Company Predicts Continued Growth Throughout The Mainland In Coming Years, Despite Continuing Global Recession
We have written extensively over the past few months about western luxury brands continuing to grow in China despite difficulties in their traditional markets — North America, Europe, and Japan — and how second and third-tier cities are key to these luxury brands’ China strategies. This week, Gucci announced plans to open 2-4 more new China locations by the end of 2009 — while this may sound like a pretty insignificant number, given the size of the country, in these slower economic times it is big news. Currently, the brand has 28 locations in China — with their newest one opening this weekend — and Gucci appears undeterred in their growth plan by uncertainty in the global economy, as the company sees China as poised to lead future luxury consumption.
The Guardian posts this week on the company’s long-term China strategy, which sees the company projecting upwards of 40 stores within the next few years, as it scales back its presence in slowing developed markets and focuses more intently on cracking (and sustaining a presence in) China:
In a few years the luxury brand, owned by French retail and fashion group PPR SA, aims to have 40 stores in China, compared with the 50 it now has in Japan and roughly 70 in Europe, [Gucci CEO Patrizio] Di Marco added.
“We’re not planning to scale back, especially considering the future importance of this market,” he told Reuters in an interview.
“Look at a country like China. To have 28 stores, or to think of having 40 stores, is not excessive at all.”
He was unwilling to say when the impact of the current global downturn on the luxury sector might ease and gave no time frame for achieving the 40 store target in China, which will depend on overall market conditions as well as development of second- and third-tier cities and real estate opportunities.
…Gucci brand leather goods bucked the slump with 8 percent sales growth in the first quarter at constant exchange rates, although Bottega Veneta and Yves Saint Laurent, other luxury brands in the Gucci Group, posted a double-digit drop.China has become a key area for the group’s sales growth.
Sales of Gucci-branded products in China, Hong Kong and Macao jumped 41.5 percent in 2008 and helped to drive 8.1 percent revenue growth for the Gucci Group overall to 3.38 billion euros ($4.72 billion). That amounted to about one-sixth of PPR’s total revenue.
“Chinese consumers will probably be the driving force of the luxury industry in the years to come because of the size of the market and because of easier possibilities for consumers to travel,” Di Marco said.
He expected Chinese travellers to contribute heavily to the tourist shoppers’ market, much as Japan’s brand-conscious consumers have in the past.
“Very likely, China will assume the role that was Japan’s to be the backbone of the luxury industry,” he said.