LVMH’s L Capital makes second major investment in China

LVMH’s L Capital Asia is investing more than $US100 million in Sasseur Cayman Holding Ltd., which was founded as a coffee shop at China’s Southwest University by a photography teacher there in 1989. The coffee shop has gone–demolished by city planners–but Sasseur now has four outlet malls, where domestic and global brands sell leftover stock at bargain prices.

Sasseur plans to add another four outlet malls this year and bring its network in China to a total of 20 over the next five years. It says sales have increased at 30 per cent a year since 2008, when its first mall opened in Chongqing. Government figures show standard shops stalled last year, with sales by China’s top 50 retailers down 0.7 per cent, compared with 10.9 per cent growth in 2013.

“Outlet malls are countercyclical,” Sasseur’s founder and chairman Vito Xu says. “When retail sales fall, there is more excess inventory that needs to be cleared and more demand for bargain shopping.”

Full-price shopping malls suffer from slowing demand and increased competition, and there is more to come. Of the 10 cities in Asia that will have the most shopping mall space added this year and last quarter, nine are Chinese, CBRE Research says. The other is Bangkok.

Consumers are also looking more for value. Prices of luxury goods in China are on average 25 to 30 per cent higher than in Europe because of duties and robust demand. Also with China’s anti-corruption campaign in full swing, brands have been looking for ways to grow. Outlet malls provide a channel for clearing inventory without dedicating too many full-price stores to sales.

U.S. private-equity fund Warburg Pincus, which invested in Sasseur’s first round of fundraising three years ago, also participated in this second round, which was led by L Capital Asia. Warburg Pincus hasn’t disclosed how much it invested.

Bailian Outlet Mall Shanghai