Godfrey Deeny April 24th, 2008 @ 00:39 AM Milan
LVMH Moet Hennessy Louis Vuitton is buying itself another watch brand, upping its commitment to the sector in the weeks following the world's largest watch and jewelry fair in Basel.
Luxury's largest conglomerate, LVMH inked a deal with the Geneva, Switzerland-based Hublot group, a high end watchmaker that has posted respectable sales growth in recent years.
Terms were not released in the deal which will see Paris-based LVMH buy Hublot from its founder Carlo Crocco, who launched the label in 1980, and Jean-Claude Biver, Hublot's CEO since 2004.
LVMH executives regard Hublot as a brand that will dovetail with its existing stable of watch makers that is comprised of TAG Heuer, the Swiss Watch Manufacturer Zenith, Dior Montres, and the watch collections of jewelers Chaumet, Fred and De Beers plus Louis Vuitton's watch line.
"Hublot is a strategic and very complementary acquisition. Its high-end positioning, selective distribution, financial performance and growth potential make Hublot a 'rising star'," said Philippe Pascal, CEO of LVMH’s Watches & Jewelry business group, in a release.
Hublot has grown at a rapid pace since 2004, racking up net revenue of some $149 million in 2007 with what a LVMH release termed "excellent profitability” without, however, stating a figure.
"I am happy that Hublot, an innovative brand since its creation, is joining the LVMH group, the world leader in luxury goods, whose creative passion is without any doubt a value that I have always shared," said founder Crocco.
Hublot currently retails in a selective distribution network of just 300 stores worldwide, primarily in Europe, though this should expand as the label has begun selling its products in China and India and sees strong growth potential in Asia, Japan and North America.
Hublot's product range is characterized by watches in unusual materials using unlikely combinations of precious metals like gold and platinum with technological metals such as titanium, tantalum and far more left-field ideas like ceramics, diamonds and natural rubber.
Its Big Bang collection includes models equipped with automatic movements whose prices range from 8,000 euros for steel and ceramic, to more than 300,000 euros, when integrating precious metals and technical complexity.
Hublot recently launched the Big Bang collection for women at the last Basel watch fair to considerable acclaim.
2008/04/25
CEIBS Hosts 1st Annual Luxury Brands Forum
April 19, 2008. Shanghai campus - Three hundred international and domestic luxury brand executives, students and journalists packed the CEIBS Shanghai campus auditorium today and yesterday for the school’s 1st Annual Luxury Brand Forum. The forum, entitled "Winning Consumers with Luxury as a Value-Added Service," featured speeches from 17 top luxury industry executives, officials, or academic experts.
CEIBS Executive President Pedro Nueno opened the forum by explaining why the school -- which organizes annual fora on other industries including automobile, banking, media, and healthcare -- decided to tackle the luxury brand industry. "We must keep our feet on the ground and stay relevant," Executive President Nueno stated. "The luxury brand sector is remarkable because it is one of the most creative and innovative industries, and because it has experienced such tremendous globalization. For every Euro of sales in this business, there is much more money spent on innovation and globalization than in other industries. This makes it well worthwhile to spend a day-and-a-half studying this industry." In conclusion, he urged the audience to make the most of the forum. "Let’s network as much as possible today and tomorrow," he said.
Fondazione Italia Cina President Cesare Romiti next delivered a welcome address in which he explained that Italy’s luxury brand industry was formed through a long tradition of small-scale, limited edition production of high-end products such as wine, jewellery, and accessories. "There are many brands in Italy that are well known only in the Italian domestic market. The Fondazione is now trying to promote these Italian brands, as well as Italian lifestyle, to new markets overseas such as China," said Mr. Romiti.
"China is expected to overtake the U.S. and Japan as the world’s #1 consumer of luxury goods soon," he said. Thus China has become a key target market for his work to promote still-undiscovered Italian brands. "We hope to serve as a bridge between Italian brands and Chinese consumers," he said.
Next, Wang Depei, Deputy Chairman of China’s Economic System Reform Research Association and Chief of the Shanghai FC Economic Forecast Institute, gave his outlook for China’s overall economic growth and his predictions for the luxury brand industry, in particular. Drawing upon the research of the Shanghai FC Economic Forecast Institute, Mr. Wang said, "Despite strict regulations and efforts to chill overheated sectors, China’s economy is still growing very fast." He predicted that China will experience four "explosions" in the coming years: in terms of economic growth-rate, wealth accumulation, finance, and capital accumulation.
Turning to the luxury brand sector specifically, Mr. Wang said he preferred to use the term "high-end" rather than "luxury." He explained that "high-end" has no negative connotations in Chinese language and also fits well with the reality of the consumer market in China. He described a transformation within the industry worldwide in which luxury brands went from being considered highly exclusive before 1980 to a more mass-market approach today. He expects this trend to continue, especially as Chinese consumers emerge as increasingly influential buyers in this sector.
Winning Chinese Consumers: Ermenegildo Zegna
As the Forum’s first featured luxury brand representative, Ermenegildo Zegna Holditalia SPA President Paolo Zegna spoke on "Winning Chinese Consumers." Mr Zegna, the grandson of the company’s founder, introduced the history of the 98-year-old firm, then outlined its current and future plans in China. Beginning with his grandfather’s dream, "to create and produce the best fabrics in the world," the company expanded during the second generation of the family business during the 1940s to 1980s to reach its current level of global recognition.
In recent years, the company’s consolidated revenue increased from Euro 634 million in 2004 to Euro 843 million in 2007. Mr. Zegna stressed that Asia, and China in particular, has become an increasingly hot market. Today, 33 percent sales revenue for Ermenegildo Zegna comes from Asia, and 12% from China. The company employs 7,500 people in six countries including China, and operates 525 sales points worldwide. He stressed that emerging markets are now the key "drivers" in the company’s growth, with 25% of global growth for the brand coming from the combined markets of China, India, Russia, Latin America, Middle East and Southeast Asia. By 2010, that percentage will reach 33%. Giving insight to the peculiarities of the Chinese market, he stressed that luxury goods consumers here tend to be far younger than their counterparts in other markets worldwide.
Cultures, Tastes and Preferences: Tous and Torres
The forum next looked at two sub-sectors of luxury brands -- jewellery and wine -- with representatives from Tous and Torres.
"Making people happy," is the secret to success for famed jewellery brand Tous. So said company co-presidents Rosa and Salvador during their talk on "Entrepreneurship in Jewellery Sector." The pair introduced the growth of the Barcelona-based company, which identifies its target consumer as confident and independent women who value quality and individual style. Since 2002, the company has aggressively expanded into international markets: Germany, Japan and the United States.
Turning to the business of high-end wine, Miguel Torres began by explaining the mission of his family-run business. Launched in 1870, the mission of Torres is: "To remain an independent, self financed family company while remaining a global player that aims to turn every customer into a friend. To be a leader in premium wine and brandy, by marketing products with clearly defined character, by constantly improving their quality and design, and by communicating the culture of wine." The company has had operations in China since 1992, and became a wholly foreign owned company in 2002. Mr. Torres discussed the challenges and opportunities of growing while also remaining committed to environmental protection.
Creativity and Luxury Brands
The Forum next featured one of China’s most famous fashion entrepreneurs, Yue-Sai Kan, Chairwoman of the House of Yue-Sai. Ms. Kan introduced her phenomenal career, which began 24 years ago, as a presenter for a CCTV programme introducing the West to Chinese audiences. She commented on how fast and how far China has come since then. "It was a very difficult time back in 1986. By comparison, today I’m really glad to talk about the luxury sector." The TV host-turned-luxury brand entrepreneur commented that part of her success in launching her cosmetics and fashion company, as well as authoring a number of popular books, has been in part due to China’s growth and development. "I don’t think of myself as a hero. I was just really lucky to be at the right place at the right time."
Wang Depei, Deputy Chairman of China’s Economic System Reform Research Association and Chief of the Shanghai FC Economic Forecast Institute, was the Forum’s opening keynote speaker.
Dressed in her trademark bright colours - orange, pink and purple - designer Agatha Ruiz de la Prada, next spoke on "Art, Design and Fashion." She told the audience that she believes in democracy in fashion, meaning that fashion should not be priced so highly that it is only accessible to an elite few. For example, one of her favourite companies to co-brand with is Swatch, which creates watches that are affordable and fashionable for large populations of diverse consumers worldwide.
The designer expressed optimism for the future of China’s fashion industry. "I am a little bit obsessed with China," Ms. Ruiz de la Prada told the audience. "I hope there will be some China-made luxury in the future. The advantage for China is that you can learn from our mistakes in the Western world. China has great opportunities now because of the high technology available now that allows you to grow economically but balance with environmental protection. I’m looking forward to seeing Chinese style from Chinese designers in the future."
Opportunities and Challenges of Luxury Brands
China may only account for 5% of the global luxury market, but it’s not a market that can be ignored. That was the message from a presentation entitled "Opportunities and Challenges of Luxury Brands in China," made during session four of the Forum. Presenters were Professor Michel Chevalier of Paris Dauphine University, who also serves as Partner and Manager at EIM Paris and Shanghai; and Professor Pierre Lu Assistant Professor of Fudan University.
According to the professors, China - the country where the millionaires are youngest in the world and 195 million members of the upper middle class have the means to indulge in luxury brands - offers huge growth potential for high-end products. Prof. Chevalier explained that China, coupled with Japan, accounts for half the global fashion sales volume. Even more noteworthy, he says, is that because of China’s steadily increasing growth and Japan’s slowdown, China’s fashion sales volumes will surpass Japan’s by 2015 at the latest.
That growth is driven by what Prof. Lu described as four categories of Chinese consumers: the status-seeking luxury lovers (15%); those who see luxury items as a way to belong to a social group, the luxury followers (21%); the luxury intellectuals (35%) whose purchases are based on a search for knowledge, heritage, value, etc; and the luxury laggards (28%) who just go with the flow.
World Fashion Centres: Learning from Milan
"Learning from Milan as a World Fashion Capital" was the topic addressed by Mario Boselli, President of Camera Nazionale Della Moda Italiana (CNMI). The 50-year-old non-profit organization represents 200+ Italian fashion companies including such famous Italian brands as Prada, Missoni, Salvatore Ferragamo, and Versace.
Mr. Boselli explained that the success of "made in Italy" is the result of the ability to create a synergy between creativity and technology, leading to the production of elegant products that are both fashionable and wearable. He added that the success of Milan’s fashion industry is a great source of pride for the city, making it the capital of "made in Italy."
Luxury: Chinese Style
Day two of the 1st Annual Luxury Brands Forum began with a look at the niche market from a Chinese perspective. The first speaker to take the podium was LVMH Group Director Andrew Wu who spoke on the issue of "Benefiting from China’s Generational Transformation." Drawing on his long history within the luxury industry, Mr. Wu painted a picture of China’s past, present and future from the perspective of luxury items. He said, "We are benefiting from a very, very important transformation here in China unfolding in front of you. Without the China story, there would be no luxury story."
Ermenegildo Zegna Holditalia SPA President Paolo Zegna was the Forum’s first featured luxury brand representative.
He explained the changes in China’s luxury market in terms of the country’s generational changes -- from Mao Ze Dong helping the Chinese to stand up, Deng Xiaoping helping China to open up and the message of China’s increasingly global integration behind the present Olympic slogan of "One World, One Dream."
According to Mr. Wu, "the whole nation is trading up" and that is why the China market is so attractive for luxury brands and companies as a whole. The changes, he said, are reflected in the increasing shift in popular culture, with the mainland now being embraced - by its residents - as a source of fashion and celebrities. In the past, Mainland Chinese looked to Taiwan and Hong Kong, he said. The 42% of China’s population who are under 30 is a large source of the changing landscape, he explained. Mr. Wu urged, "That generation is already showing its impact on consumption, influencing the luxury goods market a bit. The challenge for marketers, industries and the government is how to ride this generational change." He added: "It’s a fascinating time; we are in an era where China is being changed by, and is changing, the world."
Constant Change
That internal change can also be seen from the experiences of China’s independent brands, such as EVE Enterprises Group. In her address on "The Development Road of Independent Brands in China" company president Ms. Xia Hua shared with the audience her company’s various stages of transformation during the last 14 years. In the early days, EVE faced the uncertainty of how to effectively position itself in the market. The company began as Beijing Eve Fashion & Company Limited, and then evolved into the corporate brand, Eve. In 1999, the company established a special team to "produce dedicated small accessories for clients", Ms. Xia explained, adding that the organization eventually moved into a mature phase in which it built its name as a value brand.
President of Shanshan Group Mr. Zheng Yonggang then offered his insights into the luxury industry from the perspective of "A Multi-brand Chinese Company." People, he said, are willing to spend a lot of money on luxury items - whose cost is sometimes only 10 percent of the sale price - because these purchases add prestige to their lives. "China is a huge market, that is why so many international luxury brands are focused on Chinese markets," he said. Mr. Zheng posited that the newly-emerging Chinese luxury band market has a bright future, due in large part to the Chinese work ethic. "I believe our culture is our key to success," he said.
The penultimate session then examined the role that management and communication plays within the luxury brand industry with input from representatives from Publicis China, a global leader in communications and marketing solutions. The company’s Chief Strategy Officer George Singleton urged the audience, comprised of representatives of some of the luxury industry’s big names, to understand the global changes taking place and how these changes will impact the way they interact with consumers. With a dramatic increase in Asia’s middle class population, and their inclination to spend money on luxurious good and experiences, producers and marketers of luxury goods must keep abreast of all the changes, he said. According to Mr. Singleton, even the mere definition of luxury is evolving. "It’s less about what you carry in your hand and more about what you carry in your head. It’s no longer about showing people you can afford something, it’s the knowledge about the product, why it is good, its origin, what makes it different from others," he said.
