This year, fashion brands expanded their presence across the globe from Hamburg, Germany, to Ho Chi Minh City, Vietnam. Firms are reaching out to new customers in emerging markets as well as bolstering their name recognition in more established, competitive stalwarts like Europe and Japan.
India was an especially hot destination this year. Valentino, Fendi, Ferragamo, Christian Dior and Versace all launched in the Asian nation in 2006, joining a string of other brands already with footing there, including Bulgari, Moschino, Chanel, Burberry and Louis Vuitton. Although many executives lament a lack of suitable retail space and infrastructure, the market’s untapped potential is definitely wooing brands.
“Most people don’t know India, and Indians themselves don’t really know their own country because they don’t travel,” Salvatore Ferragamo chief Michele Norsa said at a recent conference, highlighting an overall lack of industry knowledge about the market.
Unsurprisingly, China was another epicenter of fashion activity this year. Donatella Versace, clad in oversized sunglasses for every possible photo op, made her first trip to the country this year, retracing some of Giorgio Armani’s steps in a similar voyage two and a half years ago. Versace, Armani, Dolce & Gabbana and a host of other brands expanded their retail presence in China this year, reaching out to an increasingly sophisticated consumer base. “It’s a country that has a luxury sensibility,” Dolce & Gabbana director of general affairs Cristiana Ruella told WWD in October.
And Versace chief Giancarlo Di Risio said in Hong Kong, “The China market has really developed lately. It is now third after the U.S. and Japan for luxury products. We are talking about 110 million people who can afford to spend on luxury brands today. In fact, one of our private jets was just sold to a Chinese client.”
Another hot Italian brand, Miu Miu, opened a store in Hong Kong just last week.
The swelling interest in these other nations comes at an opportune time. The Japanese market, surely a bastion of frenzied luxury consumption in recent years, has become somewhat mature. While it remains a key arena for many Western brands, as exemplified by numerous high-profile store openings this year, the savvy Japanese consumer is buying judiciously, often more by look and personal preference and less by imported status brand. Thus, the market has become less of a guarantee for U.S. and European labels, making it a good time for those brands to start cultivating other emerging markets.
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As for major American brands seeking growth with a capital G, nowhere seems more tempting to plunk a store these days than India or China. Dense populations, booming factories, a rising middle class and consumer hunger for new goods and retail experiences have made brands willing to overlook challenges in bureaucracy, culture and infrastructure.
The brands lining up to find expansion opportunities — through local licensing partners, joint ventures or wholesale arrangements — range from VF Corp to Guess and Wal-Mart Stores to Saks Fifth Avenue.
“There are more than a billion people [in India],” Tom Murry, CKI’s president and chief operating officer, told WWD this year on the heels of a deal to open 40-plus licensed ck Calvin Klein and Calvin Klein Jeans stores across India. “The economy is growing quickly and the affluence is rising. We really wanted to be established in India and get ready for the growth that we anticipate in that market over the next five years.”
One of the most striking deals is a joint venture inked in November between Bentonville, Ark.-based Wal-Mart and Bharti Enterprises Ltd., India’s largest telecom company. The partnership reportedly plans to open more than 100 stores in the coming years. At present, India restricts foreign retailers from opening multicategory stores, but Wal-Mart’s model with Bharti, which calls for franchised units, may pave the way for big-box retailing in the country.
Other operators are playing with partnerships and licensing arrangements.
Saks Fifth Avenue intends to open a four-level, 300,000-square-foot store in Shanghai with Roosevelt China Investments Corp. ahead of the 2008 Olympics in Beijing. If that store fares well, the retailer has said it would consider similar joint ventures in Japan and India, among other possibilities.
Guess opened 10 licensed stores in India in 2005 and 15 this year. The Los Angeles-based sportswear label, on a hot streak in recent years, continues to push forward in China. Four more stores will open by February, in Shanghai, Beijing, Macao and Hong Kong, for a total of 13 stores.
In September, VF ponied up $33 million for a joint venture with Arvind Mills Ltd. that looks to send its Lee, Wrangler, Nautica, JanSport and Kipling brands to India.
Other brands are pursuing expansion directly, convinced these lucrative markets are worth controlling directly.
Adidas recently bought back the distribution rights for Reebok in China. A new Reebok store will open every day and a half next year, for a rough total of 240 stores.
Still, fashion brands’ international development this year extended far beyond India and China to myriad points across the globe. To wit, both Dior and Chanel opened flagships in Russia this year, and men’s wear label Ermenegildo Zegna even ventured to open a store in Siberia. Further East, Gucci inaugurated a new eight-story tower in Tokyo’s Ginza district, and Hermès opened the doors of a new seven-story building in Seoul.
Emporio Armani bowed in two new markets this year, with stores in Guam and Estonia. Those moves are emblematic of a larger overall trend: brands and retailers expanding to secondary and tertiary cities in the U.S., Europe, Asia and South America. Suddenly, places like Leeds, England, Charlotte, N.C., and Samara, Russia, are emerging on the luxury map.
Also this year, American and European brands did plenty of pond-crossing, invading one another’s turf. Mulberry embarked on a U.S. retail push, opening four stores in the U.S., with an inaugural unit on Bleecker Street. A Christian Lacroix store made its debut in Las Vegas. Meanwhile, Miu Miu changed its location and updated to its new store concept in Paris this year, as Tommy Hilfiger, Marc Jacobs and Rick Owens all opened boutiques in the City of Light.