- The acquisition of a 80% share in Delvaux, the Belgian leather goods manufacturer, through DLX Holdings, an ad-hoc subsidiary. Founded in 1829 in Brussels, since 1883 Delvaux has been an appointed supplier to the Court of Belgium. The brand has three production facilities in Brussels, in Bourg-Argental (France) and Ho Chi Minh City (Vietnam). The company operates 10 stores of it own, and has 220 employees with an annual sales turnover of 17 million Euros.
- The acquisition of 90% of Robert Clergerie through a subsidiary, RC Holdings. The brand has around 200 employees, independently manages a network of 20 stores all over the world and has a manufacturing workshop and a development centre in Romans. Its annual turnover represents over 20 million Euros.
It seems to me that this is the right moment to decipher the strategy of the Li & Fung group. I suggest we take a closer look at 6 key factors:
- The arrival of Victor and William Fung at the head of a Chinese brokerage family group in 1989. Realizing that the role of broker was doomed to disappear, they completely transformed the company by making it a key player in international sourcing. In the words of Victor Fung: "Through a network of 80 sourcing offices around the world, Li & Fung sources high-volume, time-sensitive consumer goods – such as garments, fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandises, toys, sporting goods, and travel goods – on behalf of customers worldwide. Li & Fung provides its customers with the convenience of a one-stop shop with a value-added package starting from product design and development, through raw material and factory sourcing, production planning and management, quality assurance and export documentation, to shipping consolidation. And, instead of owning production facilities, Li & Fung manages over 10,000 quality-conscious, cost-effective producers who deliver on short deadlines for its customers". He adds, "We call ourselves an “information company”, relying on a far-flung network of suppliers to do the work". (Competing in the flat world: the Li & Fung Experience, July 2008). They thus subcontract for Tommy Hilfiger, KarstadtQuelle, Liz Claiborne, Walmart, Helly Hansen, Timberland, Mexx, Toys "R" Us, and others.
- This strategy, initially applied to fashion and toys, was developed from 2009 onwards to include Beauty: the acquisition of the Jackel Group in 2010 allowed them to become full-service providers for brands wishing to develop their own brands or private beauty labels.
- In a second phase Li & Fung created a distribution company - mainly for the U.S. market. They were thus able to offer the distribution of their products to their clients (for whom they design and manufacture products), banking on their logistical expertise. Distribution is essentially in the form of licenses. They established a foothold in the retail market by acquiring distribution rights for Toys "R" Us in Southeast Asia - and setting up the brand's boutiques.
- Li & Fung took the third step by acquiring brand licences - this allowed them to develop comprehensive know-how, from creation / development to distribution.
- With their expertise in distribution they created an independent structure - Trinity - specializing in men's fashion, that obtained distribution licences for several high-end and luxury brands. For each of them, Trinity developed networks of boutiques: they now have 409in China. They then set up a joint venture with Salvatore Ferragamo, which they distribute in Korea, Singapore, Malaysia and Thailand. They thus acquired a real expertise in retail.
- The final step was the acquisition of luxury brands - either through Trinity (Cerrutti 1881) or the Fung Brands Limited fund. The know-how that they lacked - brand management - is within their reach, especially since they are surrounded by leaders from the luxury sector.
Li & Fung has therefore become a global Chinese group in a few years, having all the expertise needed to develop brands - from mass market to luxury, from fashion to beauty. They are now incontestably a major player that one should watch closely!