PDF《OUR BUSINESS》

fashion . Men'

s fashion . Jewelry, watches, leather goods, accessories . Sportswear and shoes . Jeans, kidswear, underwear . Cosmetics . Household goods and others OUR BUSINESS C

92 C Our principal business strategy is to bring Chinese consumers luxury and high-end merchandise that is tailored to local market preferences, by operating flagship department stores throughout China that offer a pleasant shopping environment under the PCD brand. Our flagship stores are situated in affluent Chinese cities that we believe offer promising market potential in terms of long-term sustainable consumer spending power and growth. We establish flagship stores through purchasing, leasing or entering into long-term store cooperation agreements for prime sites. In seeking sites for our stores, we look principally for existing department stores with strong, established customer traffic located in established retail areas, coupled with the potential for us to transfer or upgrade the property significantly by refurbishing, re-positioning, optimizing brand mix or making significant operational improvements. We earn our revenue primarily through concessionaire sales, which accounted for 69.8% and 64.8% of our total revenue for the year ended December 31,

2008 and for the six months ended June 30, 2009, respectively. Concessionaire sales refer to arrangements under which we allow suppliers of branded goods (namely concessionaires) to occupy designated areas of our stores and sell their merchandise. In return, we receive a commission, generally expressed as a percentage of their gross sales proceeds, from the concessionaires. In line with industry practice in China, we sell all of our cosmetics products through direct sales to customers. Our direct sales accounted for 22.9% and 23.0% of our total revenue for the financial year ended December 31,

2008 and for the six months ended June 30, 2009, respectively. We also provide management consultancy services to seven department stores and one outlet mall pursuant to management agreements. Revenue from management consultancy service fees accounted for approximately 3.4% and 8.1% of our total revenue for the financial year ended December 31,

2008 and for the six months ended June 30, 2009, respectively. We also provide retail space at certain of our self-owned stores to businesses that are typically not associated with department stores but which complement our high-end retail business. This is done through both subleases and concessionaire arrangements. For example, our Scitech Plaza store has agreements with food suppliers that offer premium grocery products. In addition, we sublease space in some of our self-owned department stores to businesses which we believe complement our retail business such as restaurants. OUR COMPETITIVE STRENGTHS We believe the following are our key competitive strengths: Highly experienced and competent management team with a successful track record of establishing, integrating and operating department stores We have a highly experienced and competent senior management team comprising industry veterans with extensive expertise in China'

s retail industry, well-established relationships with widely known international and domestic brands and a track record of integrating additional stores into our network. Our senior management team has contributed significantly to our success, including in the following areas: . China retail experience. The Chan Family acquired the PORTS brand of luxury apparel and accessories in

1989 and introduced PORTS Products into China in 1993. Experience gained in developing PORTS Products provides us with expertise in the OUR BUSINESS C