Bossini eyes 1,000 mainland shops in 5 years
Casual-wear retailer speeds up China expansion as rents, rivalry rise at home
Casual-wear retailer Bossini International will accelerate the expansion of its mainland operation, with a target to double the number of its outlets there to 1,000 over the next five years.
Confronted by an increasingly competitive retail market at home that is exacerbated by soaring shop rents, the retailer now looks to China as its future growth engine and says it will step up efforts to open more franchise stores across the border.
'Franchising provides high growth potential without heavy capital commitment,' said Kathy Chan, executive director of Bossini.
The chain operates 477 self-owned and franchise stores in more than 100 cities in the mainland. In Hong Kong, it has 32 Bossini stores and it plans to open three to five new stores this year, mainly in residential areas such as Tin Shui Wai.
Ms Chan said the mainland market would replace Hong Kong as its biggest turnover and profit contributor when the number of stores increased to 1,000 by 2010. Hong Kong accounted for more than 50 per cent of Bossini's $2.01 billion turnover, while the mainland contributed 21 per cent for the year to March
For the financial year to March next year, Bossini plans to add 150 new stores in the mainland; the majority of them through franchising.
'Some mainland retailers operate multi-brand shops through franchising. One retailer may be the franchisee of Bossini, G2000, Baleno and Giordano,' Ms Chan said.
Apart from the mainland, Bossini aims to expand its export franchise business in Asia.
Ms Chan said that the company recently launched a franchised business in Nepal and was now exploring market potential in India, South Korea and Japan.
At present, Bossini's export franchise operation covers 17 countries. Ms Chan said she hoped the franchise division would achieve at least 30 per cent annual sales growth.
'Export franchise business and the mainland operation will be our future growth engines,' she said.
In Hong Kong, by contrast, Bossini would not aggressively expand its retail network given sharp increases in retail rents. Rents of some ground-level shops have risen as much as 200 per cent in certain locations from the low levels during the Sars crisis in 2003.
'A landlord has doubled the monthly rent [at one of our stores] in Tsim Sha Tsui. We would never make money if we accepted the new rate,' she said.
Bossini decided to relocate the affected store to a smaller, 3,000 square foot unit nearby.
The decision represented a major change in strategy for Bossini, known in the past for aggressive expansion into prime locations. During the property and retail boom in 1996, Bossini surprised the market by opening a 1,671 sq ft shop at Island Centre opposite Sogo in Causeway Bay for a monthly rent of $2.35 million.
Ms Chan said the firm previously adopted a sales-driven strategy of aggressive expansion to boost its turnover.
'But we have changed,' she said, describing as exaggerated comments early last year from property consultants that Bossini had agreed to pay $760,000 a month - 70 per cent higher than the former tenant Giordano had paid - for a two-level, 6,233 sq ft shop on East Point Road in Causeway Bay.
Ms Chan said the media report was exaggerated but refused to disclose its month rents. 'We think the rent is reasonable,' she said.