Changes, Mr. Singleton said, have also extended to the consumer/supplier relationship. Gone are the days, he said, when fashion houses dictated what is hot and what is not. Today’s more confident consumers make their own choices, and some luxury brand producers have moved to embrace that change. The smart luxury brand producer or marketer takes advantage of consumer created buzz, the Publicis executive said. "Advertising is still important, but its role is changing. It’s not just about telling people about things, it’s about fanning the flames, creating contagious ideas. People are already talking about your brand (on blogs for example); we want to inject ourselves into that conversation to create a more positive image." In the past, the strategist added, it was about who could shout loudest. Today, it is about getting other people to shout for you.
In response to a question from the audience, Publicis CEO Sheen Jeng spoke of the future changes in China’s high-end health care market. While pharmaceutical companies now contribute 15 percent of China’s advertising revenue, she said, the premium health care industry - such as spas and cosmetic surgery - still has some growing to do. "We don’t have a successful premium health care market, but it’s developing," she said.
Culture, Values and Luxury
Session eight, the forum’s last, explored luxury brands from an architectural view point. Under the broad heading of “Trends from Architecture” CEO of Gregotti Associati International Mr. Augusto Cagnardi spoke on the topic of “Culture, Values and Luxury.” A clear understanding of the unbreakable linkages between luxury, culture and values was vital when the company helped design Shanghai Pujiang Park (near to the Expo Park); the Band Park in the north of the city; and sections of the financial district Lujiazui. As Cagnardi explained, “A luxury brand is decided by the clients themselves, so we have to pay more attention to the cultural differences. It is hard to convey a unique culture -- culture can only be shown, but can not be bought.”
The 1st Annual Luxury Brand Forum then came to an end with a closing address by CEIBS Executive President Pedro Nueno, who summed up the two days of discourse. The forum, he said, had offered much food for thought and laid the groundwork for future discussions on the topic. “I think these two days have given us an in-depth perspective; but there are still questions left unanswered. We will continue to host this forum in the future; thank you for coming and sharing your ideas,” he said.
CEIBS Executive President Pedro Nueno opened the forum by explaining why the school -- which organizes annual fora on other industries including automobile, banking, media, and healthcare -- decided to tackle the luxury brand industry. "We must keep our feet on the ground and stay relevant," Executive President Nueno stated. "The luxury brand sector is remarkable because it is one of the most creative and innovative industries, and because it has experienced such tremendous globalization. For every Euro of sales in this business, there is much more money spent on innovation and globalization than in other industries. This makes it well worthwhile to spend a day-and-a-half studying this industry." In conclusion, he urged the audience to make the most of the forum. "Let’s network as much as possible today and tomorrow," he said.
Fondazione Italia Cina President Cesare Romiti next delivered a welcome address in which he explained that Italy’s luxury brand industry was formed through a long tradition of small-scale, limited edition production of high-end products such as wine, jewellery, and accessories. "There are many brands in Italy that are well known only in the Italian domestic market. The Fondazione is now trying to promote these Italian brands, as well as Italian lifestyle, to new markets overseas such as China," said Mr. Romiti.
"China is expected to overtake the U.S. and Japan as the world’s #1 consumer of luxury goods soon," he said. Thus China has become a key target market for his work to promote still-undiscovered Italian brands. "We hope to serve as a bridge between Italian brands and Chinese consumers," he said.
Next, Wang Depei, Deputy Chairman of China’s Economic System Reform Research Association and Chief of the Shanghai FC Economic Forecast Institute, gave his outlook for China’s overall economic growth and his predictions for the luxury brand industry, in particular. Drawing upon the research of the Shanghai FC Economic Forecast Institute, Mr. Wang said, "Despite strict regulations and efforts to chill overheated sectors, China’s economy is still growing very fast." He predicted that China will experience four "explosions" in the coming years: in terms of economic growth-rate, wealth accumulation, finance, and capital accumulation.
Turning to the luxury brand sector specifically, Mr. Wang said he preferred to use the term "high-end" rather than "luxury." He explained that "high-end" has no negative connotations in Chinese language and also fits well with the reality of the consumer market in China. He described a transformation within the industry worldwide in which luxury brands went from being considered highly exclusive before 1980 to a more mass-market approach today. He expects this trend to continue, especially as Chinese consumers emerge as increasingly influential buyers in this sector.
Winning Chinese Consumers: Ermenegildo Zegna
As the Forum’s first featured luxury brand representative, Ermenegildo Zegna Holditalia SPA President Paolo Zegna spoke on "Winning Chinese Consumers." Mr Zegna, the grandson of the company’s founder, introduced the history of the 98-year-old firm, then outlined its current and future plans in China. Beginning with his grandfather’s dream, "to create and produce the best fabrics in the world," the company expanded during the second generation of the family business during the 1940s to 1980s to reach its current level of global recognition.
In recent years, the company’s consolidated revenue increased from Euro 634 million in 2004 to Euro 843 million in 2007. Mr. Zegna stressed that Asia, and China in particular, has become an increasingly hot market. Today, 33 percent sales revenue for Ermenegildo Zegna comes from Asia, and 12% from China. The company employs 7,500 people in six countries including China, and operates 525 sales points worldwide. He stressed that emerging markets are now the key "drivers" in the company’s growth, with 25% of global growth for the brand coming from the combined markets of China, India, Russia, Latin America, Middle East and Southeast Asia. By 2010, that percentage will reach 33%. Giving insight to the peculiarities of the Chinese market, he stressed that luxury goods consumers here tend to be far younger than their counterparts in other markets worldwide.
Cultures, Tastes and Preferences: Tous and Torres
The forum next looked at two sub-sectors of luxury brands -- jewellery and wine -- with representatives from Tous and Torres.
"Making people happy," is the secret to success for famed jewellery brand Tous. So said company co-presidents Rosa and Salvador during their talk on "Entrepreneurship in Jewellery Sector." The pair introduced the growth of the Barcelona-based company, which identifies its target consumer as confident and independent women who value quality and individual style. Since 2002, the company has aggressively expanded into international markets: Germany, Japan and the United States.
Turning to the business of high-end wine, Miguel Torres began by explaining the mission of his family-run business. Launched in 1870, the mission of Torres is: "To remain an independent, self financed family company while remaining a global player that aims to turn every customer into a friend. To be a leader in premium wine and brandy, by marketing products with clearly defined character, by constantly improving their quality and design, and by communicating the culture of wine." The company has had operations in China since 1992, and became a wholly foreign owned company in 2002. Mr. Torres discussed the challenges and opportunities of growing while also remaining committed to environmental protection.
Creativity and Luxury Brands
The Forum next featured one of China’s most famous fashion entrepreneurs, Yue-Sai Kan, Chairwoman of the House of Yue-Sai. Ms. Kan introduced her phenomenal career, which began 24 years ago, as a presenter for a CCTV programme introducing the West to Chinese audiences. She commented on how fast and how far China has come since then. "It was a very difficult time back in 1986. By comparison, today I’m really glad to talk about the luxury sector." The TV host-turned-luxury brand entrepreneur commented that part of her success in launching her cosmetics and fashion company, as well as authoring a number of popular books, has been in part due to China’s growth and development. "I don’t think of myself as a hero. I was just really lucky to be at the right place at the right time."
Wang Depei, Deputy Chairman of China’s Economic System Reform Research Association and Chief of the Shanghai FC Economic Forecast Institute, was the Forum’s opening keynote speaker.
Dressed in her trademark bright colours - orange, pink and purple - designer Agatha Ruiz de la Prada, next spoke on "Art, Design and Fashion." She told the audience that she believes in democracy in fashion, meaning that fashion should not be priced so highly that it is only accessible to an elite few. For example, one of her favourite companies to co-brand with is Swatch, which creates watches that are affordable and fashionable for large populations of diverse consumers worldwide.
The designer expressed optimism for the future of China’s fashion industry. "I am a little bit obsessed with China," Ms. Ruiz de la Prada told the audience. "I hope there will be some China-made luxury in the future. The advantage for China is that you can learn from our mistakes in the Western world. China has great opportunities now because of the high technology available now that allows you to grow economically but balance with environmental protection. I’m looking forward to seeing Chinese style from Chinese designers in the future."
Opportunities and Challenges of Luxury Brands
China may only account for 5% of the global luxury market, but it’s not a market that can be ignored. That was the message from a presentation entitled "Opportunities and Challenges of Luxury Brands in China," made during session four of the Forum. Presenters were Professor Michel Chevalier of Paris Dauphine University, who also serves as Partner and Manager at EIM Paris and Shanghai; and Professor Pierre Lu Assistant Professor of Fudan University.
According to the professors, China - the country where the millionaires are youngest in the world and 195 million members of the upper middle class have the means to indulge in luxury brands - offers huge growth potential for high-end products. Prof. Chevalier explained that China, coupled with Japan, accounts for half the global fashion sales volume. Even more noteworthy, he says, is that because of China’s steadily increasing growth and Japan’s slowdown, China’s fashion sales volumes will surpass Japan’s by 2015 at the latest.
That growth is driven by what Prof. Lu described as four categories of Chinese consumers: the status-seeking luxury lovers (15%); those who see luxury items as a way to belong to a social group, the luxury followers (21%); the luxury intellectuals (35%) whose purchases are based on a search for knowledge, heritage, value, etc; and the luxury laggards (28%) who just go with the flow.
World Fashion Centres: Learning from Milan
"Learning from Milan as a World Fashion Capital" was the topic addressed by Mario Boselli, President of Camera Nazionale Della Moda Italiana (CNMI). The 50-year-old non-profit organization represents 200+ Italian fashion companies including such famous Italian brands as Prada, Missoni, Salvatore Ferragamo, and Versace.
Mr. Boselli explained that the success of "made in Italy" is the result of the ability to create a synergy between creativity and technology, leading to the production of elegant products that are both fashionable and wearable. He added that the success of Milan’s fashion industry is a great source of pride for the city, making it the capital of "made in Italy."
Luxury: Chinese Style
Day two of the 1st Annual Luxury Brands Forum began with a look at the niche market from a Chinese perspective. The first speaker to take the podium was LVMH Group Director Andrew Wu who spoke on the issue of "Benefiting from China’s Generational Transformation." Drawing on his long history within the luxury industry, Mr. Wu painted a picture of China’s past, present and future from the perspective of luxury items. He said, "We are benefiting from a very, very important transformation here in China unfolding in front of you. Without the China story, there would be no luxury story."
Ermenegildo Zegna Holditalia SPA President Paolo Zegna was the Forum’s first featured luxury brand representative.
He explained the changes in China’s luxury market in terms of the country’s generational changes -- from Mao Ze Dong helping the Chinese to stand up, Deng Xiaoping helping China to open up and the message of China’s increasingly global integration behind the present Olympic slogan of "One World, One Dream."
According to Mr. Wu, "the whole nation is trading up" and that is why the China market is so attractive for luxury brands and companies as a whole. The changes, he said, are reflected in the increasing shift in popular culture, with the mainland now being embraced - by its residents - as a source of fashion and celebrities. In the past, Mainland Chinese looked to Taiwan and Hong Kong, he said. The 42% of China’s population who are under 30 is a large source of the changing landscape, he explained. Mr. Wu urged, "That generation is already showing its impact on consumption, influencing the luxury goods market a bit. The challenge for marketers, industries and the government is how to ride this generational change." He added: "It’s a fascinating time; we are in an era where China is being changed by, and is changing, the world."
Constant Change
That internal change can also be seen from the experiences of China’s independent brands, such as EVE Enterprises Group. In her address on "The Development Road of Independent Brands in China" company president Ms. Xia Hua shared with the audience her company’s various stages of transformation during the last 14 years. In the early days, EVE faced the uncertainty of how to effectively position itself in the market. The company began as Beijing Eve Fashion & Company Limited, and then evolved into the corporate brand, Eve. In 1999, the company established a special team to "produce dedicated small accessories for clients", Ms. Xia explained, adding that the organization eventually moved into a mature phase in which it built its name as a value brand.
President of Shanshan Group Mr. Zheng Yonggang then offered his insights into the luxury industry from the perspective of "A Multi-brand Chinese Company." People, he said, are willing to spend a lot of money on luxury items - whose cost is sometimes only 10 percent of the sale price - because these purchases add prestige to their lives. "China is a huge market, that is why so many international luxury brands are focused on Chinese markets," he said. Mr. Zheng posited that the newly-emerging Chinese luxury band market has a bright future, due in large part to the Chinese work ethic. "I believe our culture is our key to success," he said.
The penultimate session then examined the role that management and communication plays within the luxury brand industry with input from representatives from Publicis China, a global leader in communications and marketing solutions. The company’s Chief Strategy Officer George Singleton urged the audience, comprised of representatives of some of the luxury industry’s big names, to understand the global changes taking place and how these changes will impact the way they interact with consumers. With a dramatic increase in Asia’s middle class population, and their inclination to spend money on luxurious good and experiences, producers and marketers of luxury goods must keep abreast of all the changes, he said. According to Mr. Singleton, even the mere definition of luxury is evolving. "It’s less about what you carry in your hand and more about what you carry in your head. It’s no longer about showing people you can afford something, it’s the knowledge about the product, why it is good, its origin, what makes it different from others," he said.
Changes, Mr. Singleton said, have also extended to the consumer/supplier relationship. Gone are the days, he said, when fashion houses dictated what is hot and what is not. Today’s more confident consumers make their own choices, and some luxury brand producers have moved to embrace that change. The smart luxury brand producer or marketer takes advantage of consumer created buzz, the Publicis executive said. "Advertising is still important, but its role is changing. It’s not just about telling people about things, it’s about fanning the flames, creating contagious ideas. People are already talking about your brand (on blogs for example); we want to inject ourselves into that conversation to create a more positive image." In the past, the strategist added, it was about who could shout loudest. Today, it is about getting other people to shout for you.
