Gucci moves faster as mainland sales growth exceeds 65pc

Andy Chen

Italian luxury retailer Gucci is speeding up its expansion on the mainland and expects sales in the country to surpass those in Japan within two decades to account for the lion's share of the group's Asian revenues.

Sales from the mainland saw growth of more than 65 per cent last year, chief executive Mark Lee said in an interview.

While the retailer started its mainland business a decade ago it was not until 2005 that it 'actively' targeted expansion in the country, according to Mr Lee (right), an American who took the helm in 2004.

Gucci, which now has 16 stores on the mainland, following the opening of six new stores in 2005 and last year, and will maintain a 'similar pace' of expansion in the coming few years. Mainland operations have been profitable for three years, said Mr Lee, and each new store achieved profitability within a year of operation.

The mainland ranks second following Hong Kong in Gucci's sales in Asia excluding Japan, said Mr Lee. But within the next 20 years, he added, mainland sales would surpass sales in Japan, currently the retailer's single largest Asian marketplace.

Goldman Sachs says the mainland is now the world's third-largest consumer of luxury goods, accounting for 12 per cent of global sales, behind Japan's 41 per cent share and a 17 per cent share held by the United States. The brokerage forecasts that the mainland will become the world's second-largest purchaser of luxury goods by 2015, with 29 per cent of sales.

Fashion magazine Vogue last year ranked Gucci as the second most preferred high-end fashion label in the mainland, following Louis Vuitton, while domestic player Ports ranked third.

Mr Lee said Gucci would penetrate into more mainland second-tier cities after establishing a foothold in Shanghai and Beijing. The retailer, which already operates stores in Qingdao, Suzhou and Tianjin, will open a store in Changchun by the end of this year.

Mr Lee said he was happy with the pace of the expansion despite the fact that the number of Gucci stores on the mainland still lagged some international luxury goods makers such as Italy's Salvatore Ferragamo, and home-grown label, Ports.

'We don't open stores for the sake of opening,' he said.

Ferragamo, which operates some 25 mainland stores with a joint-venture partner which it declined to name, plans to double the number of its mainland outlets by 2010.

Ports, which now has 329 stores in the country, plans to expand the network between 8 per cent and 10 per cent a year.

Ports' chief executive Alfred Chan Kai-tai said his company's strategy had switched to boosting same store sales rather than aggressively expanding its network.

Mr Lee said Gucci had 219 stores worldwide, which generated revenue of Euro2.1 billion (HK$22.69 billion) last year and it would be 'impossible' for the company to have as many as 300 stores on the mainland.