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Valentino Sees Surge In Demand In China

Luxury Retailer Notes That Stabilized Sales, Huge Growth In Greater China Have Fueled Asia Expansion

Italian fashion company Valentino is looking to expand quickly in Asia, with a focus on China & Hong Kong

Italian fashion company Valentino is looking to expand quickly in Asia, with a focus on China & Hong Kong

Most global fashion houses have, over the years, worked hard to make something of a foothold in the Chinese market. As we’ve written before, one of the first major Western fashion companies to enter China following the “reform and opening” policy of the late 1970s was Pierre Cardin, who began selling in China in 1979. Since then, major fashion boutiques from around the world can be found in China’s largest cities, and some have progressed into smaller (but still large by most standards) second- and third-tier cities throughout the country. Despite major setbacks for some retailers in formerly reliable markets like Japan — where companies like French Connection and Versace have recently closed down operations — and a drop in demand in the American market (although that has, according to reports today, stabilized for many luxury companies), the surge in demand for certain designers in the Chinese mainland should soften the blow in revenue that these companies are experiencing as a result of the global economic downturn.

The Valentino Fashion Group — which includes the Valentino, Hugo Boss, and Marlboro labels, today announced that the company has benefitted from the quick rise in consumer demand throughout China. From Bloomberg:

Revenue in China and Hong Kong jumped 40 percent in the past month, and the company expects that pace to continue, Sassi said backstage after the show…

Although sales in Japan were described today by Valentino’s CEO as “not that bad,” the company’s major focus is store expansion in mainland China, Hong Kong, and Southeast Asian markets like Singapore:

[Valentino CEO Stefano Sassi] said the group is opening Valentino stores in Asia — Singapore, China and Japan. “These are not great times to open shops, but we are going ahead with what needs to be done.”

Fashion: From “Made In China” To “Owned By China”

Acquisition Of High-Profile Western Brands By Chinese Companies Gives Chinese Designers And Brands Broader Distribution Base

Pierre Cardin has become one of the most recognizable and coveted foreign brands in China since entering the market in 1978. Photo (c) CRI English

Pierre Cardin was recently acquired by a Chinese fashion company, boosting the popular brand's reach in the China market. Photo (c) CRI English

In the wake of the global economic crisis, several Chinese companies have gone on global shopping sprees, spurred by the one-two punch of a drop in luxury consumption in developed markets and a motivation to control the sale of high-profit luxury goods inside the Chinese mainland. Although China, as the world’s most populous nation, has a massive consumer base, much of that base remains far below the income level of regular luxury consumers, meaning domestic companies often experience a difficult conundrum — if they want to tap into the wallets of China’s 1.3 billion consumers, they generally have only two real choices — toss brand equity aside and focus on the lowest-price-point consumer or bring a foreign brand with much higher brand equity to China and target the emerging middle class and wealthy consumers. As a result, the transition from local to global (or maybe more accurately, glocal), seems natural. In the capitalism-on-speed world of China’s major metropolitan areas, either you go global or you’re crushed by your competitors.

This week, the subject of Chinese companies purchasing established western fashion brands was raised in a Reuters article (via Canada’s Financial Post), which focused on the delicate balance some major Chinese companies are dealing with at the moment — whether to try to purchase distressed foreign brands to sell in the brands’ existing established markets or simply to buy the brands then control them as they please within the Chinese market. There is no guarantee that consumers in developed markets will bounce back from the recession to spend as freely on luxury goods and haute couture as they once did, but at the same time the majority of Chinese consumers are not in the market for these goods. Additionally, Chinese fashion companies may not yet have the management experience necessary to oversee a western brand (or its employees) in its usual markets, so time will probably be necessary for Chinese companies to work out the kinks that would emerge down the road if they were to focus too strongly on overseas markets.

According to some sources — such as the exporter interviewed in the Reuters article — Chinese companies shopping for western fashion brands would be better off counting on the continued growth of the Chinese middle class, as this area should see sustained growth that may outpace the rebound of the consumer in developed countries.

After decades of Made-in-China garments, China’s fashion industry is keen to move on from being just a mass manufacturer of clothes. It now wants to own western brands and to sell them to China’s 1.3 billion consumers.

The right to sell brands of several international fashion labels locally, such as Aquascutum and Pierre Cardin, have been recently acquired by Chinese clothes makers and sellers.

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Pierre Cardin: From Popular Brand In China To Popular Chinese Brand?

Ongoing Negotiations Over Acquisition of French Brand Pierre Cardin Shows Chinese Luxury Brands Have Sights Set On Rapid Growth

Pierre Cardin has become one of the most recognizable and coveted foreign brands in China since entering the market in 1978. Photo (c) CRI English

Pierre Cardin has become one of the most recognizable and coveted foreign brands in China since entering the market in 1978. Photo (c) CRI English

Mixed signals surround the rumored takeover of the Pierre Cardin brand by two Chinese groups, which would — if true — illustrate the speed with which Chinese companies hope to attain global reach and influence. Early reports appeared to suggest that an acquisition of only Cardin’s China operations was imminent, but statements by the brand’s China director, Fang Fang, insinuated that the company was open to the idea of a wholesale takeover of its global assets. Although Pierre Cardin himself has denied these rumors, the story is making waves in the Chinese and global business press.

As one of the first western brands to enter the Chinese market after the government initiated its “opening and reform” policies in the late 1970s, Pierre Cardin carries significant brand equity in China, a point which gives this story extra importance in the grand scheme of Chinese luxury branding. As the AFP pointed out today, the acquisition of the Pierre Cardin brand by a Chinese company would be, in the mainland at least, considered a point of pride:

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