Facing Two Uncertainties, What Will BELLE'S Future Road Take?

BELLE international is the largest female footwear retailer in the mainland. As of the end of June 2007, its self retailing outlets reached 4816, an increase of 988 over the end of 2006.

The company currently operates 8 footwear brands, of which four of its four brands occupy 17.7% of the mainland market share in 2006.

Not only that, BELLE international is also the largest retail agent of Nike and Adidas's two sports brands in the mainland.

Although the success of BELLE international has the macroeconomic factors such as the continuous improvement of China's economy and the rise of "her era" economy, the key to its success is to adopt the vertically integrated chain business mode, skillfully arranging the rhythm of upstream and downstream capital inflow and outflow and light asset operation strategy.

In May 23, 2007, mainland China Women's shoe retail Belle International Holdings Ltd (hereinafter referred to as BELLE international or company) was officially listed in Hongkong. The first day of the listing of BELLE was HK $8.14, and the price of 6.2 Hong Kong dollars rose by 31%.

According to the closing price of the day, BELLE International's market value reached HK $78 billion 900 million, which exceeded the market value of Gome on the day of HK $36 billion, becoming the largest mainland retail listed company in the market capitalization of the Hongkong stock exchange.

In the course of the offering, BELLE International's public offering has gained nearly 500 times the amount of subscription. The frozen capital is as high as HK $438 billion, breaking the record of 415 billion 600 million Hong Kong dollars frozen by ICBC in 2006. It has become the most popular capital in Hongkong's capital market.

From nearly three years of financial indicators, BELLE international sales and profits have shown a rapid growth trend. In 2006, BELLE international sales revenue was 7.16 times in 2004, the profit is equivalent to 13 times in 2004, the rapid growth of the situation is amazing.

What special advantages does BELLE international have to develop at such a high speed?

Bypassing policy restrictions and laying the foundation for development, BELLE International's predecessor was Lihua Shoes Co., Ltd., founded by Chairman Deng Yao in 1981 and engaged in footwear products trade in Hongkong.

In October 1991, Lihua set up a Sino foreign joint venture Shenzhen BELLE Shoes Co., Ltd. (hereinafter referred to as Shenzhen BELLE), engaged in processing and manufacturing footwear products, and then expanded its business to sell footwear products wholesale in China.

After accumulating more than ten years of experience in footwear manufacturing, the company set up StaccatoFootwearcompanyLimited in 1998, and retailing women's footwear products in Hongkong.

At the same time, the company has begun to expand its global retail network.

As of December 31, 2006, the company has opened 35 retail outlets in Hongkong, Macao and the United States.

The company originally planned to develop footwear products retail business in the mainland in 1997. However, because the mainland was in the regulatory environment restricting the participation of foreign businessmen in China's retail industry, the company's development of the retail network in the mainland had been limited.

In 1997, in order to create and own its own brand and improve the share of the footwear products in the mainland market, BELLE and the mainland, about 16 individual distributors signed exclusive distribution agreements.

By distributor, as a retailer, exclusive distribution of brand footwear products in various regions has made significant progress in brand building and market penetration of BELLE international in China.

In 2001, Belle leather shoes became the first two sales and sales of similar products in China.

As of July 2002, the number of retail outlets operated by these distributors in the mainland reached 600.

In July 2002, individual distributors set up the Shenzhen BELLE Investment Co., Ltd. (BELLE investment).

The company is to establish a similar exclusive distribution agreement with BELLE to replace the exclusive distribution agreement previously made with individual distributors.

Most of the shareholders of BELLE investment are individual distributors, but at the same time, the founder Deng Yao family member and general manager Sheng Bai pepper's family members altogether hold 45% of BELLE investment, deeply intervening in this company, which is mainly built by the sales network terminal.

Through this equity arrangement, Deng Yao and other founders obviously strengthened their control over downstream sales terminals.

In April 2004, China promulgated the "management of foreign investment in commercial areas", which eased the restrictions on foreign investment. At that time, BELLE investment in China actually controlled 1681 retail outlets.