In response to a question from the audience, Publicis CEO Sheen Jeng spoke of the future changes in China’s high-end health care market. While pharmaceutical companies now contribute 15 percent of China’s advertising revenue, she said, the premium health care industry - such as spas and cosmetic surgery - still has some growing to do. "We don’t have a successful premium health care market, but it’s developing," she said.
Culture, Values and Luxury
Session eight, the forum’s last, explored luxury brands from an architectural view point. Under the broad heading of “Trends from Architecture” CEO of Gregotti Associati International Mr. Augusto Cagnardi spoke on the topic of “Culture, Values and Luxury.” A clear understanding of the unbreakable linkages between luxury, culture and values was vital when the company helped design Shanghai Pujiang Park (near to the Expo Park); the Band Park in the north of the city; and sections of the financial district Lujiazui. As Cagnardi explained, “A luxury brand is decided by the clients themselves, so we have to pay more attention to the cultural differences. It is hard to convey a unique culture -- culture can only be shown, but can not be bought.”
The 1st Annual Luxury Brand Forum then came to an end with a closing address by CEIBS Executive President Pedro Nueno, who summed up the two days of discourse. The forum, he said, had offered much food for thought and laid the groundwork for future discussions on the topic. “I think these two days have given us an in-depth perspective; but there are still questions left unanswered. We will continue to host this forum in the future; thank you for coming and sharing your ideas,” he said.
2008/04/21
Luxury Car Makers See China Boom
By GORDON FAIRCLOUGHApril 20, 2008 11:18 a.m. WSJ
BEIJING – Luxury car makers say they expect China's booming market for up-market autos to keep growing.
BMW AG plans to expand production in China by up to 40% this year, to about 42,000 cars from about 30,000 in 2007, according to Ian Robertson, a member of BMW's management board.
"Over time, there will be more opportunity," said Mr. Robertson in an interview Sunday at the Beijing Auto Show.
Mr. Robertson, who is also chairman and chief executive of BMW's Rolls-Royce unit, said the company is also planning to open three more Rolls-Royce dealerships in China this year, raising the total to eight.
China is now Rolls-Royce's third-largest market in the world. The company sells twice cars in China as it does in Japan, Mr. Robertson said.
Shenyang Brilliance Jinbei Automobile Co., BMW AG's joint-venture partner in China, said it expects to increase its annual production capacity for BMW branded sedans to 100,000 by 2012.
Daimler AG, the maker of Mercedes-Benz, says it is now growing at roughly double the average rate of increase of China's passenger-car market overall. Sales of passenger cars rose by roughly 20% in the first quarter.
"We expect sales to continue to be strong," said Trevor Hale, a Daimler spokesman in Beijing. He said the company was continuing to "ramp up" production at its joint-venture plant in China, which has a capacity of 25,000 units a year.
BEIJING – Luxury car makers say they expect China's booming market for up-market autos to keep growing.
BMW AG plans to expand production in China by up to 40% this year, to about 42,000 cars from about 30,000 in 2007, according to Ian Robertson, a member of BMW's management board.
"Over time, there will be more opportunity," said Mr. Robertson in an interview Sunday at the Beijing Auto Show.
Mr. Robertson, who is also chairman and chief executive of BMW's Rolls-Royce unit, said the company is also planning to open three more Rolls-Royce dealerships in China this year, raising the total to eight.
China is now Rolls-Royce's third-largest market in the world. The company sells twice cars in China as it does in Japan, Mr. Robertson said.
Shenyang Brilliance Jinbei Automobile Co., BMW AG's joint-venture partner in China, said it expects to increase its annual production capacity for BMW branded sedans to 100,000 by 2012.
Daimler AG, the maker of Mercedes-Benz, says it is now growing at roughly double the average rate of increase of China's passenger-car market overall. Sales of passenger cars rose by roughly 20% in the first quarter.
"We expect sales to continue to be strong," said Trevor Hale, a Daimler spokesman in Beijing. He said the company was continuing to "ramp up" production at its joint-venture plant in China, which has a capacity of 25,000 units a year.
2008/04/20
LVMH Boss Shrugs Off Beijing Boycott
from Forbes
LONDON - Although prominent quarters of Chinese cyberspace have called for a boycott of French goods, in response to the catastrophic journey of the Olympic torch through Paris last week, the war of words does not seem to have had an effect on luxury goods baron Bernard Arnault.
The 59-year-old French billionaire, who is head of luxury goods firm Moet Hennessy Louis Vuitton, has told French daily Le Figaro that calls for a boycott have had "no effect" on the firm so far. He also played down the future impact of Chinese frustrations on his brands, which include Louis Vuitton and Christian Dior.
"The consequences for our company are very limited," Arnault told Le Figaro. "They would be much greater, I imagine, were we involved in public sector contracts."
Chinese blogs and chat forums have been calling for a revolt against French goods, following the disastrous Olympic torch relay in Paris on April 7. The flame was extinguished three times as protesters and human rights activists took to the streets, cutting short the ceremony and offending more austere Chinese sensibilities.
China is a precious market for luxury goods firms like LVMH, especially given the economic slowdown facing more mature markets in the Western Hemisphere. LVMH acquired a 55% stake in Chinese spirits producer Wen Jun last year, and last October its fashion brand Fendi staged a show at the Great Wall of China.
But Chinese web surfers are not just targeting Louis Vuitton bags and designer fashion--the 44 brands on the hit list include Vivendi, Renault and L'Oreal. Grocery chain Carrefour is another big target of the boycott, and the company on Thursday reiterated its support for the Beijing Olympic Games and its refusal to get involved in politics.
LVMH's Arnault increased his stake in Carrefour to 10.7% on Monday, from 9.1%, in conjunction with American private equity firm Colony Capital. (See: "Billionaire Tightens Grip On Carrefour")
The boycott spat threatened to become diplomatic on Wednesday, when a spokesperson for the Chinese foreign ministry refused to condemn the targeting of French goods. "Some Chinese people have expressed their opinions and feelings recently," the spokesperson was quoted by Xinhua news agency as saying. "All these are by no means accidental, and the French side need to ponder and reflect upon them."
But the French foreign ministry is playing down the whole affair. "The calls for a boycott are the product of a very small minority," said the ministry, "and we are not aware of any related impact from these advances on our economic relations."
LONDON - Although prominent quarters of Chinese cyberspace have called for a boycott of French goods, in response to the catastrophic journey of the Olympic torch through Paris last week, the war of words does not seem to have had an effect on luxury goods baron Bernard Arnault.
The 59-year-old French billionaire, who is head of luxury goods firm Moet Hennessy Louis Vuitton, has told French daily Le Figaro that calls for a boycott have had "no effect" on the firm so far. He also played down the future impact of Chinese frustrations on his brands, which include Louis Vuitton and Christian Dior.
"The consequences for our company are very limited," Arnault told Le Figaro. "They would be much greater, I imagine, were we involved in public sector contracts."
Chinese blogs and chat forums have been calling for a revolt against French goods, following the disastrous Olympic torch relay in Paris on April 7. The flame was extinguished three times as protesters and human rights activists took to the streets, cutting short the ceremony and offending more austere Chinese sensibilities.
China is a precious market for luxury goods firms like LVMH, especially given the economic slowdown facing more mature markets in the Western Hemisphere. LVMH acquired a 55% stake in Chinese spirits producer Wen Jun last year, and last October its fashion brand Fendi staged a show at the Great Wall of China.
But Chinese web surfers are not just targeting Louis Vuitton bags and designer fashion--the 44 brands on the hit list include Vivendi, Renault and L'Oreal. Grocery chain Carrefour is another big target of the boycott, and the company on Thursday reiterated its support for the Beijing Olympic Games and its refusal to get involved in politics.
LVMH's Arnault increased his stake in Carrefour to 10.7% on Monday, from 9.1%, in conjunction with American private equity firm Colony Capital. (See: "Billionaire Tightens Grip On Carrefour")
The boycott spat threatened to become diplomatic on Wednesday, when a spokesperson for the Chinese foreign ministry refused to condemn the targeting of French goods. "Some Chinese people have expressed their opinions and feelings recently," the spokesperson was quoted by Xinhua news agency as saying. "All these are by no means accidental, and the French side need to ponder and reflect upon them."
But the French foreign ministry is playing down the whole affair. "The calls for a boycott are the product of a very small minority," said the ministry, "and we are not aware of any related impact from these advances on our economic relations."
2008/04/19
Bernard Arnault offers support to China after threat of LVMH boycott
From The Times
Bernard Arnault, the chairman of LVMH, the French luxury goods group, distanced himself from the Dalai Lama with a show of support for Beijing yesterday amid growing concern in France over Chinese calls for a boycott of Gallic products.
France’s best-known business leader spoke out with Chinese internet users targeting Paris for criticism following the pro-Tibetan demonstrations that accompanied the Olympic torch relay.
Consumers are being urged to boycott groups such as Carrefour, the supermarket chain, and Mr Arnault’s celebrated LVMH brands, which include Louis Vuitton, Hennessy and Fendi.
With French exports to China worth €9.1 billion (£7.3 billion) last year, officials and industrialists in Paris are keen to smooth over the row.
Mr Arnault is in the front line following a widespread but, he says, unfounded rumour on Chinese websites that his group had provided financial support to the Dalai Lama.
With Goldman Sachs predicting that China will become the world's biggest luxury goods market within a decade, alarm bells are ringing at LVMH’s head office in Paris.
“I refute categorically the allegations over backing for the Dalai Lama,” Mr Arnault said.
He went on: “I understand why the Chinese population could be affected by the attacks against its country.
“Even if it may be shocking to see what’s happening in Tibet, it’s equalling shocking to see China being attacked,” he said in an interview with the newspaper Le Figaro. Mr Arnault urged his compatriots to “stop trying to teach lessons, since there are a lot of things which need improving in the world and even here in Europe”.
Carrefour is also the butt of virulent criticism, partly because Mr Arnault is the joint owner of a 10 per cent stake in the chain and partly because it is among the most visible French companies in China.
The company has 122 hypermarkets and more than 280 hard discount stores there.
“Boycott Carrefour. Slap them in the face. Let the beast disappear from Chinese territory,” one comment on a chat forum said.
After protests outside Carrefour stores in Beijing this week and calls for a consumer boycott on May 1, the group sought to appease the tide of anger.
It issued a statement to deny playing any role in Chinese internal political affairs or international relations and to pledge support for the Beijing Games.
Although there have been demonstrations throughout the Olympic torch relay, France has been singled out after protestors repeatedly broke through police cordons in Paris and at one point attacked Jin Jing, a 27-year-old wheelchair-bound athlete.
Jiang Yu, a Chinese Foreign Ministry spokeswoman, said: “You can’t on the one hand talk of the importance of the relationship between France and China and, on the other, see things which the Chinese people can’t understand and don’t accept.”
Anne-Marie Idrac, the French Overseas Commerce Minister, said there was no indication yet of a fall in sales of French goods in China.
Bernard Arnault, the chairman of LVMH, the French luxury goods group, distanced himself from the Dalai Lama with a show of support for Beijing yesterday amid growing concern in France over Chinese calls for a boycott of Gallic products.
France’s best-known business leader spoke out with Chinese internet users targeting Paris for criticism following the pro-Tibetan demonstrations that accompanied the Olympic torch relay.
Consumers are being urged to boycott groups such as Carrefour, the supermarket chain, and Mr Arnault’s celebrated LVMH brands, which include Louis Vuitton, Hennessy and Fendi.
With French exports to China worth €9.1 billion (£7.3 billion) last year, officials and industrialists in Paris are keen to smooth over the row.
Mr Arnault is in the front line following a widespread but, he says, unfounded rumour on Chinese websites that his group had provided financial support to the Dalai Lama.
With Goldman Sachs predicting that China will become the world's biggest luxury goods market within a decade, alarm bells are ringing at LVMH’s head office in Paris.
“I refute categorically the allegations over backing for the Dalai Lama,” Mr Arnault said.
He went on: “I understand why the Chinese population could be affected by the attacks against its country.
“Even if it may be shocking to see what’s happening in Tibet, it’s equalling shocking to see China being attacked,” he said in an interview with the newspaper Le Figaro. Mr Arnault urged his compatriots to “stop trying to teach lessons, since there are a lot of things which need improving in the world and even here in Europe”.
Carrefour is also the butt of virulent criticism, partly because Mr Arnault is the joint owner of a 10 per cent stake in the chain and partly because it is among the most visible French companies in China.
The company has 122 hypermarkets and more than 280 hard discount stores there.
“Boycott Carrefour. Slap them in the face. Let the beast disappear from Chinese territory,” one comment on a chat forum said.
After protests outside Carrefour stores in Beijing this week and calls for a consumer boycott on May 1, the group sought to appease the tide of anger.
It issued a statement to deny playing any role in Chinese internal political affairs or international relations and to pledge support for the Beijing Games.
Although there have been demonstrations throughout the Olympic torch relay, France has been singled out after protestors repeatedly broke through police cordons in Paris and at one point attacked Jin Jing, a 27-year-old wheelchair-bound athlete.
Jiang Yu, a Chinese Foreign Ministry spokeswoman, said: “You can’t on the one hand talk of the importance of the relationship between France and China and, on the other, see things which the Chinese people can’t understand and don’t accept.”
Anne-Marie Idrac, the French Overseas Commerce Minister, said there was no indication yet of a fall in sales of French goods in China.
