LONDON — Exor, the owner of Ferrari and The Economist Group, has invested in Hermès International’s China project Shang Xia, the company revealed Wednesday.
Exor will invest around 80 million euros in Shang Xia by the end of the year via a reserved capital increase that will result in it becoming the company’s majority shareholder. Hermès will remain as an important shareholder alongside Exor and founder Jiang Qiong Er.
The company said with this agreement, Shang Xia will benefit from the support of two family-owned companies, one with French roots and one with Italian roots, both with a common culture of excellence and entrepreneurship.
Axel Dumas, executive chairman of Hermès, said: “We are proud of how far Shang Xia has come in the last 10 years, demonstrating our confidence in the brand’s unique model and original proposal.
“With Exor, we share a long family and entrepreneurial culture on which we will be able to build Shang Xia’s new successes,” he added.
John Elkann, Exor’s chairman and chief executive officer, said, “We’re delighted to be able to share with Shang Xia our experience of developing global luxury brands as well as the entrepreneurial spirit we bring to all our companies. Shang Xia represents a unique opportunity to build the first global luxury lifestyle brand of genuine Chinese heritage.”
“With Hermès, we look forward to accompanying Qiong Er in the years ahead, supporting her in building a great company with the ambition to increase the appreciation of the contemporary creativity and traditional culture of China to a growing client base worldwide,” he added.
Exor is one of Europe’s largest diversified holding companies and is controlled by the Agnelli family. Its portfolio is principally made up of companies in which Exor is a leading shareholder: Ferrari, Fiat Chrysler Automobiles, PartnerRe, CNH Industrial, Juventus FC, the Economist Group and GEDI Gruppo Editoriale.
Shang Xia founder Qiong Er said, “Within just a decade, Shang Xia has managed to position itself as one of the first Chinese brands on the international luxury stage. This has been achieved thanks to the consistent commitment of Hermès all along. As founder of Shang Xia, Exor joining our initial duo is a thrill as it will enable Shang Xia to pursue our dreams and ambition with more power than ever.”
Founded in 2010, as a major step for a Western brand in China, unveiling a new brand created specifically for one of the world’s fastest-growing luxury markets, Shang Xia operates stores in Shanghai, where it was founded, and in Beijing, Chengdu, Hangzhou, Shenzhen and Paris. Next year will see new stores open in Singapore and Taipei.
The brand shares a similar product offering to Hermès, selling accessories, leather goods, ready-to-wear, homeware, tableware and furniture made with traditional Chinese aesthetic and craftsmanship.
Luca Solca, head of global luxury goods at Bernstein, said “This deal is as interesting as it is unexpected. Shang Xia has been an experiment in the world of Chinese contemporary luxury, which hasn’t played out as hoped, from what I understand.”
Meaning “up-down” in Chinese, Qiong Er told WWD that she drew inspiration from Chinese philosophy for Shang Xia. “It is the meeting of the opposites, as in the Yi Ching ‘up and down,’ the ying and the yang, the woman and the man, the sky and the earth,” she said.
Patrick Thomas, chairman of Shang Xia, and ceo of Hermès at that time, said Hermès is taking it slow with the new brand. After establishing a presence in China, Shang Xia opened its first international outpost in Paris in 2013.
Earlier this year, as it marks 10 years in business, the brand said it is making a major retail push in China and launching a capsule collection for younger clients.
Thomas said the brand was coming off a banner year, with sales in China — which accounts for 90 percent of its revenues — up 60 percent in 2019, but noted that it was a marginal contributor to the French luxury house’s revenues of 6.9 billion euros last year.
His outlook for 2020 was gloomy, in line with the global luxury sector, but Thomas and Jiang were upbeat about the medium-term prospects for the label, which is reaching a new stage of maturity at a time when Chinese domestic consumption is set to expand as a result of government policies to prop up local spending, and a forecast decline in international travel due to COVID-19 restrictions.
“We have very ambitious plans this year to develop Shang Xia, despite COVID-19,” Jiang said. “Today, a luxury brand rooted in Chinese culture has great potential in China, in Asia, and potentially worldwide.”
Thomas acknowledged the brand had a bumpy start, as it took a long time to track down craftsmen who still possess traditional skills, many of which were lost during China’s Cultural Revolution. “I told [Qiong Er], ‘Don’t worry about the bottom line. Just make sure you execute the project as perfectly as possible,’” he said.
“A real luxury brand is not about getting rich,” Jiang concurred. “It requires a lot of time. It’s like architecture: if you want to build a skyscraper, you need to dig a foundation that is almost as deep. It took Shang Xia 10 years to build the foundation of the brand. We faced a lot of challenges, but we’re very happy with the result.”