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Brands including Burberry, Giorgio Armani and Marc Jacobs have opened or plan to open stores in the Far East in the next few months as the region continues to recover from the impact of last year’s SARS virus; the Chinese economy grows at nearly a double-digit rate and the core Japanese economy performs at a level not seen in more than a decade.
Burberry opened another flagship in Tokyo last week and plans to have more than 30 stores in China by the end of this year, while Armani is arriving in Shanghai this week for the opening of his Armani and Emporio Armani stores covering almost 12,000 square feet. Meanwhile, Louis Vuitton will open global stores in Tokyo, Osaka, Japan and Shanghai this year; Chanel will open a store on the first three floors of the 10-story, 66,500-square-foot Chanel Ginza Building in Tokyo in December, and Jacobs has announced plans to open his first store in China this fall, also in Shanghai.
“China is where all luxury brands are going,” said Dana Telsey, an analyst with Bear Stearns. “The Chinese are being more consumers of luxury. It is a good time to invest and the area will grow over time.”
Goldman Sachs has estimated that China’s luxury market is now worth about $2 billion, a fraction of its overall clothing and apparel market and only about 3 percent of global luxury goods sales of $65 billion. Clare Kent, luxury analyst at Morgan Stanley in London, has predicted that profits for luxury brands in China are at least five years away as wealth levels remain low among consumers and brands continue to face import duties of up to 35 percent on some products.
But luxe executives — like those in every other industry — remain eager to get in on the ground floor of the potentially huge Chinese market; Kent predicts the country eventually could rival Japan as a consumer of luxury goods. Meanwhile, the store openings and growing demand in Asia are among the reasons luxury brands are bullish in their outlook for 2004 following a strong end to 2003. Gucci Group, for example, said its organic growth in Asia was 25 percent last year.