At the end of 2004, BELLE invested 1681 retail stores and gradually pferred to Off Shore Company BELLE international through the way of leasing contracts. The management of stores was pferred by re hiring salesmen, while BELLE's office equipment, cars and intangible assets were sold to BELLE international for 61 million 200 thousand yuan.

In August 2005, the company terminated its exclusive distribution agreement with BELLE and began restructuring in August 24, 2005. In September 12, 2005, financial investors of Morgan Stanley's two fund companies, such as MsShoesLimited, MsShoesIILimited and CDHRetailLimited of CDK investment, subscribed some new shares of BELLE international at HK $23 million 664 thousand. On the same day, three new BVI companies Handy, Essen and ProfitLeader, which were BELLE's International Personal distributors and main executives, subscribed some of the new shares at HK $77 million 430 thousand, HK $76 million 880 thousand and HK $293 million 560 thousand respectively.

After the completion of the restructuring in September 2005, BELLE international with sufficient capital began to expand rapidly.

By the end of 2006, BELLE international had more than 1400 new retail outlets in the mainland, with a total number of 3828 chain stores.

At present, BELLE international is China's largest women's footwear retailer and one of China's largest sportswear retailers.

BELLE has 8 brands, including 6 brands, including Belle (BELLE), Staccato (Staccato), Teemix (Teenmix), Tata (HERS), Fato (JipiJapa), JipiJapa, Joy& Peace (real beauty poem) and Bata two authorized brands.

The price ranges from 300 yuan to 2000 yuan.

In the same target group, the company provides targeted footwear products for work, leisure, formal and sports occasions.

But from the product brand positioning map, we can see that although the company's products cover a wide range, but in the more casual and fashionable footwear products, there is a lack of high-end products (Figure 1).

BELLE International said it would be ready to develop, acquire or act as a high-end leisure or fashion brand in the future to balance the product mix so as to maximize revenue.

BELLE international, which runs many brands, is also quite successful in brand building.

According to the statistics of CIIIC, BELLE has been the first brand in Chinese women's shoes for ten consecutive years (Figure 2).

As of December 31, 2006, Teenmix, Staccato and he ranked fourth, eighth and ten respectively in Chinese women's shoes ranking.

In addition, in January 30, 2007, the Ministry of Commerce awarded BELLE as one of the five most competitive footwear brands in China.

On the one hand, multi brand strategy enables the company's products to be targeted at customers of different age, gender and income, thus providing a wide range of customers for the company.

The advantages of the company in segmented market (ten sales areas) also enable it to get different consumers in different market segments through multi brand strategy, so that the company can get a steady income.

Moreover, because different brands can be used for market communication and promotion by brand names, trademarks and advertising slogans, they will not affect the brand of any group due to the poor management of any brand or other problems.

But on the other hand, BELLE does not emphasize the publicity of the overall brand of the company. For the promotion of the market, advertising costs will be more expensive and can not play a synergistic role.

However, the BELLE international listing is undoubtedly the best publicity for the overall brand of the company. Investors have a comprehensive understanding of BELLE international products and company strategy.

The strategy of reducing the risk of retail outlets layout is because China is a diversified market. In order to better cater to the different needs and aesthetic tastes of consumers in different regions, the company divides China into 10 sales areas according to the factors of humanity, geography, economy and technology, and places the right of purchase and sale to various sales areas.

The flat decision-making process can better adapt to the rapid market changes and enhance the company's sales and profitability.

By the end of December 2006, BELLE owned and operated 3828 retail outlets in the mainland, distributed in 150 cities and 30 provinces, and another 35 retail outlets in Hongkong, Macao and the United States.

The company's self retailing stores mainly include department stores, stores and independent stores.

By the end of 2006, the sales of its stores in the department stores accounted for 73.4% of the total turnover.

The company uses a concession selling fee to cooperate with department stores, and stores calculate the rent according to the percentage of the sale fee of the franchised sales, that is, the monthly sales income of the retail store.

In this way, the company does not have to pay the scheduled rent, and avoids the adverse effects of the scheduled rent on the company's profit during the off-season.