Luxury Retailers Are Thriving in China
The amount of cash available for spending in China is unbelievable.
The Organization for Economic Cooperation and Development (OECD) predicts China will grow its economy by 8.2% this year and rebound to 9.3% in 2013. While China’s GDP growth is lower than the previous year’s, it is well above the global economic growth averages of 1.6% and 2.2% in 2012 and 2013, respectively. (Source: OECD)
In the retail sector, makers of luxury items, whether they are automobiles, clothes, or jewelry, are clamoring to expand their footprint in China, being fully aware of the country’s pent-up wealth. Of course, there are fake luxury brands, which are becoming a thriving market in Asia.
China is expected to report an estimated $27.0 billion in sales of luxury goods by 2015, which will pass Japan as the top luxury-goods market in the world, according to McKinsey & Co. (Source: McKinsey Quarterly, April 2011)
The strong demand for genuine luxury goods was demonstrated by the establishment of a new e-commerce web site called aolai.com (sorry, but it’s mainly in Chinese) that will market lesser-known luxury brands to the 2.4 million or so members. When browsing the web site, you’ll notice the “genuine” icon indicating the goods are verified as a product from a real luxury brand. So far, about 80 brands have signed on with Shangpin, the operator of the $60.0-million site that counts The Walt Disney Company (DIS) as an investor.
The top luxury retailers in China at this time are outlined below.
Coach, Inc. (COH) is seeing strong sales in China. A seller of high-end bags, purses, and accessories, Coach operates shops within Chinese department stores along with flagship, retail, and factory outlet stores. Same-store sales from China grew at double digits versus a muted 1.7% in North America. The growing importance of Asia is crucial, as Coach has 317 stores in Asia.
Luxury jeweler Tiffany & Co. (TIF) is also keen on the Chinese market for high-end goods. The retailer plans to open most of its global stores in China by 2013 with around 25–30 stores.
One of the fastest growing luxury brands in the U.S. is high-end clothing retailer Michael Kors Holdings Limited (NKORS), estimated sales growth of 36.9% in fiscal 2013 and 25.3% in fiscal 2014. The company has five stores in Mainland China but plans to open 15 stores in greater China (Mainland China, Hong Kong, Macao, and Taiwan) by the end of this year. It also has ambitious plans to grow its network to 100 stores in Greater China within three to five years.