China Connect In Paris, 2014

Nicole's Field Leave a comment | 2,587 views

Founded and organized by Laure de Carayon,  China Connect is the largest gathering of experts on Chinese consumer trends, marketing, digital and mobile in Europe. This unique event is reaching out to an audience of top-level European marketing & digital decision makers from luxury, cosmetics, fashion, retail, FMCG, Food&Beverages, automotive, services, communication, media and the international press focusing on the Chinese market.

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NC. STYLE Founder and CEO , Mrs. Nicole Chen will be attending the China Connect event in March as a guest speaker.

 

Source: ChineConnect

Global luxury brands slow store expansion on mainland China

Industry News, Retail Leave a comment | 2,415 views

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The Hang Lung Plaza in Shanghai. Photo: Xinhua

The glitzy romance between the landlords of mainland shopping centres and global luxury brands has entered a rocky patch as many top-end labels ease up on the pace of store openings in the key market.

The caution comes amid flat sales growth. Property analysts say the pace of store openings will continue to slow this year, despite the priority given to mainland expansion several years ago.

” A key reason is that the anti-corruption measures in China have curtailed the use of public funds for high-priced gifts. Meanwhile, for the more aspirational and price-sensitive customer groups, where there is still spending growth driven by rising incomes, they are increasingly going to Hong Kong or other low-tax destinations to buy luxury goods,” said Steven McCord, a director of China retail research at Jones Lang LaSalle, Shanghai.

Sebastian Skiff, an executive director at CBRE Retail – Asia, said the price differential between the mainland and other markets became a bigger hurdle when consumers were buying for personal use, as opposed to purchases as business gifts.

Sales of luxury goods on the mainland edged up 2 per cent last year from 2012 to 116 billion yuan (HK$148 billion), according to consultancy Bain & Co. Sales grew 7 per cent in 2012.

According to a research report by Knight Frank and Woods Bagot released last month, 65 per cent of the international luxury brands they monitored missed their targets for store openings last year. Gucci, which had planned to open 10 stores, did not open any. Prada targeted seven stores but added only four. Burberry opened eight instead of 11.

“It’s important to note that luxury retail sales growth has declined, not luxury retail sales values, which have still shown small but positive growth,” said Paul Hart, an executive director for Greater China at Knight Frank. “In the primary cities, this may translate into a slowdown in rental growth in the luxury property sector, not necessarily a drop in rents.”

Knight Frank expects rents in prime shopping centres in main cities to increase 5 to 10 per cent this year. Growth was 10 per cent for the past two years.

Industry players say the slowdown in the luxury sector would not necessarily hit top-tier mall landlords.

Ronnie Chan Chichung, the chairman of Hang Lung Properties, which has a number of luxury shopping centres on the mainland, said the slowdown in expansion meant retailers would pick the best mall operators. His view that Hang Lung will be among those selected is shared at Jones Lang LaSalle.

“When we score the various properties a retailer could enter in mainland cities, the top line retail developers are always the safest bet: Sun Hung Kai Properties, Hang Lung, Swire Properties, China Resources, and the like. They have the ability to build, and more importantly, to operate on a long-term basis, a top-line scheme,” McCord said.

A senior executive of a foreign shopping mall operator said that instead of opening new stores in second or third-tier cities, luxury retailers had been consolidating their resources in first-tier cities. “Base rents may be lower, but we can achieve strong additional rents in accordance with sales turnover. There are still a large number of super rich who buy luxury watches for investment, rather than gifting,” she said.

Amid the slowdown in luxury sales, some mall landlords are looking for other tenant types. Those offering “light” luxury , or so-called affordable luxury, along with fast-fashion retailers, are seeing a lot more growth, property consultants say.

They say the rapid growth of the food and beverage industry shows no signs of abating. More mall space will go towards the sector in a trend that will shrink allocations to fashion operators.

“The food and beverage trade generally pays less rent. This inevitably leads to lower average rent per square metre for the malls,” McCord said.

Source: SCMP

Female Fashion Addicts Change China’s $19 Billion Market

Industry News Leave a comment | 4,144 views

Louis Vuitton in Shanghai | Source: Flickr

BEIJING, China — Lisa Yan is the new face of the Chinese luxury consumer: female and fashion-forward.

The 26-year-old finance saleswoman checks social media daily to see what celebrities or friends are wearing. She wears Burberry coats, alternates between a light blue Valentino bag and a black Dolce & Gabbana one for work, and reads magazines such as Vogue before trying to replicate the newest styles.

