Richemont spies China growth

10 October 2011

BEIJING: Richemont, the luxury group, is expanding the Shanghai Tang brand, a core part of its Chinese portfolio, both locally and internationally, reflecting the rising power of China's shoppers on the global stage.

The Shanghai Tang fashion boutique chain currently boasts 17 outlets in China, and Richemont expects this figure to hit 30 in the next two years, as the firm taps into increasing affluence levels in the country.

As part of this process, it will open a new flagship branch, the Shanghai Tang Mansion, in Shanghai next year, covering four floors and 20,000 square feet.

To drive buzz about this event, Richemont is to hold a contest asking web users to guess the location of its new store, which will sell items like $470 kimonos and denim shirts boasting mandarin collars for $235.

"China is the number one luxury market in the world," Raphael le Masne de Chermont, Richemont's executive chairman, told Bloomberg.

As well as enhancing Shanghai Tang's position, the decision to move its main Shanghai store reflects the arrival of less exclusive mass market players like Gap and Abercrombie & Fitch, the latter of which will fill Shanghai Tang's old site.

More broadly, Richemont plans to unveil a Shanghai Tang branch in Paris by 2013, alongside a similar outlet in Tokyo by 2014, appealing to Chinese consumers travelling overseas.

Chermont argued that the hardening demand for big-name products such as Louis Vuitton among Chinese shoppers is reshaping the trading climate both at home and abroad. "Who do you think will queue for LV in Paris?" he said. "Not Westerners."

According to Richemont, the proportion of customers making purchases at the 42 Shanghai Tang sites worldwide who are from mainland China has grown from 2% to 18% in three years.

This total still falls behind the 22% logged by American clients at present, but Chermont predicted Chinese buyers would assume a leading role within the next 18 months.

Matt Marsden, director of consumer and retail research at Daiwa Capital Markets, the investment bank, suggested Richemont's strategy was likely to be a profitable one.

"Shanghai Tang has done a fantastic job of building brand equity and has become a genuine luxury brand in Hong Kong and the West," he said. "This will help give it credibility and increase the chances of success as the company expands in China."

Data sourced from Bloomberg; additional content by Warc staff