2008/04/18
China Will Become World's Biggest Luxury Market By 2014
Yu Guangzhou, vice minister of Ministry Of Commerce, says that by 2014 China may become the world's biggest luxury market with about 23% share of the total global revenue.
Yu says that China has a rapid development in its consumer market. Since 1978, its average annual increase is as high as 14.4%, which is about three times the global average level. With this growing speed, the share of China's luxury goods will be about 23% of the global total by 2014.
Not long ago, the World Luxury Association released a report which said that in 2007 Chinese people spent US$8 billion on accessories, apparel, leather products and perfume. China's luxury consumption already takes 18% of the global amount.
Yu says that China has a rapid development in its consumer market. Since 1978, its average annual increase is as high as 14.4%, which is about three times the global average level. With this growing speed, the share of China's luxury goods will be about 23% of the global total by 2014.
Not long ago, the World Luxury Association released a report which said that in 2007 Chinese people spent US$8 billion on accessories, apparel, leather products and perfume. China's luxury consumption already takes 18% of the global amount.
Hartmarx digs Doc
April 17, 2008
BY SANDRA GUY Staff Reporter
STRATEGY Venerable suitmaker adds Martens line of sportswear
Hartmarx, the venerable Chicago company known for its Hart Schaffner Marx men's suits, will start making men's and women's sportswear for the hip, off-beat Doc Martens label as part of its makeover into a global and higher-priced clothing manufacturer.
Doc Martens boots gained popularity among punk rockers in Great Britain in the 1970s, but the clothing line has evolved into an eclectic mix of T-shirts and club shirts for 15-to-25-year olds. The menswear line launches in fall of 2009 followed a year later by the womenswear.
Click to enlarge image Maria Bragioli checks lining material at the Hartmarx plant at 1680 E. Touhy in Des Plaines in 2006. The company plans to do less licensing of brands while expanding globally into luxury offerings. (Al Podgorski/Sun-Times)
The 123-year-old Hartmarx, hit hard by Macy's takeover of St. Louis-based May Department Stores three years ago, has started opening retail stores to display its brands and has bought womenswear jeans, knits and sportswear labels.
CEO Homi Patel told the media after the company's shareholders meeting Wednesday that Hartmarx's other big changes this year will include terminating its license to manufacture the Tommy Hilfiger line, and partnering with a company in India to sell Sansabelt slacks, Pierre Cardin tailored clothing and Hart Schaffner Marx suits in that country.
Hartmarx had already terminated its licenses to make Kenneth Cole, Perry Ellis and DKNY Donna Karan New York men's tailored clothing.
CEO Homi Patel told shareholders that Hartmarx remains the largest U.S. tailored clothing business, but its model of licensing a brand and paying the licensor will be a shrinking part of its strategy.
Instead, Hartmarx aims to expand globally and target the luxury men's and women's markets, both casual and tailored.
Patel would not name the company's new partner in India, but the deal follows by a year Hartmarx's partnership with Youngor Group Ltd., the largest public menswear retailer in China, to open 400 franchisee-run stores in China. The first store opened recently in the port city of
Ningbo on the East China Sea.
In the China deal, Hartmarx outsourced manufacturing to China and collects licensing revenues as a percentage of sales, with a guaranteed minimum of $1 million annually.
Hartmarx plans to expand its global sales of Hart Schaffner Marx men's tailored suits to Indonesia, Thailand and Central and South America.
Hartmarx's transition is evidenced by:
Clothing manufactured for sale in middle-market department stores has dropped to 17 percent of Hartmarx's business, and should decline into the single digits later this year. The percentage was once as high as 25 percent.
Macy's department store is no longer one of Hartmarx's biggest retail clients. Macy's has put a greater emphasis than did Marshall Field's on selling its own clothing brands.
Luxury clothing accounts for 29 percent of Hartmarx's business versus 21 percent two years ago. Hartmarx's sales totaled $562.4 million in fiscal 2007.
Among the fastest-growing businesses are those for women, such as Simply Blue, Monarch and Exclusively Misook. The women's business did $129.5 million in sales in fiscal 2007, or 23 percent, compared with $433 million in menswear sales.
Separately, Hartmarx will open its Hickey Freeman store 114 E. Oak St. in Chicago in late July.
Though Hartmarx's retail stores reported year-over-year sales declines ranging from 9 percent to 17 percent in March, its makeover strategy is good news for Hartmarx's factory in Des Plaines, where employment has held steady at about 600.
Hartmarx competes primarily with European tailored-clothing manufacturers in Italy, France and Scotland, rather than low-priced clothes makers in Asia, Patel said.
Hartmarx's quarterly sales and earnings results have proven dismal as the economy has weakened, but Patel sought to assure employees, retirees and shareholders at the meeting Wednesday at the Chicago Club, 81 E. Van Buren.
"It's been a tough couple of years," Patel said. "We're going to have to dig in deep and deeper. But this company went through World War I, the Great Depression and World War II. If they could figure out how to get through that, this is nothing."
BY SANDRA GUY Staff Reporter
STRATEGY Venerable suitmaker adds Martens line of sportswear
Hartmarx, the venerable Chicago company known for its Hart Schaffner Marx men's suits, will start making men's and women's sportswear for the hip, off-beat Doc Martens label as part of its makeover into a global and higher-priced clothing manufacturer.
Doc Martens boots gained popularity among punk rockers in Great Britain in the 1970s, but the clothing line has evolved into an eclectic mix of T-shirts and club shirts for 15-to-25-year olds. The menswear line launches in fall of 2009 followed a year later by the womenswear.
Click to enlarge image Maria Bragioli checks lining material at the Hartmarx plant at 1680 E. Touhy in Des Plaines in 2006. The company plans to do less licensing of brands while expanding globally into luxury offerings. (Al Podgorski/Sun-Times)
The 123-year-old Hartmarx, hit hard by Macy's takeover of St. Louis-based May Department Stores three years ago, has started opening retail stores to display its brands and has bought womenswear jeans, knits and sportswear labels.
CEO Homi Patel told the media after the company's shareholders meeting Wednesday that Hartmarx's other big changes this year will include terminating its license to manufacture the Tommy Hilfiger line, and partnering with a company in India to sell Sansabelt slacks, Pierre Cardin tailored clothing and Hart Schaffner Marx suits in that country.
Hartmarx had already terminated its licenses to make Kenneth Cole, Perry Ellis and DKNY Donna Karan New York men's tailored clothing.
CEO Homi Patel told shareholders that Hartmarx remains the largest U.S. tailored clothing business, but its model of licensing a brand and paying the licensor will be a shrinking part of its strategy.
Instead, Hartmarx aims to expand globally and target the luxury men's and women's markets, both casual and tailored.
Patel would not name the company's new partner in India, but the deal follows by a year Hartmarx's partnership with Youngor Group Ltd., the largest public menswear retailer in China, to open 400 franchisee-run stores in China. The first store opened recently in the port city of
Ningbo on the East China Sea.
In the China deal, Hartmarx outsourced manufacturing to China and collects licensing revenues as a percentage of sales, with a guaranteed minimum of $1 million annually.
Hartmarx plans to expand its global sales of Hart Schaffner Marx men's tailored suits to Indonesia, Thailand and Central and South America.
Hartmarx's transition is evidenced by:
Clothing manufactured for sale in middle-market department stores has dropped to 17 percent of Hartmarx's business, and should decline into the single digits later this year. The percentage was once as high as 25 percent.
Macy's department store is no longer one of Hartmarx's biggest retail clients. Macy's has put a greater emphasis than did Marshall Field's on selling its own clothing brands.
Luxury clothing accounts for 29 percent of Hartmarx's business versus 21 percent two years ago. Hartmarx's sales totaled $562.4 million in fiscal 2007.
Among the fastest-growing businesses are those for women, such as Simply Blue, Monarch and Exclusively Misook. The women's business did $129.5 million in sales in fiscal 2007, or 23 percent, compared with $433 million in menswear sales.
Separately, Hartmarx will open its Hickey Freeman store 114 E. Oak St. in Chicago in late July.
Though Hartmarx's retail stores reported year-over-year sales declines ranging from 9 percent to 17 percent in March, its makeover strategy is good news for Hartmarx's factory in Des Plaines, where employment has held steady at about 600.
Hartmarx competes primarily with European tailored-clothing manufacturers in Italy, France and Scotland, rather than low-priced clothes makers in Asia, Patel said.
Hartmarx's quarterly sales and earnings results have proven dismal as the economy has weakened, but Patel sought to assure employees, retirees and shareholders at the meeting Wednesday at the Chicago Club, 81 E. Van Buren.
"It's been a tough couple of years," Patel said. "We're going to have to dig in deep and deeper. But this company went through World War I, the Great Depression and World War II. If they could figure out how to get through that, this is nothing."
2008/04/17
LVMH May Buy Spirit, Watch Brands in Any Downturn
By Sara Gay Forden April 16 (Bloomberg)
LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury goods maker, may take advantage of a downturn in the industry by acquiring a liquor or watch brand, Group Managing Director Antonio Belloni said.
"There might be opportunities in a difficult market for a group like ours to round out our portfolio,'' especially if smaller, family-owned companies decide to sell, Belloni said in a telephone interview today.
The Paris-based company reported sales growth that surpassed analysts' estimates after markets closed yesterday, sending its shares up as much as 5.3 percent today. Improved demand for Louis Vuitton handbags and Christian Dior fragrances helped the company withstand waning consumer confidence in the U.S. and U.K. and declining wine and spirit sales.
LVMH, whose more than 50 brands include Veuve Clicquot champagne, could buy a tequila or whisky label, as well as jewelry businesses to complement its Tag Heuer, Zenith and Chaumet units, Belloni said.
Belloni said LVMH has cash for acquisitions and will lower its debt-equity ratio to a range between 25 and 30 percent by year-end. He declined to specify any companies LVMH may be interested in. He's the second-ranking executive at LVMH after Chairman and controlling shareholder Bernard Arnault, France's richest man, and joined the company in 2001.
Bulgari Speculation
Analysts have said Rome-based Bulgari SpA may be an attractive acquisition target for LVMH, and the company may return cash to investors if it doesn't make any purchases.
"I can't exclude a cash return at some point in the future, although our clear focus remains on building the brands and the business,'' Belloni said. He said LVMH plans to keep lifting its dividend in line with results.
Bulgari is a "fantastic'' company, Belloni said, adding that he doubts the company's owners want to sell. Bulgari shares rose 28 cents, or 4.1 percent to 7.13 euros at 3:35 p.m. in Milan, giving the company a market value of 2.1 billion euros.
The Rome-based jeweler isn't for sale, Bulgari Chief Executive Officer Francesco Trapani said in a subsequent e-mail today. Brothers Paolo and Nicola Bulgari and Trapani, their nephew, own about 52 percent of the shares.
Conference Call
Chief Financial Officer Jean-Jacques Guiony, speaking on a conference call today, said an acquisition wouldn't necessarily preclude returning cash to shareholders, depending on its size. He said the issue is "a bit theoretical'' to discuss now.
LVMH said yesterday that growth will continue this year in the face of a "challenging monetary environment and an uncertain economic climate.'' It raised prices on champagne and luggage to combat the higher euro, which cuts the value of sales in other currencies. The dollar lost 10 percent against the euro last year, while the yen fell 5 percent.
Analysts have been lowering forecasts for luxury-goods companies since November amid concern demand will decline as Americans and Britons face the worst housing markets in a quarter-century.
Belloni said U.S. department-store sales were "difficult'' in March, though overall revenue is "holding up'' as the economy slows. He said tourists shopping in Manhattan are offsetting weaker demand in other parts of the country.
LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury goods maker, may take advantage of a downturn in the industry by acquiring a liquor or watch brand, Group Managing Director Antonio Belloni said.
"There might be opportunities in a difficult market for a group like ours to round out our portfolio,'' especially if smaller, family-owned companies decide to sell, Belloni said in a telephone interview today.
The Paris-based company reported sales growth that surpassed analysts' estimates after markets closed yesterday, sending its shares up as much as 5.3 percent today. Improved demand for Louis Vuitton handbags and Christian Dior fragrances helped the company withstand waning consumer confidence in the U.S. and U.K. and declining wine and spirit sales.
LVMH, whose more than 50 brands include Veuve Clicquot champagne, could buy a tequila or whisky label, as well as jewelry businesses to complement its Tag Heuer, Zenith and Chaumet units, Belloni said.
Belloni said LVMH has cash for acquisitions and will lower its debt-equity ratio to a range between 25 and 30 percent by year-end. He declined to specify any companies LVMH may be interested in. He's the second-ranking executive at LVMH after Chairman and controlling shareholder Bernard Arnault, France's richest man, and joined the company in 2001.
Bulgari Speculation
Analysts have said Rome-based Bulgari SpA may be an attractive acquisition target for LVMH, and the company may return cash to investors if it doesn't make any purchases.
"I can't exclude a cash return at some point in the future, although our clear focus remains on building the brands and the business,'' Belloni said. He said LVMH plans to keep lifting its dividend in line with results.
Bulgari is a "fantastic'' company, Belloni said, adding that he doubts the company's owners want to sell. Bulgari shares rose 28 cents, or 4.1 percent to 7.13 euros at 3:35 p.m. in Milan, giving the company a market value of 2.1 billion euros.
The Rome-based jeweler isn't for sale, Bulgari Chief Executive Officer Francesco Trapani said in a subsequent e-mail today. Brothers Paolo and Nicola Bulgari and Trapani, their nephew, own about 52 percent of the shares.
Conference Call
Chief Financial Officer Jean-Jacques Guiony, speaking on a conference call today, said an acquisition wouldn't necessarily preclude returning cash to shareholders, depending on its size. He said the issue is "a bit theoretical'' to discuss now.