While women have long dominated luxury shopping globally, they’re just now catching up with men in China, who historically had greater purchasing power and accounted for most business- related gift giving. Companies from Chanel to LVMH Moet Hennessey Louis Vuitton SA are stepping up to meet demand from the country’s new breed of female “fashion addicts,” dedicating more floor space to women’s wear amid a crackdown on expensive gifts such as watches.

“Its a rebalancing of the consumption between females and men,” said Mario Ortelli, a senior analyst at Sanford C. Bernstein in London. “Women are becoming more independent, becoming richer, and so are buying for themselves.”

Men accounted for 90 percent of China’s high-end purchases in 1995, according to industry consultant Bain & Co. Women now make up about half, Bain said in a report last month. That still trails the global average in mature markets, where female consumers account for about two-thirds.

Bain estimated China’s domestic luxury market to be worth 116 billion yuan ($19 billion) last year.

‘Fashion Addicts’

“Luxury buying by Chinese women is driven by jobs and peer pressure,” said Yan, whose collection also includes bags from Louis Vuitton and Saint Laurent Paris. “These are items we’ve eyed in the past and now are able to afford. We also see friends around us carrying these things.”

A growing group of “fashion addicts” in China will continue to fuel the trend toward women’s high-end apparel, according to Bain’s report. These are Chinese consumers — mostly female, middle-income professionals in larger cities such as Shanghai, Beijing, and Guangzhou, who shop for personal use and are knowledgeable about fashion as well as luxury.

“The fashion addicts are well informed and looking to stand out from the crowd,” Bruno Lannes, Bain’s Shanghai-based partner, said in an interview. “They are a lot more into fashion than accessories, bags or watches.”

Getting China right is a high-stakes play for the luxury companies. After outpacing growth in the rest of the world for years, spending on the mainland — which excludes Hong Kong, Macau and Taiwan — grew at the slowest pace last year since at least 2000, according to Bain, after President Xi Jinping started a campaign to rein in lavish spending. Chinese people are also increasingly shopping abroad, where prices are lower.

‘New Era’

Spending on expensive menswear and watches both fell in China last year, data from Bain shows. Meanwhile, demand for women’s wear, cosmetics and perfume increased 10 percent, making them the fastest-growing categories in China’s luxury-goods industry. In contrast, apparel sales are declining as a percentage of global luxury sales, according to Bain.

“Nobody expects any changes to government policy,” Lannes said of China. “That’s why it is the beginning of a new era, and brands have to rebase their business.”

Retailers such as Louis Vuitton and Chanel have set aside more store space in China for fashion apparel, while Hugo Boss AG, Coach Inc. and Tod’s SpA are expanding women’s wear collections in the country.

Overseas Buying

Although Chinese customers are the world’s biggest luxury buyers by nationality, accounting for 29 percent of high-end purchases last year, mainland sales have slowed as Chinese shoppers now buy more than two-thirds of their items overseas, according to Bain.

Prices are between 30 to 40 percent lower in Europe and as much as 25 percent lower in Hong Kong, according to Bernstein’s estimates.

Chanel’s black leather Sac Classique bag sells for 35,200 yuan in China, according to the company’s local website, while it sells for 2,950 euros, or the equivalent of about 24,400 yuan, in a boutique in Paris.

Refocusing on women’s fashion can help luxury-goods makers counter the overseas-buying trend, Bernstein’s Ortelli said.

“You can postpone the buying of a watch or piece of jewelry,” Ortelli said. “But if you have an important dinner today, you don’t go to Hong Kong to buy your dress.”

‘Own Money’

Still, ready-to-wear apparel has its drawbacks. Gross profit margins are at least 10 percentage points lower than those for leather goods, analysts from HSBC Holdings Plc and Bernstein said.

“Diversification is a good thing to revive interest and drive sales,” said Erwan Rambourg, Hong Kong-based managing director and global co-head of consumer and retail research at HSBC. “It’s obviously less positive in terms of margins and returns on investment.”

With apparel and shoes, brands have to carry different sizes and need more space to display them, Rambourg said. Apparel retailers also tend to hold sales at the end of a season, he said.

Still, shoppers like Carry Zhuang, a 32-year-old who works in the media industry in Shanghai, are grabbing companies’ attention as a way to overcome the slowdown.

“We earn our own money,” said Zhuang, dressed in a black blouse and skirt and carrying a Ferragamo leather bag, while shopping in the city’s IFC Mall, home to luxury stores from Chanel to watch retailer IWC. “And we want to spend it on something we like.”

Source: BOF