China: Macy's Plots Chinese Entry While Home Depot Retreats

By Sterling Wong  SEP 14, 2012 2:45 PM

Apple and ConocoPhillips also in China news.

 


MINYANVILLE ORIGINAL Where on earth is Xi Jinping? That was the question of everyone who followed Chinese political developments this week, as China’s vice president continues to be missing from the public eye.
 
After skipping numerous meetings with foreign leaders and dignitaries, including one with US Secretary of State Hillary Clinton, speculation rose that Xi, next in line to become China’s president in a planned leadership transition later this year, had suffered a stroke, a heart attack, or had even been assassinated. The Chinese government’s silence on the matter only helped to further fan rumor fires.
 
It turns out that Xi has actually been out of commission with a bad back, according to Reuters, who spoke with sources familiar with Chinese leaders. Xi has been undergoing physiotherapy and is likely to make his first public appearance in two weeks come Saturday.
 
Here are this week’s business news:
 
Apple (AAPL): With the release of the iPhone 5, Apple will be hoping to recapture a larger share of the ever-growing smartphone market in China. In the second quarter of 2012, the iPhone’s share of the Chinese high-end smartphone market fell to 38% compared to 44% a year ago, while the share of Google’s (GOOG) Android phones grew to 59% from 41% in the prior-year quarter.
 
Some of that drop for Apple was attributed to customers holding out for the iPhone 5, so the Cupertino, California-based company is likely to see a sharp jump in sales once the iPhone 5 is released in the mainland. China Unicom (CHU) and China Telecom (CHA) have confirmed that they will introduce the device to China within the next three months.
 
What’s unknown for now, however, is whether China Mobile (CHL) will also carry the iPhone 5. With some 688 million customers (69 million with 3G subscriptions), China Mobile, the world’s largest cellular service provider, would certainly enable Apple to reach a sizable new crowd.
 
Retailers: American retailers Neiman Marcus, Macy’s (M), and Milly are entering the China market, but they will not have a physical presence in the mainland, at least not yet. Instead, these retailers plan to introduce themselves to the Chinese online, via partnerships with local Web businesses, reports Bloomberg.
 
Why the Web approach? For one, these retailers want to learn more about the China market before expanding their presence there. Also, it’s comparatively much cheaper to start with an online business – Macy’s budget for its China Web business is some $15 million, which is peanuts compared to the $400 million it is spending to renovate its flagship New York outlet.
 
Neiman Marcus plans to launch a new namesake website with Hong Kong-based partner Glamour Sales Holding by the end of the year, while Macy’s will debut its middle-tier INC apparel on VIPStore’s website, www.omei.com, by the spring of 2013.
 
ConocoPhillips (COP): With Royal Dutch Shell (RDS-A), Chevron (CVX), BP (BP), and Total SA (TOT) already in the market, ConocoPhillips is the latest to express interest in entering the shale gas market in China. Speaking at the US-China Oil & Gas Industry Forum in San Antonio, Texas, Mark Nelson, ConocoPhillips's vice president of commercial and sustainable development, confirmed that his company is "looking into expanding into shale" in China, the Wall Street Journal reports.  
 
China’s Ministry of Land and Resources announced on Monday its second shale gas tender, with 20 blocks up for offer. For the first time, foreign companies can join in the bidding process through joint ventures with Chinese companies. Previously, companies like Shell had struck deals with Chinese firms to develop shale assets outside the tender process.
 
China has plenty of shale resources but does not produce shale gas commercially. As such, it is partnering with foreign oil and gas outfits and making use of their expertise and know-how to get shale production off the ground. The Chinese have an ambitious target of producing 229.5 billion cubic feet a year of shale by 2015, which analysts believe is unrealistic given the infrastructure problems the burgeoning industry faces.
 
Baidu (BIDU): Chinese search giant Baidu is launching its own mobile browser to compete against giants like Apple’s Safari and Google’s Chrome and default Android browser in the fast-growing Chinese mobile Internet market.
 
Baidu's general manager of mobile and cloud computing, Li Mingyuan, said last week that according to internal tests, the company’s browser runs 20% faster than those of its rivals. Baidu’s target is to have its mobile browser downloaded by 80% of Android devices by the end of 2012.
 
For now, Baidu is concentrating on developing products for the mobile Internet market, as advertising clients are also still in the midst of developing mobile-friendly websites. However, the search company it hopes that its mobile browser will eventually become a strong revenue generator.
 
Home Depot (HD): It appears Chinese homemakers are not big fans of Home Depot’s D-I-Y approach. The world’s largest home improvement chain announced Friday that it will shutter all seven of its big box stores in China, shedding 850 jobs in the process.
 
Home Depot will instead refocus on online and specialty stores. It has opened two specialty stores in Tianjin and is also planning partnerships with Chinese e-commerce websites.
 
“China is a do-it-for-me market, not a do-it-yourself market, so we have to adjust," Home Depot spokeswoman Paula Drake told Reuters.


Twitter: @sterlingwong
No positions in stocks mentioned.

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