LVMH said yesterday that growth will continue this year in the face of a "challenging monetary environment and an uncertain economic climate.'' It raised prices on champagne and luggage to combat the higher euro, which cuts the value of sales in other currencies. The dollar lost 10 percent against the euro last year, while the yen fell 5 percent.
Analysts have been lowering forecasts for luxury-goods companies since November amid concern demand will decline as Americans and Britons face the worst housing markets in a quarter-century.
Belloni said U.S. department-store sales were "difficult'' in March, though overall revenue is "holding up'' as the economy slows. He said tourists shopping in Manhattan are offsetting weaker demand in other parts of the country.
Luxury Mattress Brand Magniflex Opens Stores Internationally
Wednesday, April 16, 2008 By: Furniture World Magazine
Magniflex, one of the world’s largest luxury mattress brands, has expanded its worldwide presence by adding five new international showrooms. The Italian company also recently added several new retail partners across the United States. The moves are part of the company’s continued plans to grow the Magniflex mattress brand internationally.
"While our retailers will continue to sell direct, having our own showrooms in high traffic areas internationally will expose the brand to more consumers," said Marco Magni, global sales director for Magniflex.
“Magniflex worldwide showrooms allow consumers to browse, try and test out our products. We remain committed to our retailers carrying the Magniflex brand as the fastest growth still comes from our dealers.”
The company opened five new showrooms in: China, in Guangzhou, Beijing and Shanghai; Kiev, Ukraine; and Dubai, United Arab Emirates. They join the company’s existing showrooms in Tokyo, Dubai, New York and Florence.
"Whether you live in New York, China or the Ukraine, today’s consumer is more interested in the health benefits of a better night’s sleep using finer quality bedding," continued Magni. "Our expanding worldwide network reflects our continued growth path in meeting this consumer’s needs, and we’re confident that our mix of customizable products will provide them with the luxurious, restorative sleep that they seek."
Magniflex entered the U.S. market last year, opening a showroom in Manhattan’s SoHo district. The SoHo showroom will host a grand re-opening this spring, featuring an additional lower level as retail space, and a major remodel throughout the store to display an expanded selection of premium bedding and accessories.
The company already has a major retail presence in Italy with 50 franchisee-operated stores all under the name, Materassi & Materassi. The company hopes to have 100 stores in Italy by 2009.
Magniflex has developed many unique mattress covers and cores that provide comfort and safety to consumers while minimizing impact on the environment. Its unique Memoform material begins conforming to a consumer’s body impression using weight-sensitivity, rather than body heat, as found with other memory foam mattresses. This enables consumers to attain their desired sleep position faster than with other brands.
Magniflex was also the first mattress company to be certified by Oeko-Tex to guarantee absence of allergenic substances harmful to consumers and to the environment. With the exception of its premium Gold and Platinum Collections, a typical Magniflex collection carries a suggested retail price between $999 and $7,599 in queen.
Magniflex was founded over 50 years in a suburb of Florence, Italy, and today 20 million people in 45 countries sleep on Magniflex mattresses. Known as the world leader in quality, comfort and innovation, Magniflex has a central manufacturing facility producing up to 10,000 mattresses a day, 80-percent of which are exported to countries such as Japan, Spain, Germany, Russia and now, the United States.
Magniflex recently opened a showroom at 59 Crosby St. in Manhattan and a national dealer network throughout the United States.
Magniflex, one of the world’s largest luxury mattress brands, has expanded its worldwide presence by adding five new international showrooms. The Italian company also recently added several new retail partners across the United States. The moves are part of the company’s continued plans to grow the Magniflex mattress brand internationally.
"While our retailers will continue to sell direct, having our own showrooms in high traffic areas internationally will expose the brand to more consumers," said Marco Magni, global sales director for Magniflex.
“Magniflex worldwide showrooms allow consumers to browse, try and test out our products. We remain committed to our retailers carrying the Magniflex brand as the fastest growth still comes from our dealers.”
The company opened five new showrooms in: China, in Guangzhou, Beijing and Shanghai; Kiev, Ukraine; and Dubai, United Arab Emirates. They join the company’s existing showrooms in Tokyo, Dubai, New York and Florence.
"Whether you live in New York, China or the Ukraine, today’s consumer is more interested in the health benefits of a better night’s sleep using finer quality bedding," continued Magni. "Our expanding worldwide network reflects our continued growth path in meeting this consumer’s needs, and we’re confident that our mix of customizable products will provide them with the luxurious, restorative sleep that they seek."
Magniflex entered the U.S. market last year, opening a showroom in Manhattan’s SoHo district. The SoHo showroom will host a grand re-opening this spring, featuring an additional lower level as retail space, and a major remodel throughout the store to display an expanded selection of premium bedding and accessories.
The company already has a major retail presence in Italy with 50 franchisee-operated stores all under the name, Materassi & Materassi. The company hopes to have 100 stores in Italy by 2009.
Magniflex has developed many unique mattress covers and cores that provide comfort and safety to consumers while minimizing impact on the environment. Its unique Memoform material begins conforming to a consumer’s body impression using weight-sensitivity, rather than body heat, as found with other memory foam mattresses. This enables consumers to attain their desired sleep position faster than with other brands.
Magniflex was also the first mattress company to be certified by Oeko-Tex to guarantee absence of allergenic substances harmful to consumers and to the environment. With the exception of its premium Gold and Platinum Collections, a typical Magniflex collection carries a suggested retail price between $999 and $7,599 in queen.
Magniflex was founded over 50 years in a suburb of Florence, Italy, and today 20 million people in 45 countries sleep on Magniflex mattresses. Known as the world leader in quality, comfort and innovation, Magniflex has a central manufacturing facility producing up to 10,000 mattresses a day, 80-percent of which are exported to countries such as Japan, Spain, Germany, Russia and now, the United States.
Magniflex recently opened a showroom at 59 Crosby St. in Manhattan and a national dealer network throughout the United States.
Beijing auto show spotlights automakers' hopes for booming China market
The Associated Press, Thursday, April 17, 2008 BEIJING
On display at next week's Beijing auto show: Global automakers' hopes that booming China will drive sales this year as demand elsewhere slumps.
General Motors plans to show 42 models at the six-day Auto China 2008, while Volkswagen is debuting two cars designed with domestic partners for the China market. More than 100 others ranging from luxury automakers Mercedes and Bentley to ambitious Chinese upstarts are showing off compacts, sedans and SUVs.
"The interest is unprecedented for automakers. It's become one of the industry's main events," said Tim Dunne, director of Asia-Pacific market intelligence for J.D. Power and Associates.
The reason is simple: Sales in China — already the world's No. 2 market after the United States — are forecast to rise by 15 percent this year, in contrast to flat or falling sales in the United States, Europe and Japan.
"Both for volume car makers and luxury car makers, they all are looking at China as their main growth engine," said John Zeng, China auto industry analyst for the consulting firm Global Insight.
Chinese automakers, little known abroad, hope to use the show, which opens to the press on Sunday and to the public on Thursday, to build global brands even as they face growing competition at home from bigger, richer foreign rivals.
China's Chery Automobile Co. says it will display 26 of its own vehicles in Beijing, ranging from subcompacts to an SUV. Chery has a deal with Chrysler LLC to produce a low-cost car for the U.S. market but the release has been pushed back as the partners reportedly work on improving the vehicle's quality.
Another Chinese competitor, Geely Group Ltd., says it will show 23 models and a concept, or display, car.
China overtook Japan as the world's second-biggest vehicle market in 2006.
Last year, Chinese drivers bought 5.5 million cars, minivans and SUVs and 3 million commercial vehicles. That was up from a total of just 1.6 million vehicles sold in 1997. J.D. Power says sales should grow by 1 million vehicles annually through 2015.
Demand is driven by economic growth that has topped 10 percent for the past five years and reached 10.6 percent for the first three months of this year.
"Other developing markets might have fast growth but not the volume and consistency of China's growth," Dunne said. "The biggest growth potential is in China."
The officially endorsed car culture has transformed China.
A country that had almost no private cars 15 years ago is crisscrossed by new highways. Ancient city centers have been bulldozed to make way for car-friendly avenues. Cities are surrounded by American-style shopping centers with sprawling parking lots.
But the car culture has left major cities choked by smog and rush-hour traffic jams. It has boosted dependence on imported oil, which worried communist leaders see as a strategic weakness.
Automakers are so eager for a share of China's market that they are willing to bear the high cost of two Chinese auto shows — one in Beijing annually and a second every other year in Shanghai.
Most shows are so expensive they usually are held once every two to three years. In Europe, the Paris and Frankfurt shows are held in alternate years. Tokyo's auto show takes place every other year.
___
On the 'Net:
Auto China 2008: http://www.china-autoshow.com
On display at next week's Beijing auto show: Global automakers' hopes that booming China will drive sales this year as demand elsewhere slumps.
General Motors plans to show 42 models at the six-day Auto China 2008, while Volkswagen is debuting two cars designed with domestic partners for the China market. More than 100 others ranging from luxury automakers Mercedes and Bentley to ambitious Chinese upstarts are showing off compacts, sedans and SUVs.
"The interest is unprecedented for automakers. It's become one of the industry's main events," said Tim Dunne, director of Asia-Pacific market intelligence for J.D. Power and Associates.
The reason is simple: Sales in China — already the world's No. 2 market after the United States — are forecast to rise by 15 percent this year, in contrast to flat or falling sales in the United States, Europe and Japan.
"Both for volume car makers and luxury car makers, they all are looking at China as their main growth engine," said John Zeng, China auto industry analyst for the consulting firm Global Insight.
Chinese automakers, little known abroad, hope to use the show, which opens to the press on Sunday and to the public on Thursday, to build global brands even as they face growing competition at home from bigger, richer foreign rivals.
China's Chery Automobile Co. says it will display 26 of its own vehicles in Beijing, ranging from subcompacts to an SUV. Chery has a deal with Chrysler LLC to produce a low-cost car for the U.S. market but the release has been pushed back as the partners reportedly work on improving the vehicle's quality.
Another Chinese competitor, Geely Group Ltd., says it will show 23 models and a concept, or display, car.
China overtook Japan as the world's second-biggest vehicle market in 2006.
Last year, Chinese drivers bought 5.5 million cars, minivans and SUVs and 3 million commercial vehicles. That was up from a total of just 1.6 million vehicles sold in 1997. J.D. Power says sales should grow by 1 million vehicles annually through 2015.
Demand is driven by economic growth that has topped 10 percent for the past five years and reached 10.6 percent for the first three months of this year.
"Other developing markets might have fast growth but not the volume and consistency of China's growth," Dunne said. "The biggest growth potential is in China."
The officially endorsed car culture has transformed China.
A country that had almost no private cars 15 years ago is crisscrossed by new highways. Ancient city centers have been bulldozed to make way for car-friendly avenues. Cities are surrounded by American-style shopping centers with sprawling parking lots.
But the car culture has left major cities choked by smog and rush-hour traffic jams. It has boosted dependence on imported oil, which worried communist leaders see as a strategic weakness.
Automakers are so eager for a share of China's market that they are willing to bear the high cost of two Chinese auto shows — one in Beijing annually and a second every other year in Shanghai.
Most shows are so expensive they usually are held once every two to three years. In Europe, the Paris and Frankfurt shows are held in alternate years. Tokyo's auto show takes place every other year.
___
On the 'Net:
Auto China 2008: http://www.china-autoshow.com
2008/04/16
LVMH denies Tibet support, sees no Chinese boycott-report
Wed Apr 16, 2008 4:02pm EDTPARIS, April 16 (Reuters)
LVMH has so far not been affected by any boycott of its products in China, the head of the French luxury group said in an interview, denying accusations by Chinese Internet users that it supported Tibet's Dalai Lama against China.
"I categorically deny the allegations made against us on these blogs about the support that we would have given to this or that political or religious cause," LVMH Chief Executive Bernard Arnault told Le Figaro in an interview published on the French daily's website late on Wednesday.
Earlier this week, Chinese people were urged through text messages and online chat rooms not to buy goods from French retailer Carrefour's outlets from May 1, with posts accusing the company of supporting funding for the Dalai Lama.
Carrefour is 10.7 percent owned by Blue Capital, a holding company owned by property group Colony Capital and Arnault.
Some supporters of the boycott have also said that LVMH "donated a lot of money to the Dalai Lama."
"This is absolutely groundless," Arnault said.
"Even if one can be shocked by what's happening in Tibet, it is equally shocking to see attacks against China," Arnault told Le Figaro. "China has made immense progress in 20 years, in its economic development and its opening to the world.
"China needs time. If we want to dialogue with it, there are better things to do than attack the Olympic torch when it goes through Western cities," the French billionaire added, referring to disruptions to the torch relay in London and Paris earlier this month.
Beijing is hosting the Olympics later this year.
China has been waging a propaganda war against Tibet's exiled spiritual leader, whom it accuses of masterminding deadly riots in Tibet's regional capital Lhasa last month and other ethnic Tibetan areas in neighbouring provinces.
The Dalai Lama has rejected the allegations, speaking out against the use of violence, calling for talks with China and backing the Beijing Olympics.
Arnault said LVMH, which sells Louis Vuitton luxury handbags and whose operations also range from fine wines and Moet champagne to perfumes, has not been affected by any boycott so far.
ECONOMIC SLOWDOWN
Asked about risks that the U.S. economic slowdown could hurt growth in China, Arnault said: "We think, from what our experts tell us, that growth should resume by the end of the year. Will this impact emerging countries, Europe, Asia?
"Probably but in a limited way. If Chinese growth falls from 10 percent to 8 percent, this will be surmountable and China will continue to lift the world's economy."
