Partners Group finds proxy for China sports boom

Adidas operates 12,000 stores across 1,200 cities in China. More than 1,000 new outlets opened in 2018 and a rollout of similar scale is expected this year. Nike, Anta and Li Ning, which together with Adidas account for over half of sportswear retail sales, also have aggressive expansion plans. All want to secure a meaningful piece of a market that Euromonitor International estimates will be worth RMB383 billion ($53.8 billion) by 2023, up from RMB286 billion this year.

BCR Group, a domestic provider of retail display solutions recently acquired by Partners Group, is one of the companies that makes this rollout real. Shelving, checkout counters, fitting rooms, logo walls, lighting – BCR provides it all to order. Brands just need to ensure the building can stand, the sales staff are trained, and the merchandise is ready to be stocked.

“These brands need a qualified supplier who can work closely with their designers and turn what they want into reality,” says Sheng Liu, a senior vice president in Partners Group’s Asia private equity direct team. “They also want someone who is reliable in mass production. Every day they open a couple of stores in different regions. Vendors must be able to ship products on time with a very low error ratio, so store openings are not delayed.”

Founded in 2008 by Hong Li, who retains a minority stake in the business, BCR started out as an original equipment manufacturer (OEM). It supplied global retail display providers that worked with international brands when they entered China. After a while, the brands started using the OEMs directly, drawn by their lower costs, quick response times, and evolving in-house design capabilities.

BCR is now a full-service operator that covers everything from design to installation to ongoing maintenance. With a staff of around 600 and a 50,000 square-meter manufacturing plant in Jiangsu province, it serves over 3,000 retail stores every year. Most of its clients are in the sportswear industry – local brands as well as international players – but the company also works with groups specializing in beauty products, luxury goods, fashion, and home decoration.

Its offering has developed in tandem with the rise of e-commerce. “Previously, brick and mortar stores were primarily for the display of the product itself. Now, especially in sportswear and beauty, people want to experience the brand,” says Liu. “Brands like Nike and Adidas are opening very large stores where they display their products but also have marketing campaigns – for example, fans can meet football stars. It is all about being more creative and communicating the concept.”

In addition, BCR is embracing omnichannel retail, providing digital displays that allow customers to browse the entire catalogue, identify products that might not be in stock, and arrange delivery. Partners Group plans to work with the company on this and other initiatives aimed at market and customer base expansion, strengthening the management team, and improving service quality.

One of the reasons Li sought out a private equity partner – Partners Group prevailed in a limited auction – was for assistance in taking his business to the next level. The motivation is consistent with that noted by Partners Group in multiple other situations as more first-generation entrepreneurs entertain the possibility of divestment rather than keeping businesses within the family.

There is plenty for the new owner to aim at during its holding period, given the sports retail display market is thought to be worth more than $2 billion a year yet lacks heavyweight clout. “The market is very fragmented and there are opportunities to consolidate and to win customers from competitors,” Liu adds. “BCR is selective about the sectors and customers it serves. We want to serve existing customers well and then expand into other segments and target new customers.”

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• Topics
• Greater China
• Buyouts
• Consumer
• Support services
• China
• Partners Group