Sorry, we're full. Luxury brands find China taken

PUBLISHED : Monday, 13 June, 2011, 12:00am
UPDATED : Monday, 13 June, 2011, 12:00am


With China, the fastest-growing market for luxury products in the world, the first challenge faced by international brands in the mainland market is where to locate their outlets.

They may have to wait for a year or longer to secure a prime site in major cities because of competitive demand for space and limited supply, according to property consultants.

Meanwhile, luxury retailers are cautious about opening up in smaller, so-called second-tier cities, where spending power and property management are often weaker.

Ada Nip, the head of retail at property consultancy DTZ in north China, said further openings in Beijing, Shanghai and Guangzhou would be unlikely over the next two to three years.

'Luxury retailers expanded at a fast pace in China between 2006 and 2010. Now most high-end shopping locations in these cities are full and there's just no more supply of such shop sites.'

Nip said such clients set demanding standards. In Beijing, for example, the locations they are willing to consider are limited to a small number of areas: the central business district, Wangfujing, Parkview Green and Liangmaqiao.

In addition, they often set stringent requirements relating to interior decoration, floor size and the outlook of the building. A nearby five-star hotel was regarded as an added attraction.

According to a report by consultancy Bain & Co, the three luxury brands with the most outlets on the mainland are Dunhill, Hugo Boss, and Burberry, with 93, 89 and 50 shops respectively as of August last year. Louis Vuitton, Gucci and Cartier operate 34, 37 and 33 shops, respectively.

Jeannette Chan Wing-wai, the head of retail for Hong Kong and southern China for consultancy Jones Lang LaSalle, said there was room for expansion in second and third-tier cities, where luxury brands tended to have just one or two shops.

'They will consider having more only if sales at the existing shops reach a certain level and, generally speaking, Beijing, Shanghai and Guangzhou are still their first choice and where their main business is,' Chan said.

She said luxury brands also struggled to find sites in Hong Kong. 'Their desire to open shops is very strong, especially in places like Causeway Bay, and Canton Road in Tsim Sha Tsui.

'But the reality is it may take at least one year before a vacancy arises in these places.'