Belle: the Fate from Peak to Valley

By Wu Rong

Translated by Rachel Wang


On July 27th, 2017, the statements on the Belle official website issued that the privatization proposals took effect and the company launched the delisting mechanism, marking the end of the shoes empire of Belle. After the privatization, Hillhouse Capital Group is going to be the largest shareholder of Belle Group with 57.6% of shares; Deng Yao, the president of the board as well as the founder of Belle, and Sheng Baijiao, CEO, will not engage the privatization, but close out all the shares, which may lead them to cash tens of billions dollars out.

In the view of market value, it may be the largest privatization, with 53.135 billion Hong Kong dollars volume, ever in the Hong Kong stocks market. Dating back to 2013, Belle’s market value overpassed 150 billion Hong Kong dollars with nearly 20 thousands stores, ranking first in Chinese footwear industry.

Delisting and the shrinking of the market value is the reflection of the weakened sales. Since the 2015 fiscal year, Belle has fallen in business. Net profit dropped to 2.934 billion RMB, with a drop of 38.4% in 2015, and in 2016, the retained profit went on worse, declining 38.4% of 2.403 billion dollars. In this year, Belle closed 700 stores, 2 stores a day on average in contrast with the previous opening one stores in two days.

Sheng Baijiao had expressed for many times that the major obstacle for Belle to transform the business mechanism is the limited position in market and the shortage of human resources. But how Belle thrived in the early period? How did Belle transform from a manufacturer to a brand controlling the whole industry chain, and even established an empire of shoes? Why the business pattern does not work now? What is the future path for Belle after the privatization? The answer may be in the following text.


Extending in the window period of the high-speed industry

Deng Yao’s business acumen is the key to the Belle’s business success. From 1974 to 1976, he has been a minor celebrity in Hong Kong shoemaking industry. In 1979, Chinese in the initial stage of reform and opening-up, Deng established a brand in Hong Kong with the name of Belle, meaning “the beauties” in French. After the investigation in the mainland market, he developed the business mode of “Design in Hong Kong—Made in Mainland China—Sales in Hong Kong”, cooperating with the inland factories. Utilizing the cheap labor costs in mainland China, Deng Yao made Belle take ten times profits than the usual.

Then, Deng Yao realized that that model had been too sluggish to capture the capricious trends in Hong Kong, in that he built factories in Shenzhen in 1978, shortening the product development period from 6 months to 3 month.

Following the development of the market in mainland, Deng views the huge potential in the domestic market. In 1991, he registered the Belle Co. Limited in Shenzhen, aiming at the mainland market. At that time, it was a seller’s market, and the products, however the designs were made, were easily to be sold. Meanwhile, the Hong Kong pop-stars was in vogue in 1990s, as the K-pop stars today, so the mainland customer would rush to purchase whatever shoes as long as it was in trend in Hong Kong. Belle was a win-win outcome of the complementation of Hong Kong and mainland resources at that time.


Belle Investment Company for channel controlling

Counterfeit products were booming in the mainland market for Belle’s exquisitely design. In 1994, to protect the brand, Deng Yao made up his mind to develop exclusive shops, and expand the sales network in franchise mode, crush the market of the fake Belle shoes.

In 1995, as the manufacturer, Belle sought to get rid of the control of purchasers, establishing the direct-sale chain sales model, integrating the manufactures, supplies and sales as a retail network. In 1997, Belle signed the deal with 16 exclusive distributors, who sold Belle product respectively in their regions. In 1998, to make full efforts in the mainland market, Deng curbed the business in Hong Kong, when the number of exclusive stores had surged to 600, with 16 thousand thousands staffs in mainland China.

The exclusive distributors rapidly integrated the resources and extended the market shares. However, the conflict was acute as well that distributor would threaten the brand when having a dominant, which was also a huge issue for Belle.

To solve this, Belle Investment Company was established in 2002 by the families of Deng Yao and Sheng Baijiao and all the Belle’s distributors, to be the only agency to sell Belle’s products. In this way, the top management team of Belle regained the control of distribution. In 2004, Belle Group acquired all the assets of Belle Investment Company, marking the accomplishment of the integrated configuration of the entire industry chain. Seizing the initiative in the market, until the moment when retail restraints were utterly abolished in mainland, Belle had controlled 1681 stores in China.

In terms of inner management, Deng Yao gradually empowered to the professional managers. Besides, compared with the domestic sports brands advertised on TV or sports competitions, Belle resorted to retail-oriented sales mode, motivating the production by the exquisite market information.

Channel resources

The first movement advantage in the sales channel

 The abundant and far-sighted channel resources are considered to be the key to Belle’s success. In the late 1990s and the early 2000s, department stores sprang out in the mainland China and Belle was the pioneer to occupy the department retail channels.

Once serving for Belle, independent fashion commenter Christine Tsui analyzes that Belle’s status in the market could not achieve overnight, but gradually from the multi-brand strategy and the reputation among customers.

Nevertheless, following the development of the society, the sales channels verified a lot, causing the decay of department store business. The plunging customer flows impacted all the brands, including Belle, that rely on the department stores heavily.


Forced to abandon the mass market

The traditional female shoes brands like Belle always tried to attract all the females in their 20s to 40s. However, in the area of pursuing individuation, the market has been broken up on account of the customers’ increasing individuation.

Meanwhile, the competition in the footwear industry was growingly severe. Until 2012, there has been over 7200 brands in China, including many international brands, entry lux brands and fast fashion brands.

What’s the worse, the product circles, from designs to products, in Belle were 3-6 months, but in ZARA and H&M only two weeks. Except the fast fashions, the e-commerce brands were indeed the real rivals, who could realize a popular item from street snaps to a best seller only in 2-3 days, surpassing Belle obviously in supply chains, updates and design styles.

Confronted with the plights, Belle was certainly aware of urgent reform, whereas the cumbersome structure made it harder than expectations. In the dilemma, the first measure was to close stores.

Besides, Belle turned to online stores. Since 2009, Belle has set up a website for its online sale, which experienced severe personnel changes with various management methods, leading to the destructive internal frictions in the company. As a result, Belle failed to enter the and in the 2013-2016 periods, when the two e-commerce giants extended their business rapidly.

The failure of Belle’s online business, according to Li Chengdong, lies largely in the price strategies. Relying on the offline business, Belle had to protect it through ensuring that the prices online won’t go higher than offline. So the unsatisfactory performance online would made Belle cut the budgets on e-commerce. In consequence, the transformation towards online field failed for the protection of stores.

Ending up with the privatization, Belle may choose the right path, expressed by CEO Sheng Baijiao. “A listed company has to publish the operational data each season, forcing the management group to chasing the short-term profit goals, but after the privatization, Belle will have more possibilities to transform.”

Christine Tsui views the privatization is Belle’s initiative selection. Holding the optimism towards Belle, she says “Many media omitted the fact that the present two biggest shareholders had hold Belle’s share for a long time, which means the two funds still hold an optimistic expectation on Belle.”

Now Belle is in a predicament. If there any chance to get back to the top? Christine Tsui regards it lies in the variation of products and design concept. Aesthetic has changed a lot since 10 years ago, which Belle was failed to adjust to. To be specific, the customers brought Belle shoes ten years ago was in their 20s, but now they have stepped in their middle age. So Belle has to decide whether to get mature with the previous customers or to develop new young customers with updating fashion sense. Belle’s dilemma is not only losing the old customers but also failing to cater for the young. In additional, Belle also needs to organize a younger-in-average team and conceive to the age of internet and intelligence instead of the previous time.

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