Geox has found two Chinese distributors to replace Riqing Enterprise and help it cover the whole mainland while it pursues a strategy of opening directly-operated stores (DOS) in Beijing and Shanghai.
The company has signed a deal giving Pou Sheng International, the Chinese retail subsidiary of Yue Yuen Industrial Holding, an exclusive distribution license to sell Geox' men's and women's collections through physical stores all over mainland China, with the exclusion of Beijing and Shanghai. Pou Sheng will have the right to sell Geox' adult products all over China online and through its own physical stores, with the objective of setting up 229 mono-brand stores and placing the goods in 199 multi-brand stores in three years' time. That would include Pou Sheng's YY Sports chain of sports stores. Pou Sheng will also have the right to sell Geox' collections to multi-brand e-commerce platforms all over mainland China, including YY Sports' own website, but will not be permitted to create an online site using Geox' name.
The other distribution deal is with Goodbaby China Commercial, which will sell the brand's children's products, both online and offline, under its Kids Station banner. The company is due to set up 225 Geox corners in Kids Station stores, including those located in Beijing and Shanghai, in three years.
Goodbaby China, which is a spin-off of a Hong Kong-listed company, Goodbaby International, made headlines in the business newspapers in February when it decided to pull out of a public offering of shares in the former British colony in what was seen as the result of deteriorating investor confidence in the Chinese consumer market as the domestic economy slows down. Goodbaby China sells baby products in nearly 3,300 stores across China.
Geox' expansion in China has been a rough ride, the company having to regularly change partners. It entered the Chinese market in 2003 through a partnership with a local footwear manufacturer, Aokang. When their agreement expired in 2008, Geox chose Belle International as its new distributor. But in October 2012, Geox announced that it was changing partners again and joining forces with Riqing. Under the deal, Geox was scheduled to open about 100 DOS in Shanghai and Beijing by the end of 2016. While Riqing had pledged to open about 400 points of sales in the rest of China. Early last year, Geox announced that Riqing had asked for a drastic downsizing of its investments in the stores, prompting the Italian company to call off the deal.
With the two new partnerships, Geox expects to sell its products in a total of 653 wholesale doors in mainland China by the end of 2018, up from 46 at the end of 2015. Meanwhile, Geox will continue to build up its local DOS network, which is due to rise to 99 units in 2018 from 65 at the end of 2015.
China is the keystone to the group's expansion in Asia-Pacific, where the number of stores operated by wholesale customers is expected to rise by about 700 units, largely made up of corners in multi-brand stores, and reach 1,159 in 2018 compared with 448 last year.
The number of wholesale doors in Japan is due to almost double, rising to 100 from 53. In Hong Kong, where the brand has no presence outside its own stores at the moment, Geox is aiming for sales in five wholesale accounts. The number of doors in the rest of Asia-Pacific is set to rise to 401 from 349. The number of DOS in the region is expected to rise to 141 in 2018 from 100 in 2015, with Hong Kong increasing to 22 units from 21 and Japan to 20 from 14.
Geox has identified Hong Kong, Shanghai, Beijing and South Korea as core markets in the region. The firm said that it has been investing massively in Shanghai and Beijing, and even if brand awareness has not reached the levels recorded in its core European markets – namely Italy, France, Iberia and Germany - the trend is positive. Geox sees the Chinese wholesale channel as well as Indonesia as so-called “development markets” for its brand, offering high growth potential, but where brand awareness has yet to be built up. It sees Singapore as a “penetration market,” where it already enjoys strong brand awareness, although the growth potential is limited.
Geox' chief executive, Giorgio Presca, stated the company's ambition is to be “a world-class brand” and to turn Asia-Pacific into one of its key markets along with the Europe, Middle East and Africa (EMEA) region, where it is solidly established, and North America, where the brand's presence is still much smaller and where it is aiming for annual sales growth of 16 percent, as reported in another article in this issue.