Headquartered in Hong Kong, Li & Fung operates a ninety-nine-year old sourcing and distribution business that spans 70 offices in 40 countries around the world. The company represents a critical ‘gateway to Asia’ for hundreds of clients looking to source products overseas, where cost advantages are significant. By outsourcing these responsibilities to an agent-partner, Li & Fung becomes its clients’ eyes and ears, providing local market expertise and, we think, a high-quality and cost effective production network. In addition, its clients ensure ethical working conditions in its subcontracted facilities. To that end, Li & Fung employs dozens of people on the ground, who regularly monitor factory partners’ labor standards, immediately removing from their network any factory in violation of local working conditions or safety codes. The way the model works is an apparel company such as Carter’s enlists Li & Fung’s help in processing a line of clothing which can number in the millions of units of, in this case, baby clothes. Li & Fung then relies on its nonasset based network of 10,000 global suppliers, including fabric warehouses, garment makers, and factory owners to provide Carter’s a full suite of value added services, including: design consulting, sourcing, manufacturing, compliance, shipping and tracking. The company is not a manufacturer and owns neither inventory nor factories; rather it acts as a buying agent, linking factory owners with brands and taking a concession fee for this advisory work. In the event of a crisis, a regional flare-up, or raw material shortage, Li & Fung believes it can seamlessly divert production of goods from one factory or country to the next. To a brand24 manager in the U.S., this ability to maneuver quickly and maintain production is critical to running its day-to-day business.
In our view, Li & Fung has a dramatic and far-reaching impact on the retail industry, touching practically every product found in a shopping mall, and yet is the behind the- scenes company that no one ever sees. In China, Li & Fung is a highly regarded, blue chip concern where shares trade on the Hang Seng Index, the equivalent of our Dow Jones Average, and where it has been ranked as one of the best performing stocks since its inclusion six years ago. The firm is run by third generation members of a prominent Chinese family who have established Li & Fung as one of the largest, most respected export companies in the world. Chairman Victor Fung and his brother William have transformed the company over the years from its concentration in China and singular focus on the apparel supply chain to various product line extensions, such as furniture, toys, and home goods and broadened its geographic expansion. Strategic acquisitions have allowed Li & Fung to develop the strongest brand among retailers and suppliers with the lowest cost sourcing network. One such acquisition of a smaller Canadianfocused competitor brought the company a key leadership addition in its group President - an industry veteran and the first non - Fung family member to run the business - Bruce Rockowitz! We believe barriers to entry given Li & Fung’s long track record and relationships are enormous. As globalization leads to greater changes, and rapidly emerging markets such as India, Vietnam, and Bangladesh enter the world trade arena, we view Li & Fung as more vital and relevant than ever before.
In our view, Li & Fung has a dramatic and far-reaching impact on the retail industry, touching practically every product found in a shopping mall, and yet is the behind the- scenes company that no one ever sees. In China, Li & Fung is a highly regarded, blue chip concern where shares trade on the Hang Seng Index, the equivalent of our Dow Jones Average, and where it has been ranked as one of the best performing stocks since its inclusion six years ago. The firm is run by third generation members of a prominent Chinese family who have established Li & Fung as one of the largest, most respected export companies in the world. Chairman Victor Fung and his brother William have transformed the company over the years from its concentration in China and singular focus on the apparel supply chain to various product line extensions, such as furniture, toys, and home goods and broadened its geographic expansion. Strategic acquisitions have allowed Li & Fung to develop the strongest brand among retailers and suppliers with the lowest cost sourcing network. One such acquisition of a smaller Canadianfocused competitor brought the company a key leadership addition in its group President - an industry veteran and the first non - Fung family member to run the business - Bruce Rockowitz! We believe barriers to entry given Li & Fung’s long track record and relationships are enormous. As globalization leads to greater changes, and rapidly emerging markets such as India, Vietnam, and Bangladesh enter the world trade arena, we view Li & Fung as more vital and relevant than ever before.
