Trinity puts lower-tier cities on luxury sales list
As global luxury brands saturate first and even second-tier mainland cities, Hong Kong-based luxury menswear group Trinity is pushing its frontiers in third and fourth-tier cities.
The group is setting up a central China regional office in Wuhan in the middle of this year, riding on the business opportunities that will come with the construction of high-speed railway lines in the region.
Group managing director Sunny Wong Yat-ming said he was bullish about the markets in provincial capitals like Wuhan, Nanchang and Changsha.
He believes the luxury menswear market on the mainland is still under-penetrated by global brands, especially in third and fourth-tier cities.
'There are three types of luxury menswear customers: entrepreneurs, senior management of local or foreign companies, and the professionals,' he said.
'You have senior management and professionals in first and second-tier cities. But if you are talking about entrepreneurs, like department store bosses and coal mine owners, they are everywhere in China - in Taiyuan, in Xian, in Inner Mongolia. You don't have a lot of professionals, but then you don't need that many customers. The entrepreneurs will spend a lot.'
As Wong sees it, the way forward is to increase shop density in second-tier cities and spread the group's footprints into yet more third and fourth-tier cities.
Trinity now has 409 shops in 50 cities - compared with 354 shops in 42 cities in 2009.
But, Wong realises there could be growing pains as the company ventures into a market totally unused to high-end consumption.
'As we go to the smaller cities, it is virtually impossible to find staff who already know this kind of business,' he said. 'We either look for people in a different kind of retailing industry, or those we believe are trainable.
'When we went into Inner Mongolia - we couldn't find anyone. Then we had to think: would a five-star hotel receptionist be good? Or should we just look for someone working for the ticketing office of a big airline?
'Hiring is always a challenge in China. We spend a lot time hiring and training people.
'Every industry keeps saying they will open many shops, but where are they going to hire all those people?'
Wong said having local partners could be one of the best solutions. Local department stores and hotels could help recruit and screen the candidates for the shops in exchange for a commission on sales.
And finding the right location could also be a puzzle. 'It is not difficult to get into a good shop,' Wong said. 'The challenge is to know which one is the best, because they are all very nice, but they are not yet completed, and you have to use your imagination. So you can be wrong, you can choose the wrong guy, bet on the wrong horse ... this happens.
'But more often we choose our partners for the quality of their management; if they are committed and if they know how to do this kind of business.'
He said the good thing was the company could always choose to move to another shop location, or another city. In 2010, Trinity closed 49 shops on the mainland, while opening 104 new shops in new locations.
Trinity now owns the Kent and Curwen and Cerruti 1881 brands globally, and manages five other international luxury brands including Gieves & Hawkes, D'urban, Intermezzo and Altea.
Having completed the Euro53 million (HK$582 million) acquisition of Cerruti 1881 earlier this month, Wong said the group was actively looking for opportunities to buy European brands.
The mainland market has become the focus of all luxury brands.
According to a recent report by independent brokerage and investment group CLSA, the mainland's domestic luxury market amounted to Euro9.2 billion in 2009, about 5 per cent of the global market. The market is expected to grow by about 25 per cent per year for the next five years, reaching Euro74 billion by 2020, making it the largest domestic market in the world.
Including the Taiwan, Hong Kong and Macau markets, Greater China demand will account for 44 per cent of the global luxury goods market by 2020.
While big luxury brands are buying back shares from their local partners in order to have total control over the lucrative expansion into China, Wong said smaller European brands were more open to the idea of partnerships or takeovers because they might not have the resources to compete with the big tickers.
'There are always some brands which catch our eyes,' he said. 'We will wait for the right opportunity and right timing.'