The future of fashion - Hong Kong Institute of Certified Public ...

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want a chief financial officer’,” Au recalls. Intrigued, Au researched the company, which has a portfolio spanning brands as diverse as sportswear giant Nike and Italian luxury label Roberto Cavalli, then flew to Shanghai for talks. Au took the job and now helps the company distribute some of the world’s most popular fashion brands across the Mainland. Success requires mastering different channels: department stores, discount outlets, franchises, wholesale, online. “It is very mathematical,” he explains. “You have to understand your products, your channels, your cash flow before you can make a decision on where to put what. That’s the complication of retailing,” he adds. The biggest challenge, he says, is cash flow. UCCAL buys inventory from fashion brands, then sells it at its own discretion. As CFO, Au is also heavily involved in strategy, helping to decide when to “harvest” a brand – to sell it at the right time. Fashion is by nature a fickle beast, but the speed at which consumer behaviour changes in China means that UCCAL must constantly adapt its brands – and sell off those that it believes have reached their peak, Au says. Nike, which he describes as his personal favourite in the portfolio because he “loves sport” – at the time of the interview he was training to run a half marathon in Shanghai in December – has moved to reposition itself from being pure sportswear to more of a lifestyle brand in China. However, he believes that the future lies in luxury. “When I first came to China in the 1980s and 1990s, people would wear low-value Well-worn path China’s retail clothing market is now the world’s second largest– at US$110 billion in 2011, it ranks behind only the United States (US$232 billion) and recently surpassed that of Japan (US$100 billion), according to data from McKinsey & Co, the consulting company, and PricewaterhouseCoopers. China is also the most attractive emerging market for apparel retailers, says a recent study by A.T. Kearney, another consulting company. The market has grown at a rapid pace – at a compound annual growth rate of more than 20 percent in the past five years – and this is expected to continue for the next five years, the study concluded. Foreign apparel brands are aggressively entering the market. As well as Roberto Cavalli’s deal with UCCAL in 2011 that will see 85 of the Italian luxury clothes-maker’s shops in the Mainland by 2016, American clothing retailer Gap opened stores in Beijing and Shanghai in late 2010, PVH Apparel Group entered China in 2011 with its Izod brand, while Italian retailer RDM plans to set up five formal shirts and suits. Five years ago people started to dress more casually, in brands like Nike and Giordano. In the coming years, we are looking at luxury because there will be more and more millionaires,” he says. UCCAL has had particular success with Italian designers such as Isaia and Amedeo Testoni. “We have lots of Italian brands. They all buy the concept, they all buy our strategy,” he says. As Chinese consumers travel more, a lot of luxury consumption has been “lost” to foreign markets, where duties on goods are substantially lower. But Au sees a bright future for retail in China with wealth continuing to grow rapidly. The government’s well-publicized policy to boost domestic consumption to relieve dependence on manufacturing will also help, he adds. “What is local consumption? Retailing. If you have more money in your pocket then you can consume more,” he says. In a coup for 13-year-old UCCAL, Au has just brokered a deal to sell the company to a privately owned Hong Kong blue chip. Some might see it as an opportunity for an exit, but he is determined to stay and build the company. Au says he relishes a challenge. “If you look at my whole career, you can see that I don’t have a comfort zone. If I get too comfortable, I like to do something else,” he says. Taking the driver’s seat That attitude might have developed in contrast to Au’s father. The young Au grew up in Hong Kong as the son of a man who fled China during the tumultuous years of civil war. A PLUS After the upheaval, his father became a headmaster in a primary school and urged his son to follow a secure career path, preferably in public service. “The war destroyed everything,” Au says. “My father didn’t have the aggressiveness to go for his own career. He just wanted a quiet life. He would say, ‘Go to work for the government, be a civil servant’,” he recalls. Ambitious, commercially minded Au had other ideas. As a child he attended Chinese schools, where he learned Mandarin and English and discovered he had a talent for numbers. By 16, he had decided to become an accountant. “I was thinking, how can I put languages and maths together? Then I found out there was something called accounting,” he says. He went on to study accounting at Hong Kong Shue Yan College (now a university), graduating four years later. In 1984, he began his first job at Li, Tang, Chen & Co., a family-owned audit firm in the city, where he worked on the books of property developers, retailers and manufacturers. “As a learning base I think auditing was good, but as a career it’s not my type of work,” he says. “I wanted to add more value to a business.” Looking for his next move, Au received two offers. The first was from the audit department of the Hong Kong government – an offer which, of course, thrilled his dad. The second was as an accountant at Sime Darby, a Malaysian conglomerate. Au asked the government recruiters how long he could expect to wait before being promoted. “They said seven years. I said, retail outlets in China this year. While UCCAL and its competitors are seeing sales boom in the branded stores they manage, other retailing models are emerging. "Retail formats in China are diversifying beyond traditional department stores,” says Hana Ben-Shabat, a partner with A.T. Kearney in New York, who says Chinese consumers are beginning to shop at hypermarkets, outlet stores, discount stores and online. Meanwhile, Japan’s Uniqlo has more than 100 stores in the Mainland, while Swedish retailer H&M has 89 stores in 36 cities and Spain’s Zara has 66 stores in 31 cities. This reflects a desire by retailers to expand in China beyond major metropolises such as Beijing and Shanghai into second and third-tier cities. “The arrival of such mass-market brands is particularly significant,” says Tom Miller, a Beijing-based analyst with GK Dragonomics, a financial research company. “It is recognition that millions of urban residents in China’s less fashionable cities are becoming a viable consumer market.” January 2013 35
Success ingredient ‘Forget it.’ So I picked Sime Darby,” he says. He joined the Malaysian group as an accountant in Hong Kong, working across its car dealerships business selling BMWs, Mitsubishis and Fords. He rose quickly through the ranks, becoming the group’s youngest chief accountant at the age of 30. It was a pivotal time for the company. After years of political tension, relations had thawed between Malaysia and China. The bright young Hong Kong accountant with the impressive language skills was handpicked to be the group’s first China mergers and acquisitions manager, with a mandate to hunt out business opportunities on the Mainland. Au began travelling to China, brokering deals to establish car dealerships there. “It was very, very exciting. I can still remember my first trip to Shenzhen – we started the market there. Everything was so different at that time. It was like Hong Kong in the 1960s. 36 January 2013 You couldn’t see tall buildings or cars.” Au decided he needed to formalize his skills and began studying for a master of business administration degree at Hong Kong University of Science and Technology. “I was doing a lot of M&A work... I needed more skills: commercial thinking, analytical skills, logic, other disciplines such as marketing, operations, logistics, IT.” While he was studying, Sime Darby asked him to move to Guangzhou to be the manager of a joint venture with Mitsubishi. It was a tough time, he recalls, straddling the cultural differences with a Japanese partner and managing the difficulties of the emerging Mainland market. Personal life began to intervene. Au found it heartbreaking to leave his wife and three young children behind in Hong Kong. After two years he returned to his hometown, first as the general manager of Sime Darby’s Suzuki business, then starting Nis- san dealerships on the Mainland. After a few years the business landscape shifted. China had joined the World Trade Organization and was trying to boost its local enterprises before the country’s entry on to the international stage in 2005. Foreign retailers such as Sime Darby suddenly found themselves locked out. Seeking a change, and with the lure of unknown climes calling again, he joined Lei Shing Hong, a rival conglomerate, as its Indochina manager based in Vietnam. Au was able to apply what he had learned from China to the emerging Vietnamese market. “Culturally they are both very Chinese, very Confucian,” he says. Au received a personal letter of appreciation from George W. Bush for helping to organize the then United States President’s visit to Vietnam in 2006, a moment which Au describes as the “high point” of his career.
Page 1 and 2: ISSUE 1 VOLUME 9 JANUARY 2013 PLUS
Page 3 and 4: President’s message “ I look fo
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Page 10 and 11: NEWS GREATER CHINA Economic policie
Page 12 and 13: Mainland may adopt IFRS de facto co
Page 14 and 15: OW UR GET George W. Russell finds o
Page 16 and 17: Mainland M&A M&A concerns are magni
Page 18 and 19: e very rigorous. “You definitely
Page 20 and 21: THE LEAD PHOTO: SAMANTHA SIN Januar
Page 22 and 23: PHOTO: SAMANTHA SIN the hard work p
Page 24 and 25: Entrepreneur CPAs Peter Nixon Filli
Page 26 and 27: Constant adaptation in fashion-cons
Page 30 and 31: While Au did not follow his father
Page 32 and 33: hina’s economy avoided a major sl
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