Cheng, who has bought stakes in publications, luxury retailers and fashion tech companies over the last decade, is bankrolling fine jewellery rental service Flont’s expansion into dozens of stores owned by Chow Tai Fook, his family’s conglomerate. He is also funding luxury e-commerce play Moda Operandi’s planned showroom and a store for upscale athleisure retailer Bandier. Flont, Moda and Bandier will all open locations in Hong Kong by the end of 2019, in Cheng's planned 3 million-square-foot Victoria Dockside mall development.
The venture capitalist has stakes in the three companies through his C Ventures fund, a six-month-old investment vehicle for millennial-centric brands. Cheng said he wants to serve as the bridge between Western retailers and Chinese consumers. He’s also bought stakes in technology companies that help US and European players expand into the Asia-Pacific market, and is eyeing US media firms that would appeal to Asian audiences.
“The reason we have access to all these deals is because we’re not just going to give them the money. We get the Asia rights and we help them strategically expand,” Cheng said. “There are a lot of hurdles [for Western businesses] going into China, because it’s a new rule of game, a new ecosystem and a new way of thinking.”
Despite a slump in 2016, Chinese luxury consumption grew by 15 percent last year to a market size of $24 billion, in part due to the country's aggressively growing middle class, according to a December Bain report.
"Luxury consumers are willing to pay premiums in China [because of] the sheer size of the market," said Ricardo Rubí, partner at retail consultancy Simon-Kucher, adding that there is still very low market share penetration for luxury brands in China as compared with other countries.
Flont’s expansion in Asia is funded by a $12 million joint-venture led by Cheng through C Ventures and Chow Tai Fook. The rental service will open a members’ lounge in Hong Kong in September, and a second location in Shanghai. At least 50 Flont service counters will follow in Chow Tai Fook stores by the end of 2019.
Moda Operandi, which raised $165 million in a December funding round led by Cheng and private equity firm Apax Partners, will be opening a brick-and-mortar location in Hong Kong in the third quarter of 2019. According to chief executive Deborah Nicodemus, Asian customers make up 8 percent of Moda's total sales. She expects the number to exceed 20 percent in "very short order," she said. Following the Hong Kong opening, Moda is looking to expand to Shanghai and Seoul as part of its five-year international plan.
Bandier, in which Cheng invested in October, will also have a presence in China, as will Beautycon, the beauty festival company and online hub that Cheng bought a stake in around the same time.
Bandier chief executive Neil Boyarsky told BoF that the location in Hong Kong will be the start of the brand's potential rollout in China.
"There’re other properties that we’re exploring in several cities. Definitely Shanghai would be the next one," he said. "Being in China was part of our long-term framework, but that was accelerated based on the partnership we've developed with C Ventures."
Plans for Beautycon are less definitive, as the company is still in negotiations to debut in China, according to Cheng.
While most of his holdings cater directly to consumers, Cheng is also interested in technology companies that provide omnichannel solutions, which allow retailers to sell to customers both online and in physical stores. One of his latest investments is an e-commerce platform, D1M, according to sources familiar with the matter. The sources said LVMH is among D1M’s customers.
About 600 million people in China participated in its $500 billion sharing economy in 2016, as reported by the Chinese government. Chinese millennial consumers are especially receptive to rental platforms like Flont, Cheng said, because their habits are primed for change in the coming decade, as more of their disposable income will go toward family and parenting. “Millennials will grow older and need to support their parents, and the idea of ownership will change,” he said.
The 39-year-old entrepreneur, who created C Ventures to address the demands of millennials and Gen Z consumers, said he’s investing in companies that recognise younger shoppers' preference for unique items and personalised content over broader trends. This set of criteria is why Cheng invested in e-commerce companies like Moda Operandi and Galore magazine.
Cheng added he is now seeking to buy stakes in media companies, and said he was recently in Los Angeles exploring entertainment companies.
Already, C Ventures backs Dazed Media, the British company that publishes Dazed magazine and AnOther, as well as Skybound Digital, an entertainment platform that caters to fandoms. Having a stake in such publications will help build the fund’s online-offline "ecosystem," he said. For instance, an online magazine like Dazed could host a pop-up shop or themed party that feature products supplied by Moda or Bandier.
“We’re trying to connect all the dots,” he said, pointing to additional investments in the pipeline. “We have big ones coming up.”
Editor's Note: This article was revised on 24 May, 2018. An earlier version of this article misstated that Adrian Cheng is 39. He is 38.