label, an editorial and e-commerce platform that promotes emerging designers from around the world; upscale fitness brand Bandier; women’s social media platform Galore, and the entertainment site SkyBound.
Cheng has said his vision is to unite culture-oriented brands into a portfolio that marries fashion, art and creative media, and to meet the demands of next-generation consumers. His theory is that, in the eyes of consumers under the age of 25, the world is without borders.
“The younger generations are much more globally connected. They fly around. You look at China, you look at the West, they don’t care what race you are, what boundaries you have, all they care about is whether you’re cool. This word is important and while ‘coolness’ is a little bit of a cliché, it connects people,” the dapper Cheng told WWD in an exclusive interview.
“People are opening up, and so it’s the right time to build this ecosystem. We are using C Ventures as a window to this new generation, to see these early adopters, trendsetters, and how they look at the world.”
Cheng said he wants the companies he’s invested in to “mingle and get to know each other. It’s a family. The key is to hook them up, connect them, and see whether they can connect their synergies. At the moment, C Ventures boasts nine companies, but the plan is to have 20 or more.”
He declined to say how much money he plans to spend and described C Ventures as “more of an investment club, so it’s not capped at $30 million or $100 million. It’s more spontaneous.”
Cheng has commerce in his veins. Alongside his investment businesses, he also serves as executive director of New World Development and Chow Tai Fook Jewellery Group and is heir apparent to his father Henry, who serves as chairman of the two firms.
In addition to being one of the largest property developers in Hong Kong, the family conglomerate owns the Rosewood Hotel Group, which includes The Carlyle hotel in Manhattan and the Hôtel de Crillon in Paris, among others. The family firm also controls four listed companies and some private ones.
Combined, the Cheng family’s real estate and jewelry businesses are valued at an estimated $30 billion. Two of Cheng’s other siblings are involved with the family-run business, a rags-to-riches enterprise started by their grandfather Cheng Yu-tung, who built a $15 billion fortune.
Although his investments are wide-ranging within the lifestyle space, fashion continues to capture Cheng’s imagination and he said he’s specifically looking for brands that are strong online. His target brands are in the affordable, contemporary, accessible luxury space. “I’m looking at everything from clothes to jewelry to shoes and accessories,” he said.
Moda does not fit this niche, being focused almost exclusively on designer and luxury fashion, accessory and jewelry brands.
Cheng is also fixated on how artificial intelligence and virtual reality will shape the future of shopping, saying that he can see the day when shoppers strap on their VR headsets and land at Selfridges in London — or any other big retailer.
“VR creates so many surprises, it’s like a game. You go in, you choose a dress, you go back to the e-commerce site. It’s not anything that is over the top. It’s possible, and it’s coming,” he said.
He’s warming to the idea of virtual identity — and plans to invest in a related project going forward.
“Virtual identity is going to be the next big thing — and that will be a big business. You can’t do cosmetic surgery all the time but you can enhance your skin in the virtual world. You can have bigger eyes, or go to a spa to make yourself thinner. My virtual self can go to a Gucci shop to get whatever I want. And then that virtual world becomes connected. Press this button and let’s go shopping. We can talk and chat. You like a dress? Poof! Try it on, and let’s buy it.”
Asked about the stamp he wants to put on the family brand, Cheng doesn’t hesitate to answer. “Disruption, innovation and building a cultural enterprise, an ecosystem, an incubator. Not just on the hardware but on the software side, too. For many years we’ve been building spaces, hardware, brick-and-mortar, but we haven’t been building ecosystems on the software or intellectual property side. If we do this then we have the entire circle,” he said.