Fosun shapes up to rival LVMH and Kering

Fosun Fashion Group

█ In 2018, when luxury house Lanvin was put on sale by its former Taiwanese owner Shaw-Lan Wang, Fosun acquired the storied French brand outbidding competitors including Qatari investment fund Mayhoola, owner of Valentino and Balmain. The deal drew attention to Fosun, but the Chinese conglomerate, which was founded in 1992 by billionaire Guo Guangchang, had started making inroads into the international luxury market seven years earlier, with the acquisition of a 10 per cent stake in Folli Follie in 2011. Today, the group holds majority stakes in a slew of fashion brands, including Austrian luxury legwear brand Wolford, American knitwear label St. John, Italian menswear brand Caruso, fast fashion Tom Tailor and premium accessories label Folli Follie.

Lanvin 2020 Spring/Summer runway show

China’s Fosun is consciously forming a fashion empire, whose scale and capability is hoping to rival LVMH or Kering – the world’s two most renowned luxury corporations – some day. In February 2019, the company established Fosun Fashion Brand Management (FFBM) Group, a pure play operation firm facilitating brands’ expansion in China, signalling an entry into a period of management after the shopping spree.

Prior to the acquisition, Lanvin was near bankruptcy and its former majority stakeholder struggled to rescue it. But Fosun, with business spanning from real estate and healthcare to travel and hospitality, has sufficient capital to support a much-needed turnaround. Fosun’s total assets exceed US$85 billion (RMB560 billion) as of 2019, company accounts show. The group has a number of listed subsidiaries on the Hong Kong Stock Exchange, including Fosun International Limited, Fosun Tourism and Shanghai Fosun Pharmaceutical. Fosun International Limited, considered to be the group’s public trading arm, recorded US$16.5 billion (RMB 109.4 billion) of revenues in 2018, up 24.2 per cent from the previous year. In comparison, LVMH Group scored US$53.5 billion (€46.8 billion) the same year, while Kering gained $15 billion (€13.7 billion). Despite the one-year-old Fosun Fashion Group has not started to make profits, its parent company has the financial muscle to compete with LVMH and Kering, which is a precondition for any success in this cash-burning industry.

Fosun's expansion 

into fashion

Chart: compiled by Vogue Business in China

But fashion business is not merely a capital game. There is a question mark about Fosun’s ability to turn around fashion and luxury brands considering its lack of experience in the field. For Lanvin, Fosun appointed French designer Bruno Sialelli (who used to work under Loewe’s creative director Jonathan Anderson) to head the creative team in early 2019, with Jean-Philippe Hecquet departing Sandro to take up the role of CEO. So far, Sialelli’s three major runway shows for Lanvin demonstrate a millennial-focused design style, but he hasn’t been able to shed references to his former employer’s aesthetics.

Vogue Business in China’s editorial director Imin Pao recently caught up with Fosun Fashion Group (FFG) and Lanvin chairman Joann Cheng in Shanghai. Cheng says Fosun is in the fashion game for the long haul and is confident about the company’s ability to overcome any difficulties.

Fosun Fashion Group (FFG) and Lanvin chairman Joann Cheng

This interview was originally conducted in Mandarin. It was edited and condensed.

Q: For more than 20 years, the group has been doing very well in real estate, healthcare, finance. Why fashion?

A: Fosun's mission is to create customer-to-maker (C2M) ecosystems in health, happiness and wealth, providing high-quality products and services for over one billion middle-class families in China. The C2M strategy is designed to enable seamless connection and mutual empowerment between customers (the C-end) and makers (the M-end) through precisely addressing family customers’ demand and pain points. Fashion falls under the happiness pillar (covers brands bring happiness to customers), which is an important industry to cover. Fashion is also a huge growth area.

Fosun started investing in fashion in 2013. That year, we invested in Caruso, St. John and Tom Tailor, but all minority stakes. It wasn’t until 2017 that we turned into majority stakeholders. At that point, the company decided to form a fashion group to manage these brands. We also wanted to acquire more brands to enrich our portfolio, so we bought stakes in Wolford and Lanvin in 2018.

Q: Volvo’s transformation proved that a global brand can be successfully managed and cultivated by a Chinese owner. How are you managing these acquisition brands?

A: When we acquired Lanvin and the other brands, they all had very similar issues in terms of management and talent. So internally, we first had an upgrade – hiring new management teams and enhancing management system. For us (Chinese companies) to manage overseas Western brands successfully, we need to respect their DNA and local culture, and communicate with a transparent attitude.

Fosun is building a fashion ecosystem to help brands like Lanvin open up more opportunities in different markets, especially China. That’s why in early 2019, we acquired a team with more than 20 years of industry experience to set up Fosun Fashion Brand Management (FFBM) Group. FFBM offers a full range of services including retail and wholesale operations, localised touch on merchandising, marketing and communication management, human capital support and complete back office support (finance/IT/legal) for brands. The team is led by CEO James Chen and his core members, who have on average acquired 15 years of operational experience to grow Western fashion brands in China. That’s our strategy to support Lanvin’s expansion in China.

Q: What are the short- and long-term visions for these brands and for Fosun Fashion Group?

A: I hope our brands can stabilise and develop further in the short term, not only in China but around the globe. In the long run, the aim is to build a complete fashion ecosystem. We hope to help Chinese brands go international and bring Western brands success in China. So far, I have not seen any company that has been able to achieve this.

Q: What other advantages does FFG have over Prada Group, Capri Holdings, Tapestry Group, Kering and LVMH?

A: As the Chinese saying goes, “The pavilion closest to the water enjoys moonlight first.” We can offer Lanvin and other brands first-hand information about the Chinese market. I always give a lot of feedback to our Paris team. For example, our team noticed that the streetwear fashion is extremely trendy in China and I told our CEO in Paris about that. Our communication is very free and transparent.

Secondly, I have to say I am in awe of what LVMH and Kering have achieved in the luxury industry. We are very modest, but I think one of our strengths is that we are super young and flexible. Our headquarters has 18 people in total and the average age is around 30. It is a very down-to-earth team with fast reactions to everything. That will enable us to move efficiently and be fast in decision-making. We are running five companies located in different time zones, but we are extremely passionate about them.

Another advantage is the opportunities for synergy. Fosun has an entertainment arm – it has just produced the Hollywood film Gemini Man directed by Ang Lee and starring Will Smith. It also has a lot of properties and investment, all of which provide plenty of space for cross-fertilisation. For example, we will launch an exhibition at Fosun Art Centre in December to celebrate Lanvin’s 130-year anniversary. Tiffany & Co. just had the biggest jewellery exhibition in China there. The space is in demand, but because we are from the same company, we helped Lanvin get it [sooner than expected].