Arnault also cited the steps LVMH was taking to reduce the impact of a weakening dollar against the euro, as the single currency rose to $1.5977 against the dollar on Wednesday.
"We have hedged (our foreign exchange exposure) for this year and part of next year at far better conditions than we did last year," Arnault said. "We also have a policy of systematically increasing prices on our products in concerned markets, the United States and Japan."
Arnault ruled out, at least for now, moving its production facilities outside of Europe.
"At this stage, no," he said. "We manage to improve the productivity in our workshops, certainly not as quickly as the dollar falls, but in a way that allows us to maintain this model." (Reporting by Marie Maitre; Editing by Gary Hill)
LVMH has so far not been affected by any boycott of its products in China, the head of the French luxury group said in an interview, denying accusations by Chinese Internet users that it supported Tibet's Dalai Lama against China.
"I categorically deny the allegations made against us on these blogs about the support that we would have given to this or that political or religious cause," LVMH Chief Executive Bernard Arnault told Le Figaro in an interview published on the French daily's website late on Wednesday.
Earlier this week, Chinese people were urged through text messages and online chat rooms not to buy goods from French retailer Carrefour's outlets from May 1, with posts accusing the company of supporting funding for the Dalai Lama.
Carrefour is 10.7 percent owned by Blue Capital, a holding company owned by property group Colony Capital and Arnault.
Some supporters of the boycott have also said that LVMH "donated a lot of money to the Dalai Lama."
"This is absolutely groundless," Arnault said.
"Even if one can be shocked by what's happening in Tibet, it is equally shocking to see attacks against China," Arnault told Le Figaro. "China has made immense progress in 20 years, in its economic development and its opening to the world.
"China needs time. If we want to dialogue with it, there are better things to do than attack the Olympic torch when it goes through Western cities," the French billionaire added, referring to disruptions to the torch relay in London and Paris earlier this month.
Beijing is hosting the Olympics later this year.
China has been waging a propaganda war against Tibet's exiled spiritual leader, whom it accuses of masterminding deadly riots in Tibet's regional capital Lhasa last month and other ethnic Tibetan areas in neighbouring provinces.
The Dalai Lama has rejected the allegations, speaking out against the use of violence, calling for talks with China and backing the Beijing Olympics.
Arnault said LVMH, which sells Louis Vuitton luxury handbags and whose operations also range from fine wines and Moet champagne to perfumes, has not been affected by any boycott so far.
ECONOMIC SLOWDOWN
Asked about risks that the U.S. economic slowdown could hurt growth in China, Arnault said: "We think, from what our experts tell us, that growth should resume by the end of the year. Will this impact emerging countries, Europe, Asia?
"Probably but in a limited way. If Chinese growth falls from 10 percent to 8 percent, this will be surmountable and China will continue to lift the world's economy."
Arnault also cited the steps LVMH was taking to reduce the impact of a weakening dollar against the euro, as the single currency rose to $1.5977
"We have hedged (our foreign exchange exposure) for this year and part of next year at far better conditions than we did last year," Arnault said. "We also have a policy of systematically increasing prices on our products in concerned markets, the United States and Japan."
Arnault ruled out, at least for now, moving its production facilities outside of Europe.
"At this stage, no," he said. "We manage to improve the productivity in our workshops, certainly not as quickly as the dollar falls, but in a way that allows us to maintain this model." (Reporting by Marie Maitre; Editing by Gary Hill)
Burberry shines despite tough climate
LONDON - [16.04.08] Luxury-goods group Burberry has shrugged off the malaise currently sweeping through the retail industry to report an 18% increase in second half revenue to £546 million.
Overall, retail sales increased 17% to £282 million in the six months to March 31, accounting for more than 50% of the group’s total revenue. Wholesale revenue in the six months increased by around 25% to £219 million, while licensing revenues were flat at £45 million.
Over the year, Burberry has concentrated on expanding its retail network with the addition of 40 concessions as well as its first standalone childrenswear store, located in Hong Kong. It has also aimed to generate growth through expansion in emerging countries such as mainland China where the clamour for luxury goods continues apace as well as in the United States where sales figures were up 20%.
It has also made a push into accessory products such as silk scarves, shoes and handbags which account for over 30% of revenue.
Looking forward, Burberry will be delighted with the momentum of its brand as the core luxury, retail and non-apparel strategies continue to gain traction. Behind the scenes, the management team has also focused on improving the operational aspects of the business as it continues to pursue its strategy of investing in under-penetrated markets.
Overall, retail sales increased 17% to £282 million in the six months to March 31, accounting for more than 50% of the group’s total revenue. Wholesale revenue in the six months increased by around 25% to £219 million, while licensing revenues were flat at £45 million.
Over the year, Burberry has concentrated on expanding its retail network with the addition of 40 concessions as well as its first standalone childrenswear store, located in Hong Kong. It has also aimed to generate growth through expansion in emerging countries such as mainland China where the clamour for luxury goods continues apace as well as in the United States where sales figures were up 20%.
It has also made a push into accessory products such as silk scarves, shoes and handbags which account for over 30% of revenue.
Looking forward, Burberry will be delighted with the momentum of its brand as the core luxury, retail and non-apparel strategies continue to gain traction. Behind the scenes, the management team has also focused on improving the operational aspects of the business as it continues to pursue its strategy of investing in under-penetrated markets.
Luxury? What it means in China
Luxury is spreading in China. The Bentley dealership in Beijing is, on a good day, one of the busiest in the world.
Louis Vuitton has opened stores even in second-tier cities like Chengdu and Xi'an, away from the prosperous coast.
Last year, the company held one of its four 150-year anniversary galas in Hong Kong (the others were in New York, Paris, and Tokyo), and it recently opened a giant, fancy new flagship store in downtown Shanghai.
But closer examination reveals luxury in China is a specific sort of luxury and, in fact, rather different from the notion of luxury in today's developed economies.
Arguably, the concept of luxury itself has mutated considerably over time. The first, earliest incarnation of luxury is still best represented by expensive, handmade products -- a Rolls-Royce car, a Patek Philippe watch.
Ownership and display are the point.
Over time, however, just as countries moved from monarchies to democracies, luxe became mass luxury: Rolex and LV try to keep the aura of old luxe but market it to more people. (Patek makes about 10,000 watches a year; Rolex more than 100,000.)
The point, however, stayed the same: owning and displaying. This is the type of luxury we find in China today.
Yet luxury mutated further in the West over the past few decades. It became about connecting with the universe and expressing oneself; about being and enjoying, and less about owning and displaying.
David Brooks described this transition in his book Bobos in Paradise.
The new luxury is more organic and creative. BMW, a mid-market luxury brand not unlike Rolex or LV, is thus the 'ultimate driving machine.'
What's being marketed is the experience of driving, not the flaunting of social status. 'Sheer driving pleasure' is another BMW slogan. Less, at least by some measures, becomes more. Other examples of new luxury are resorts like Aman or Banyan Tree, eco-friendly and minimalistic. Perhaps luxe's new motto could come from author E M Forster: 'Always connect' -- with yourself, with nature.
This new type of luxury is in tune with the secular modern (or post-modern) consciousness that takes few things seriously other than the environment, world peace, the plight of the poor, and generally authenticity.
These politically correct exceptions aside, irony is important. First-generation luxury items can be mixed with low-end, even vulgar artefacts to reach an unexpected effect.
Prada has understood this, in its use of artificial fabrics, as have consumers in Japan and Hong Kong, who mix high and low fashion with abandon.
This was what Suzy Menkes, the veteran fashion editor of the International Herald Tribune, discovered on a recent visit to Hong Kong.
Alain Silverstein and Gerald Genta make watches that are expensive but full of irony (Genta has a Mickey Mouse watch). If I were an advertising or entertainment executive, that's the watch I would wear.
In another sense, the new luxury item is time, since identifying the products that perfectly express one's individuality takes time and accumulated knowledge, whereas going after a well-known brand is easy, even automatic.
Yet this is not fully true. We all have some free time; the question is how we spend it. Having interests, passions, hobbies -- choosing to spend our time in their pursuit -- is the foundation of contemporary conceptions of luxury.
Meaning is important: the product has to mean something, to speak of something; it cannot just be itself. Knowing small, dirty but oh-so-tasty restaurants half the world across is another expression of the new luxury.
I have a friend who, aside from being a successful financier, knows more about Taiwan butterflies that any lay person.
Practising yoga is another, ever more popular, example, and understanding Ashtanga versus Pilates, and spending time in India or elsewhere learning it, makes an important difference. Maybe what has happened can be described as the internalisation of luxury. In the developed West, sales of ultra-luxury cars like the Rolls-Royce are dramatically down.
Its new Phantom saloon has disappointed. DaimlerChrysler's introduction of the Maybach is considered a failure. Instead, as The Economist noted recently, luxury boats are ever more popular, but these sit moored in marinas or are sailed on the high seas.
Neither environment lends itself to sending signals of conspicuous wealth. Fast car sales are strong, too, but again, the emphasis is on the enjoyment of driving as much as, if not more than, on showing off.
And fast cars are meant to be driven on meandering coastlines or in the countryside, away from crowded areas, where onlookers might be impressed.
In this paradigm, China overwhelmingly embraces traditional, in-your-face luxury: diamond-studded gold watches, Western brand names, large limousines.
Luxury is primarily about projecting status. Sports cars are scarce. Marina after marina project has failed along the Guangdong coast. (One marina that hopes to succeed suggests businesspeople entertain guests on their boats, and impress them in the process, rather than take the yachts out at sea.)
Opulence is in: one official built a $50-million replica of the 17-century Château Maisons-Lafitte on farmland near Beijing. More down-to-earth residential compounds, albeit with names like 'Buckingham Palace' and featuring statues of medieval knights flanking grand entrances, have sprung up around the country.
DTC, as DeBeers is now called, has successfully introduced the idea of diamond rings in a culture where it didn't existed before; today, penetration rates in Chinese cities exceed those in Japan. Visually, China has never been a minimalist culture, as visits to the country's palaces and temples show. There is a preference for the grand rather than the understated.
Little matter that the grand, upon closer inspection, may be full of flaws -- say, poor finishing on a building that looks impressive from afar.
Japan and Korea, in contrast, exhibit a much simpler aesthetic. And the social definition of identity in Chinese culture, which emphasises the way the individual relates to others, promotes the outward expression of success.
Daoism, which prized humility and low profile, didn't become a mainstream school of thought. One result, for example, is that BMW uses a different advertising campaign in China, having found it difficult to translate its inner-enjoyment-of-driving concept to a Chinese audience that downplays personal pleasure for the purpose of conveying success to others.
Expensive Western brands whose products are strictly for personal or intimate use have found it more difficult to crack the Chinese market.
Luxury can denote both wealth and sophistication. The two can go hand in hand, but not necessarily. Sophistication takes time. A recent Hong Kong movie, Yesterday Once More, starring Andy Lau, a veteran star, features very little action and much minutiae on jewels, decanters, and humidors.
It works rather well -- Hong Kong and Mr Lau himself have decades of experience in the matter. In China, however, sophistication is only gradually accruing. The levels of charity donations, a corollary of luxury and sophistication, are still low.
Yet yoga schools, more stylish and organically architected housing (pioneered by SOHO, a Beijing property developer), and other 'softer' forms of luxury are also growing in popularity.
Cigar divans may be a novelty at first (a popular one overlooks the Forbidden City), but over time they become more natural destinations. The early popularity of nouveau-riche luxury may be giving way to something more complex.
The author is an expert on Greater China and director at CITIC Capital, a unit of China's largest financial group.
business-standard.
Louis Vuitton has opened stores even in second-tier cities like Chengdu and Xi'an, away from the prosperous coast.
Last year, the company held one of its four 150-year anniversary galas in Hong Kong (the others were in New York, Paris, and Tokyo), and it recently opened a giant, fancy new flagship store in downtown Shanghai.
But closer examination reveals luxury in China is a specific sort of luxury and, in fact, rather different from the notion of luxury in today's developed economies.
Arguably, the concept of luxury itself has mutated considerably over time. The first, earliest incarnation of luxury is still best represented by expensive, handmade products -- a Rolls-Royce car, a Patek Philippe watch.
Ownership and display are the point.
Over time, however, just as countries moved from monarchies to democracies, luxe became mass luxury: Rolex and LV try to keep the aura of old luxe but market it to more people. (Patek makes about 10,000 watches a year; Rolex more than 100,000.)
The point, however, stayed the same: owning and displaying. This is the type of luxury we find in China today.
Yet luxury mutated further in the West over the past few decades. It became about connecting with the universe and expressing oneself; about being and enjoying, and less about owning and displaying.
David Brooks described this transition in his book Bobos in Paradise.
The new luxury is more organic and creative. BMW, a mid-market luxury brand not unlike Rolex or LV, is thus the 'ultimate driving machine.'
What's being marketed is the experience of driving, not the flaunting of social status. 'Sheer driving pleasure' is another BMW slogan. Less, at least by some measures, becomes more. Other examples of new luxury are resorts like Aman or Banyan Tree, eco-friendly and minimalistic. Perhaps luxe's new motto could come from author E M Forster: 'Always connect' -- with yourself, with nature.
This new type of luxury is in tune with the secular modern (or post-modern) consciousness that takes few things seriously other than the environment, world peace, the plight of the poor, and generally authenticity.
These politically correct exceptions aside, irony is important. First-generation luxury items can be mixed with low-end, even vulgar artefacts to reach an unexpected effect.
Prada has understood this, in its use of artificial fabrics, as have consumers in Japan and Hong Kong, who mix high and low fashion with abandon.
