Red-Star Macalline: Turning RMB600 into RMB60 billion, Going from Poverty to Wealth in a Generation


Che Jianxin borrowed RMB 600 in 1986 to start his own company. Over the course of 30 years, that company, Red-Star Macalline, has evolved into China’s largest home furnishing chain. It is a household name among Chinese people and founder Che Jianxin is hailed as the king of home furnishings in China.
 

Mr. Che, who is about to turn 50, has begun thinking about business succession, though it is not yet a pressing issue. His two daughters did work for a time in the family business but are now working in the Internet sector; his younger son is studying abroad. 

Mr. Che wrote, “It takes generations to develop a family business. Intergenerational succession ensures the continuity of the business, passing on the family culture and knowledge.” During business succession, family members must make an effort to ensure that these things are transferred from generation to generation so that the family business can stay as vibrant as Red-Star Macalline.
 

A Second-Generation Member: A Role Model



The Red-Star Macalline founder actually thinks of himself as belonging to his family’s second generation. He believes it is his parents’ diligence, frugality, integrity and humility that have gotten him and his children to where they are today. His father and mother are ordinary farmers and laborers, but they have instilled their spirit in younger family members. In this sense, they are also great educators.

After graduating from the school in 1982, Mr. Che landed a job as an apprentice at a construction site in Jintan District, Changzho. He later got a job making ready-to-assemble furniture in 1986. He convinced his uncle into loaning him RMB 600. A year and a half later, Mr. Che opened Qinglong Wood Ware Plant with the aim of mass-producing furniture. He used the profit earned from that business to invest in establishing the 1,000-square-meter Red-Star Furniture Mall in 1990, the first large furniture store in Changzhou and its surrounding area. The Nanjing Red-Star Furniture Mall launched in 1992, and in 1996, Red-Star Macalline tried its hand at “brand bundling” with its malls, bringing in the merchants with a record of satisfied customers in terms of branding, quality and service.

Red-Star Macalline currently has annual sales revenues of RMB 60 billion, with more than 130 outlets nationwide. Red-Star Macalline was listed on the Hong Kong stock exchange in June 2015.
Under the influence of Mr. Che, his children have demonstrated a far greater commitment to entrepreneurship and innovation than their peers.
 

Accumulation of Wisdom

Mr. Che believes that only through lifelong learning can one get the most out of life. He said: “For Chinese private entrepreneurs, the secret to success is, in essence, a learning journey. It is learning that has expanded my mind and changed my values, reshaping my life.”

Mr. Che is committed to lifelong learning and he has positioned his company and family as a learning organization. He said, “I have three dreams: being a scholar; conducting myself as a gentleman; making Red-Star Macalline a Global Fortune 500 company.”
 

Wisdom of Experience: Family Treasure

Family business succession depends on sound family governance and family culture. The family constitution and precepts play an instrumental role. Mr. Che’s life philosophy and entrepreneurial experience are expressed in his three books, namely, The Wisdom of Experience: Philosophy of Growth, The Wisdom of Experience: Philosophies in Life, and The Wisdom of Experience: Philosophy of Life. Clearly, the “wisdom of experience” is treasured by the Che Family.

“One’s life is a process of problem-solving, which spurs us on to seek wisdom. By grappling with problems, we become mentally and emotionally mature.” 

Mr. Che is looking forward to developing wisdom throughout his life. Experience is the only path to lifelong learning. He expects his children will also draw wisdom from continued experience.
 

Guidance, Not Order

Mr. Che keeps an open-mind and stays up-to-date on business matters. He has given his children a free hand to explore new areas. He would rather lead his children forward than impose his will on them, and he has been tolerant of the small mistakes his two daughters have made in their entrepreneurial endeavors.

Mr. Che thinks entrepreneurs are not made at school, but nurtured through business practice. He tries to shape people as “small entrepreneurs” before gradually assigning them more duties. This is the best approach to succession.

While setting a good example, Mr. Che also learns from his children. In this sense, his family is similar to a learning organization - it is on a constant quest to learn and innovate. Regarding wisdom as the eternal fountain of life, Mr. Che puts a premium on the inheritance of wisdom rather than fortune or business. He encourages his children to acquire and inherit wisdom through experience.
 

Daughters’ Internet Startup

Both of Mr. Che’s daughters are involved the online business. The elder daughter, Che Yiming, is Vice President of the Red-Star Macalline E-Commerce Division, in charge of the group’s e-commerce business. The younger daughter, Che Youlu, has just resigned from the family business to start an online company in the home furnishings sector.

The positioning of Red-Star Macalline within the industry as a family firm defines its strategy to make inroads into the Internet sector in order to pave the way for business transition.

“If I am successful, the home furnishings industry will undergo great changes. So I have decided to set up an Internet company to develop a better marketing mechanism, and improve corporate culture and management in order to shake up the conventional ways that family firms do things,” says Che Youlu.
 

Dedication to Innovation with Daughters

Mr. Che has his own idea about the Internet Plus wave, which is sweeping across China. Mr. Che bets it is unlikely e-commerce companies can grab more than 15% of the medium-and-top-grade home furnishing market in the coming decade. If he loses his bet, he will offer Chinese entrepreneurs Jack Ma and Wang Jianlin both RMB 100 million. This bet made quite a stir.
 

Brimming with confidence about traditional retailing, Mr. Che gives e-commerce a guarded welcome. He sees five barriers to e-commerce in the home furnishing industry:
- Distribution
- Requirement for high-touch marketing
- Large transaction amount per customer
- Large variety and non-standardized products
- Low frequency of purchase


Nevertheless, Mr. Che has never interfered in his daughters’ exploration in the online business. He is leaving them to their own devices so that they can chart a proper course for transition of the traditional industry toward the Internet. The following is a quick overview of the results so far:


July 2012: “Red Mall.com” was officially launched as an e-commerce platform in the home furnishings industry. Its model is similar to Alibaba’s Tmall;
April 2013: “Red Mall.com” was renamed “MMALL.com”, and hired executives from Alibaba.com, jia.com and vip.com.
January 2015: “MMALL.com” changed into “chinaredstar.com”; the operations team was rumored to have been downsized.


The Red-Star Macalline O2O Division has been spun off as a business partnership to facilitate integration between offline malls and the O2O platform. Red-Star Macalline is also exploring Internet-based home decoration.


Mr. Che has also branched out into Internet finance to provide a P2P financing platform for more than 10,000 projects from 50,000 merchants.


Along with the development of Red-Star Macalline and growth of his daughters, Mr. Che is thinking over the family committee and family constitution for better family governance. The success in designing the governance structure will depend on the human resources within the family. On this front, Red-Star Macalline’s efforts for inheritance of wisdom have paid dividends.


In his book The Wisdom of Experience, Mr. Che wrote, “Family business succession entails not only intergenerational takeover, but also concerted efforts to make the family prosperous and the business thrive.”