William Shen: Headland Capital Is Bullish On Chinese 4S Auto Dealerships

In this episode of China Money Network, guest William Shen, senior partner and head of Greater China at Headland Capital Partners, talks with our host Nina Xiang, about why he sees 4S automotive dealerships in China as the next great opportunity, how Chinese consumers are changing, and what the impact of the economic slowdown has on Headland's investments. Listen to the full interview in the audio podcast, watch an abbreviated video version or read an excerpt below. Be sure to subscribe to the podcast in the iTunes store. Q: Can you give us a brief introduction of Headland Capital? A: Headland Capital was established in 1988. For the past 25 years, we have invested an aggregate of $2.7 billion into around 150 companies based in Greater China, South Korea and Southeast Asia. Our main focus is either providing growth capital for high growth companies or helping companies perform buyouts. We were part of the HSBC Group and did a spin out in 2010. Q: Headland has invested heavily in the Chinese consumer sector. How has the economic slowdown impacted the companies you've invested in? A: The Chinese consumers are still consuming. We are still talking about double-digit annual growth in retail sales. But there are far more choices today than five years ago. If someone's total budget for clothing, for example, has increased 40% or 50% than five years ago, the amount of choices may have doubled or tripled during the same time. Therefore, as a brand, maintaining their market share becomes more challenging. For example, in the apparel industry, the old model of operation is to use a good brand sponsor, advertise on TV and sell your products via a wholesale model. You, as the brand owner, do not operate the retail outlets. You rely on a few thousand wholesale distributors across China to sell your products. In the old days, when choices were few, this model worked for well-managed brands. But with the influx of fast fashion and foreign brands, consumers are becoming far more discerning. So without decent control at the retail level, you wouldn't know which design is selling faster or slower, and inevitably there will be inventory buildup. So in order to do well in the apparel industry, you need to operate your own stores or work very closely with selected distributors today. .......