This was what Suzy Menkes, the veteran fashion editor of the International Herald Tribune, discovered on a recent visit to Hong Kong.
Alain Silverstein and Gerald Genta make watches that are expensive but full of irony (Genta has a Mickey Mouse watch). If I were an advertising or entertainment executive, that's the watch I would wear.
In another sense, the new luxury item is time, since identifying the products that perfectly express one's individuality takes time and accumulated knowledge, whereas going after a well-known brand is easy, even automatic.
Yet this is not fully true. We all have some free time; the question is how we spend it. Having interests, passions, hobbies -- choosing to spend our time in their pursuit -- is the foundation of contemporary conceptions of luxury.
Meaning is important: the product has to mean something, to speak of something; it cannot just be itself. Knowing small, dirty but oh-so-tasty restaurants half the world across is another expression of the new luxury.
I have a friend who, aside from being a successful financier, knows more about Taiwan butterflies that any lay person.
Practising yoga is another, ever more popular, example, and understanding Ashtanga versus Pilates, and spending time in India or elsewhere learning it, makes an important difference. Maybe what has happened can be described as the internalisation of luxury. In the developed West, sales of ultra-luxury cars like the Rolls-Royce are dramatically down.
Its new Phantom saloon has disappointed. DaimlerChrysler's introduction of the Maybach is considered a failure. Instead, as The Economist noted recently, luxury boats are ever more popular, but these sit moored in marinas or are sailed on the high seas.
Neither environment lends itself to sending signals of conspicuous wealth. Fast car sales are strong, too, but again, the emphasis is on the enjoyment of driving as much as, if not more than, on showing off.
And fast cars are meant to be driven on meandering coastlines or in the countryside, away from crowded areas, where onlookers might be impressed.
In this paradigm, China overwhelmingly embraces traditional, in-your-face luxury: diamond-studded gold watches, Western brand names, large limousines.
Luxury is primarily about projecting status. Sports cars are scarce. Marina after marina project has failed along the Guangdong coast. (One marina that hopes to succeed suggests businesspeople entertain guests on their boats, and impress them in the process, rather than take the yachts out at sea.)
Opulence is in: one official built a $50-million replica of the 17-century Château Maisons-Lafitte on farmland near Beijing. More down-to-earth residential compounds, albeit with names like 'Buckingham Palace' and featuring statues of medieval knights flanking grand entrances, have sprung up around the country.
DTC, as DeBeers is now called, has successfully introduced the idea of diamond rings in a culture where it didn't existed before; today, penetration rates in Chinese cities exceed those in Japan. Visually, China has never been a minimalist culture, as visits to the country's palaces and temples show. There is a preference for the grand rather than the understated.
Little matter that the grand, upon closer inspection, may be full of flaws -- say, poor finishing on a building that looks impressive from afar.
Japan and Korea, in contrast, exhibit a much simpler aesthetic. And the social definition of identity in Chinese culture, which emphasises the way the individual relates to others, promotes the outward expression of success.
Daoism, which prized humility and low profile, didn't become a mainstream school of thought. One result, for example, is that BMW uses a different advertising campaign in China, having found it difficult to translate its inner-enjoyment-of-driving concept to a Chinese audience that downplays personal pleasure for the purpose of conveying success to others.
Expensive Western brands whose products are strictly for personal or intimate use have found it more difficult to crack the Chinese market.
Luxury can denote both wealth and sophistication. The two can go hand in hand, but not necessarily. Sophistication takes time. A recent Hong Kong movie, Yesterday Once More, starring Andy Lau, a veteran star, features very little action and much minutiae on jewels, decanters, and humidors.
It works rather well -- Hong Kong and Mr Lau himself have decades of experience in the matter. In China, however, sophistication is only gradually accruing. The levels of charity donations, a corollary of luxury and sophistication, are still low.
Yet yoga schools, more stylish and organically architected housing (pioneered by SOHO, a Beijing property developer), and other 'softer' forms of luxury are also growing in popularity.
Cigar divans may be a novelty at first (a popular one overlooks the Forbidden City), but over time they become more natural destinations. The early popularity of nouveau-riche luxury may be giving way to something more complex.
The author is an expert on Greater China and director at CITIC Capital, a unit of China's largest financial group.
business-standard.
Swatch Group Profit Rises 22% on Asian Sales of Luxury Watches
By Thomas Mulier, Bloomberg
Swatch Group AG, the world's largest watchmaker, said profit rose 22 percent in 2007 on higher Asian sales of luxury Omega and Breguet timepieces.
Net income climbed to 1.01 billion francs from 827 million francs in 2006, the Biel, Switzerland-based company said today in an e-mailed statement. That was in line with the 1.02 billion- franc average of 10 analysts' estimates compiled by Bloomberg.
"While we expect some vulnerability of Swatch's branded portfolio to a U.S. recession, its strong geographic diversification can ensure a continued good growth momentum,'' Dennis Weber, an analyst at Dresdner Kleinwort, said in a note before the release. He has an ``add'' rating on the stock.
Swatch is among European companies relying on emerging- markets growth to compensate for a U.S. slowdown. HSBC Holdings Plc, Europe's largest bank by market value, said this month second-half profit rose 17 percent on emerging-markets lending, and British American Tobacco Plc's 2007 profit rose 12 percent on sales in Russia and Brazil.
"The economic prospects in emerging markets are reassuring, but we're a bit defensive on the sector,'' said Guillaume Duchesne, a Geneva-based strategist at Fortis Private Banking, which holds shares of rival Cie. Financiere Richemont SA.
Swatch Group on Jan. 18 reported an 18 percent increase in full-year gross revenue to 5.94 billion francs after Chinese, Indian and Middle Eastern customers purchased luxury Breguet and Blancpain timepieces. Hong Kong almost beat the U.S. as the largest export market for Swiss watches in 2007.
Richemont, the world's largest jewelry maker, said Jan. 23 third-quarter sales growth slowed after wealthy Americans and Japanese bought fewer Piaget watches. Revenue rose 8 percent in the three months through December, down from an 11 percent pace in the first half.
Swatch Group Chief Executive Officer Nicolas Hayek Jr. said in January financial ``turbulence'' in the U.S. was having no effect on local revenue growth and that 2008 would be a ``super record year,'' helped by Omega's sponsorship of the Beijing Olympic games. Swiss watch export growth may slow to as little as 5 percent from last year's 16 percent, the Federation of the Swiss Watch Industry has said.
The Chinese economy expanded by 11 percent last year, boosting the disposable income of the country's 1.3 billion citizens. Hong Kong imported more Swiss watches by value than the U.S. in January. Wealthy Chinese shoppers tend to buy their timepieces in the city to avoid sales and value-added tax.
Swatch Group's order books were full for as much as five months and some products may take as much as a year to be delivered, the CEO said in January.
Chairman Nicolas Hayek Sr. said earlier this month that 2008 profit should rise as Swatch Group sells more watches in Europe and emerging markets.
Swatch Group AG, the world's largest watchmaker, said profit rose 22 percent in 2007 on higher Asian sales of luxury Omega and Breguet timepieces.
Net income climbed to 1.01 billion francs from 827 million francs in 2006, the Biel, Switzerland-based company said today in an e-mailed statement. That was in line with the 1.02 billion- franc average of 10 analysts' estimates compiled by Bloomberg.
"While we expect some vulnerability of Swatch's branded portfolio to a U.S. recession, its strong geographic diversification can ensure a continued good growth momentum,'' Dennis Weber, an analyst at Dresdner Kleinwort, said in a note before the release. He has an ``add'' rating on the stock.
Swatch is among European companies relying on emerging- markets growth to compensate for a U.S. slowdown. HSBC Holdings Plc, Europe's largest bank by market value, said this month second-half profit rose 17 percent on emerging-markets lending, and British American Tobacco Plc's 2007 profit rose 12 percent on sales in Russia and Brazil.
"The economic prospects in emerging markets are reassuring, but we're a bit defensive on the sector,'' said Guillaume Duchesne, a Geneva-based strategist at Fortis Private Banking, which holds shares of rival Cie. Financiere Richemont SA.
Swatch Group on Jan. 18 reported an 18 percent increase in full-year gross revenue to 5.94 billion francs after Chinese, Indian and Middle Eastern customers purchased luxury Breguet and Blancpain timepieces. Hong Kong almost beat the U.S. as the largest export market for Swiss watches in 2007.
Richemont, the world's largest jewelry maker, said Jan. 23 third-quarter sales growth slowed after wealthy Americans and Japanese bought fewer Piaget watches. Revenue rose 8 percent in the three months through December, down from an 11 percent pace in the first half.
Swatch Group Chief Executive Officer Nicolas Hayek Jr. said in January financial ``turbulence'' in the U.S. was having no effect on local revenue growth and that 2008 would be a ``super record year,'' helped by Omega's sponsorship of the Beijing Olympic games. Swiss watch export growth may slow to as little as 5 percent from last year's 16 percent, the Federation of the Swiss Watch Industry has said.
The Chinese economy expanded by 11 percent last year, boosting the disposable income of the country's 1.3 billion citizens. Hong Kong imported more Swiss watches by value than the U.S. in January. Wealthy Chinese shoppers tend to buy their timepieces in the city to avoid sales and value-added tax.
Swatch Group's order books were full for as much as five months and some products may take as much as a year to be delivered, the CEO said in January.
Chairman Nicolas Hayek Sr. said earlier this month that 2008 profit should rise as Swatch Group sells more watches in Europe and emerging markets.
Angela Ahrendts checks Burberry in as a global brand
Angela Ahrendts is masterminding the global expansion of the 150-year-old luxury clothing firm, writes Jenny Davey
IT was a sunny autumn day in 2005 and Angela Ahrendts, the newly appointed chief executive of Burberry, was on a trip to New York where she had arranged lunch with Christopher Bailey, the group’s brand director.
The location was the Asiate restaurant perched above the Manhattan skyline on the 35th floor of the Mandarin Oriental hotel.
The scheduled one-hour meeting stretched well into the afternoon and Ahrendts and Bailey spent more time talking than eating as they planned the biggest rejuvenation of the British luxury fashion brand since it clothed soldiers during the first world war.
Over the past three years, the blueprint drawn up that autumn day has taken Burberry on the most ambitious global expansion drive in the company’s 152-year history. Burberry is now about much more than trench coats. Welcome to the world of £1,500 handbags and luxury shoes.
On the face of it, Bailey and Ahrendts should have little in common. Bailey is a 36-year-old Yorkshireman who still has a house in Halifax. Ahrendts is American-born and 11 years his senior. But the working relationship between the two is so strong that when Burberry moves into its new headquarters on Horseferry Road in London’s Victoria later this year, they will have interlinking offices.
“I still feel like his mother,” Ahrendts giggled in her first newspaper interview since taking the helm. “But he’s a great talent. He’s from Yorkshire and I’m from a small town in Indiana, but we have a lot of values in common and, in an industry where you have to divide and conquer, it goes a long way.”
Bailey, who first met Ahrendts when they worked together at Donna Karan, is equally complimentary. “She’s my partner in crime and she’s a pleasure to work with. She has an unbelievable energy and passion and drive and she is a great strategic thinker. Neither of us grew up in mansions or flying on fancy aeroplanes - but I don’t think luxury has to be about money. We are both very grounded and we want the brand to speak to lots of people,” said Bailey.
Watching Ahrendts bounding around her bright, white office in London’s Regent Street, Bailey’s reading of her proves apposite.
She is is still statuesque at 47 – and she effuses a bubbling energy that is instantly disarming. She described herself as a “merchant” as she pointed to products in marketing brochures that cascaded over her white-and-grey marble desk.
So what is her favourite item from the Burberry collection?
“One favourite thing?” she shrieked in mock horror like a child who had just been told he can have only one toy at Christmas. “Oh I know, the Warrior mega-check bag. We’ve sold out . . . but it’s absolutely gorgeous – that is going to be my summer bag.”
When Ahrendts joined Burberry, the company had already made strides under previous boss Rose Marie Bravo, but it was clear that if the upmarket British fashion house was to succeed in its aspiration to become a global luxury brand it needed to be more innovative, increase its quotient of top-end merchandise and develop slicker marketing and product delivery. Crucially, Ahrendts has ensured that new merchandise flows into stores more evenly throughout the year.
One of her first actions as chief executive was to put Bailey in charge of all things that customers saw – from store design to product – across the Burberry global empire, to ensure it had a consistency of approach around the world.
“Our vision was to leverage the franchise – we wanted to purify the brand range and cut through the clutter. Luxury customers travel a lot and they want the same experience wherever they go, whether that is the same cup of coffee from Starbucks or the same phone from Apple.”
Ahrendts has expanded the brand into luxury handbags, shoes, small leather goods and soft accessories while staying true to the brand’s heritage as an outerwear brand, best known for its signature check.
Today the shelves of the group’s stores contain an array of products from quilted gold ballet pumps and the Knight bag – photographed on the arms of celebrities Cameron Diaz and Sienna Miller – to its centrepiece, the alligator-skin Warrior handbag that sells for £13,000.
Is the goal to be a Louis Vuitton? “No, the goal is not to be on a par with them – our peers do an absolutely brilliant job – but this is not about us trying to be someone else.
“In the world of luxury it’s really about looking less at what they do and more about doing what we do better. Our position is so modern, it’s not really edgy or trendy.”
It is clear she is excited by the potential to grow the Burberry brand in emerging and underrepresented markets.
“Everyone talks about China, but look at markets like Vietnam, Malaysia, Macau. We have signed eight new flagships in Asia in the past month. Look at that whole eastern Europe and Russia area, or go over to Dubai and then think Kuwait, Egypt. India is opening up . . . that is another whole region.”
