Gucci planning to step up mainland expansion drive

PUBLISHED : Saturday, 10 September, 2011, 12:00am
UPDATED : Saturday, 10 September, 2011, 12:00am


Italian luxury goods maker Gucci is speeding up the pace of expansion on the mainland, planning to open more than 10 shops there next year, with more than half in second- and third-tier cities.

The maker of leather handbags and high-end clothing said Chinese consumers' demand for luxury goods was very strong and their tastes were becoming more sophisticated. Aside from major cities, the company expects to expand its sales network to cities seen as tourism destinations and regional hubs.

Luxury goods consumption on the mainland is expected to grow 18 per cent annually over the next four years, according to a report by the Hurun Research Institute. Total market value would hit 180 billion yuan (HK$219.5 billion) in 2015, accounting for 20 per cent of the global luxury market, it said.

Francois-Henri Pinault, chairman and chief executive of PPR Group, parent company of luxury brands including Gucci, Yves Saint Laurent and Bottega Veneta, said: 'No country in the world has enjoyed growth as fast as China.' He said during a visit to Beijing this week that the Chinese market had exceeded the United States to become the biggest revenue contributor for the group in terms of luxury goods sales as of the end of June. Gucci, the flagship fashion brand under the group, had 44 directly-run shops in around 30 mainland cities, eight in Hong Kong and two in Macau as of June this year.

Founded by Guccio Gucci in Florence in 1921, the luxury goods brand has been accelerating the pace of shop openings since entering the mainland in 1997. It will open more than 10 shops next year, compared with nine new shops this year and seven last year. However, it would slow the pace after next year because it would be able to cover most of the places it hoped to enter by that time, the company said. Its major rival, Louis Vuitton under French luxury giant LVMH Group, now runs 45 shops on the mainland, according to the brand's website.

Despite the robust growth, Gucci said the China market remained challenging due to soaring labour costs and rent levels. In addition, the markets in second- and third-tier cities on the mainland were still highly fragmented and lacked high-quality shopping venues.

There was also increasing pressure on domestic after-sales services as more Chinese shoppers were bringing the goods they bought overseas to be repaired locally, it added.

Gucci reported revenue of Euro1.47 billion (HK$15.8 billion) for the six months to June, up 21.6 per cent on a comparable base year on year.


The proportion of Gucci sales for the six months to June that were accounted for by the Greater China region