Company stakes out a plan to put itself on the world map

When the Sanpower Group of China bought the 165-year-old British department store chain House of Fraser last year, the buyer's name would have meant little to most people.

One year on, and having chalked up record sales in 2014, House of Fraser has unveiled plans to expand to China and open three outlets, in Chongqing, Nanjing and Xuzhou, both in Jiangsu province.

Sanpower's founder and chairman, Yuan Yafei, whose name would have been just as mysterious to most Britons a year ago as that of his company, organized a business conference at Wembley Stadium in London on April 24, and called on about 1,000 British business partners to tap into the Chinese market.

The company, which was established in Glasgow in 1849, also unveiled ambitious plans to break into the Australian market. A second franchise store in Abu Dhabi will also open soon, with more stores in the Middle East set for next year.

House of Fraser's sales rose 5.8 percent last year compared with the year before, and its gross profit rose 6.8 percent to 460.2 million pounds ($710 million; 639 million euros). The company did not disclose its pre-tax profit. Online sales performed strongly, up 32 per cent, accounting for 15.4 percent of sales.

The momentum has continued into the new financial year, with sales for the first 11 weeks to April 18 rising 6.5 per cent.

Sanpower, whose headquarters are in Nanjing, took control of the House of Fraser in April last year, buying an 89 percent stake, in a deal that valued the company at more than 450 million pounds, including 250 million pounds of debt.

It is the biggest international retail acquisition by a Chinese company. The deal represented Sanpower's first investment in British retailing.

Speaking of his plans for House of Fraser in China, Yuan says: "First, a store will be opened in the Xinjiekou business area of Nanjing, and it will be named Oriental Fraser. We will introduce a modern British way of management and very high-end brands to China."

It is understood that the Nanjing store will open next March, the Chongqing one later in the year and the Xuzhou one in 2017.

Yuan says he believes suppliers and business partners outside China need the Chinese market as the country's economy is transforming, with a greater emphasis on the growth in consumption.

China will surpass the United States as the world's largest retail market within the next three years, said a joint report by PricewaterhouseCoopers and the Economist Intelligence Unit in February. Annual growth in retail sales will reach 7.9 percent by 2018, compared with 2.6 percent for North America and the global average of 3.4 percent, the report said.

"China's retailing industry is facing an adjustment in the business model," Yuan says.

As e-commerce booms in China and elsewhere, he says, Oriental Fraser will simultaneously promote online and offline business.

"We bought Meici.cn, a Chinese online luxury products shopping website, and will connect it with House of Fraser. Then customers can buy thousands of authentic British products online."

The company says House of Fraser will start to trade online in Australia before launching in China and other international markets.

Nigel Oddy, the chief executive officer, says: "We are confident that the group's business model, with our premium brand positioning and strong multi-channel operation, will ensure that House of Fraser continues to grow and develop for the foreseeable future.

"We are very excited by the future as we embark on the next phase of growth, both in the UK and internationally."

House of Fraser has long been in the mid-tier department store market, generally being outperformed by John Lewis, but keeping ahead of struggling Debenhams.

The group has 60 stores across Britain and Ireland.

Yuan, 50, founded Sanpower Group in 1993 after leaving his job working in the government office of Yuhuatai district in Nanjing.

Sanpower now employs more than 85,000 people worldwide and controls 100 companies, covering banking, retail, media and property, its website says.

zhangchunyan@chinadaily.com.cn

(China Daily European Weekly 05/01/2015 page23)