Ahrendts has also shown herself to be capable of taking tough, politically unpopular decisions such as the closure last year of the company’s shirt factory in South Wales – in the face of criticism from Prince Charles, MPs and singers Tom Jones and Charlotte Church. Production was shifted to China.
On the face of it, her strategy is beginning to pay off financially – with revenues up 23.3% to £254m in the third quarter, boosted by growth across all product channels and geographic regions. But fears that Burberry will suffer more than some of its peers if there is a sharp downturn in consumer spending and a warning note from the company that it will be a “stretch” to meet its full-year pretax profit target of £210m have punished the share price. Since last May it has plunged more than 40%.
Ahrendts is sanguine. “It’s simply timing . . . as long as we put up consistent numbers quarter after quarter. It’s like your weight: you don’t get on the scales every day, you should just watch your diet. It’s a waste of time for executives to worry about the share price – I believe we are the greatest growth story in the sector. That’s not being overly confident.
Talking about how trading is going is always sensitive for a listed company, but Ahrendts insisted: “On aggregate we are holding our own. I do feel we have some wonderful momentum right now. We’ve just got to stay focused on the things you can control and keep getting a very clear and focused message across to customers.”
The daughter of a model, Ahrendts grew up as one of six children in a humble family home surrounded by wheat fields and farms in New Palestine, Indiana. As a teenager she dreamt of a big-time fashion career and carried around the latest edition of Vogue for a month at a time. She was so determined to cut it in the fashion business that she moved to New York the day after she graduated from Indiana’s Ball State University in 1981.
She began her career at Donna Karan and worked her way up the ranks, eventually serving as president of the upmarket Donna Karan Collection. After a brief stint at the retailer Henri Bendel, Ahrendts joined Liz Claiborne in 1998, rising to become vice-president.
Despite her high-powered job, Ahrendts, a mother of three, remains remarkably grounded. She said this was because she prized family above all else.
“I’m a mom first – I have to be a wife and mother – it’s so important that I have balance.”
She talks affectionately about family evenings spent eating a takeaway pizza, watching her three children, aged 13, 12 and 7, play car games on their Xbox games console, larking around playing basketball with them or hosting sleepovers for their friends.
“Nobody will ever remember that I worked for Burberry. But raising my kids to be confident and intelligent will stay with them for as long as they live.”
IT was a sunny autumn day in 2005 and Angela Ahrendts, the newly appointed chief executive of Burberry, was on a trip to New York where she had arranged lunch with Christopher Bailey, the group’s brand director.
The location was the Asiate restaurant perched above the Manhattan skyline on the 35th floor of the Mandarin Oriental hotel.
The scheduled one-hour meeting stretched well into the afternoon and Ahrendts and Bailey spent more time talking than eating as they planned the biggest rejuvenation of the British luxury fashion brand since it clothed soldiers during the first world war.
Over the past three years, the blueprint drawn up that autumn day has taken Burberry on the most ambitious global expansion drive in the company’s 152-year history. Burberry is now about much more than trench coats. Welcome to the world of £1,500 handbags and luxury shoes.
On the face of it, Bailey and Ahrendts should have little in common. Bailey is a 36-year-old Yorkshireman who still has a house in Halifax. Ahrendts is American-born and 11 years his senior. But the working relationship between the two is so strong that when Burberry moves into its new headquarters on Horseferry Road in London’s Victoria later this year, they will have interlinking offices.
“I still feel like his mother,” Ahrendts giggled in her first newspaper interview since taking the helm. “But he’s a great talent. He’s from Yorkshire and I’m from a small town in Indiana, but we have a lot of values in common and, in an industry where you have to divide and conquer, it goes a long way.”
Bailey, who first met Ahrendts when they worked together at Donna Karan, is equally complimentary. “She’s my partner in crime and she’s a pleasure to work with. She has an unbelievable energy and passion and drive and she is a great strategic thinker. Neither of us grew up in mansions or flying on fancy aeroplanes - but I don’t think luxury has to be about money. We are both very grounded and we want the brand to speak to lots of people,” said Bailey.
Watching Ahrendts bounding around her bright, white office in London’s Regent Street, Bailey’s reading of her proves apposite.
She is is still statuesque at 47 – and she effuses a bubbling energy that is instantly disarming. She described herself as a “merchant” as she pointed to products in marketing brochures that cascaded over her white-and-grey marble desk.
So what is her favourite item from the Burberry collection?
“One favourite thing?” she shrieked in mock horror like a child who had just been told he can have only one toy at Christmas. “Oh I know, the Warrior mega-check bag. We’ve sold out . . . but it’s absolutely gorgeous – that is going to be my summer bag.”
When Ahrendts joined Burberry, the company had already made strides under previous boss Rose Marie Bravo, but it was clear that if the upmarket British fashion house was to succeed in its aspiration to become a global luxury brand it needed to be more innovative, increase its quotient of top-end merchandise and develop slicker marketing and product delivery. Crucially, Ahrendts has ensured that new merchandise flows into stores more evenly throughout the year.
One of her first actions as chief executive was to put Bailey in charge of all things that customers saw – from store design to product – across the Burberry global empire, to ensure it had a consistency of approach around the world.
“Our vision was to leverage the franchise – we wanted to purify the brand range and cut through the clutter. Luxury customers travel a lot and they want the same experience wherever they go, whether that is the same cup of coffee from Starbucks or the same phone from Apple.”
Ahrendts has expanded the brand into luxury handbags, shoes, small leather goods and soft accessories while staying true to the brand’s heritage as an outerwear brand, best known for its signature check.
Today the shelves of the group’s stores contain an array of products from quilted gold ballet pumps and the Knight bag – photographed on the arms of celebrities Cameron Diaz and Sienna Miller – to its centrepiece, the alligator-skin Warrior handbag that sells for £13,000.
Is the goal to be a Louis Vuitton? “No, the goal is not to be on a par with them – our peers do an absolutely brilliant job – but this is not about us trying to be someone else.
“In the world of luxury it’s really about looking less at what they do and more about doing what we do better. Our position is so modern, it’s not really edgy or trendy.”
It is clear she is excited by the potential to grow the Burberry brand in emerging and underrepresented markets.
“Everyone talks about China, but look at markets like Vietnam, Malaysia, Macau. We have signed eight new flagships in Asia in the past month. Look at that whole eastern Europe and Russia area, or go over to Dubai and then think Kuwait, Egypt. India is opening up . . . that is another whole region.”
Ahrendts has also shown herself to be capable of taking tough, politically unpopular decisions such as the closure last year of the company’s shirt factory in South Wales – in the face of criticism from Prince Charles, MPs and singers Tom Jones and Charlotte Church. Production was shifted to China.
On the face of it, her strategy is beginning to pay off financially – with revenues up 23.3% to £254m in the third quarter, boosted by growth across all product channels and geographic regions. But fears that Burberry will suffer more than some of its peers if there is a sharp downturn in consumer spending and a warning note from the company that it will be a “stretch” to meet its full-year pretax profit target of £210m have punished the share price. Since last May it has plunged more than 40%.
Ahrendts is sanguine. “It’s simply timing . . . as long as we put up consistent numbers quarter after quarter. It’s like your weight: you don’t get on the scales every day, you should just watch your diet. It’s a waste of time for executives to worry about the share price – I believe we are the greatest growth story in the sector. That’s not being overly confident.
Talking about how trading is going is always sensitive for a listed company, but Ahrendts insisted: “On aggregate we are holding our own. I do feel we have some wonderful momentum right now. We’ve just got to stay focused on the things you can control and keep getting a very clear and focused message across to customers.”
The daughter of a model, Ahrendts grew up as one of six children in a humble family home surrounded by wheat fields and farms in New Palestine, Indiana. As a teenager she dreamt of a big-time fashion career and carried around the latest edition of Vogue for a month at a time. She was so determined to cut it in the fashion business that she moved to New York the day after she graduated from Indiana’s Ball State University in 1981.
She began her career at Donna Karan and worked her way up the ranks, eventually serving as president of the upmarket Donna Karan Collection. After a brief stint at the retailer Henri Bendel, Ahrendts joined Liz Claiborne in 1998, rising to become vice-president.
Despite her high-powered job, Ahrendts, a mother of three, remains remarkably grounded. She said this was because she prized family above all else.
“I’m a mom first – I have to be a wife and mother – it’s so important that I have balance.”
She talks affectionately about family evenings spent eating a takeaway pizza, watching her three children, aged 13, 12 and 7, play car games on their Xbox games console, larking around playing basketball with them or hosting sleepovers for their friends.
“Nobody will ever remember that I worked for Burberry. But raising my kids to be confident and intelligent will stay with them for as long as they live.”
The Future Of Luxury by CNBC
Emerging economies are providing new demand for high-end goods – but traditional luxury markets face uncertainties, writes Boyd Farrow
In mid-January, at its gleaming new 8,000m2 Milanese headquarters – all polished stone floors, glass walkways and decked courtyards – Ermenegildo Zegna unveiled its autumn/winter 2008/09 collection. But while the men’s luxury clothing group talked up the latest, high-tech fabrics that adapt to temperature changes, its chief executive admitted that he expects the current economic chill to continue for some time.
Gildo Zegna said sales would slow this year partly because of US subprime credit fallout, and that his company is relying on emerging markets to take up the slack. “Sales will be up, but I don’t think they will be double-digit,” he predicted. “There is a slowdown in the American economy, Japan is flat, but we still can count on a decent increase in Europe, a stronger increase still in China, South-East Asia and Eastern Europe.” He added: “Thank God for emerging markets”.
Zegna’s hosanna joins a growing chorus from Europe’s luxury giants. At an industry conference in Moscow last November, Bernard Arnault, chairman of LVMH, forecast that sales of luxury products would double in the next five years to €300bn, mainly because of market growth in China, Russia and India, but also in Eastern Europe and Latin America. Arnault also expects more growth in Western Europe, Japan and North America, which he notes still consumes just 16% of luxury goods but accounts for 28% of world GDP. Indeed, it is precisely because parts of the underexploited US market have more in common with emerging luxury economies than developed ones that the Frenchman expresses such a confident long-term outlook.
According to Franck Petitgas, international investment banking chief at Morgan Stanley, despite the US downturn and slower sales growth in Western Europe, luxury companies posted results for the third quarter of 2007 that showed an average growth of 12% to 16%. Emerging markets, he says, played a substantial role.
The significance of China, with its population of 1.3 billion, cannot be understated. This is a luxury market that did not exist 20 years ago but which now boasts more than 300,000 millionaires and a middle class of around 250 million people. Ernst & Young reckons that €4bn was spent on luxury goods in 2006, while Goldman Sachs forecasts that by 2015 China’s consumers will account for 29% of all luxury goods sales – making it second only to Japan.
Also tantalising the luxury giants is Russia, where oil wealth has led to a retail revolution, evidenced by TSUM and GUM, Moscow’s most glamorous department stores, and the packed, boutique-lined streets of Stoleshnikov Pereulok and Tretyakovsky Proyezd.
However, while a breathless Forbes magazine fixates on Moscow being home to 53 billionaires, general incomes – and the size of the middle class – are rising throughout Russia. The 2005 opening of Luxury Village in Rublyovka underscored how upscale retail is growing outside the capital, and TSUM and GUM are both jostling for real estate in St Petersburg and the other nine Russian cities with populations exceeding a million.
Michele Norsa, chief executive of Salvatore Ferragamo, notes that the 15 countries of the former USSR account for 286 million people. “The Ukraine’s average spend in luxury stores in Europe is higher than Russia’s. The wealth in cities like Baku, Kiev and Vilnius is staggering,” he says. “This is why, while we hear of the mature market’s relative slowdown, we believe the growth and underexploited potential of the BRIC (Brazil, Russia, India, China) economies will guarantee the luxury goods industry an even brighter future.”
The brightest beacon is India, whose economy is growing at 8% and, in 2006, had around 1.6 million households earning over €70,000 and spending more than €6,000 on luxury. This, reports analyst Technopak, will grow 14% annually, while several other analysts predict that during the next five to 10 years, India could become luxury’s biggest market. Yves Carcelle, chief executive of Louis Vuitton, notes that a century ago the maharajahs were among the luxury brands’ biggest customers. “This is an important point because there are other countries where there is no luxury tradition,” he says. India’s luxury renaissance only began in 2006, when its government allowed FDI of 51% in single-brand retail operations. It is estimated that India will have 300 new malls by 2010. From this month consumers on New Delhi’s outskirts will be able to visit the Emporio mall, with its luxury annex. More than 70 international labels have signed up and Emporio’s developer DLF plans similar malls in Hyderabad, Chennai and Mumbai.
Nevertheless, some analysts are sceptical that booming sales in emerging markets will offset downturns in the US and European economies in the short term – particularly with a possible recession approaching. Melanie Flouquet, head of luxury research at JPMorgan Securities, notes that the Middle East, Russia, China, Latin America and India may be rapidly developing, but combined they still account for only 18% to 20% of global luxury goods sales. China represents 6% to 7%; the Middle East 5%; Russia 4%; and other emerging markets about 2%, she says.
Flouquet points out that the large luxury goods conglomerates, such as LVMH and PPR, are counting on emerging markets for 15% to 22% of their revenue. She warns that India – which still has poor basic infrastructure – was more a potential than a current source of abundant revenue for luxury firms. “Japan and Europe must grow,” she says, adding that the whole financial community was also watching for signs of whether the decline of the dollar against leading world currencies and the credit crunch would lead to an economic decoupling from the US.
Many doubt that Europe or Japan can escape America’s gravitational pull. Flouquet says Japan is still the leading market for luxury, despite signs that aside from the ultra high end the sector may be losing its pricing power – the ability to offset currency swings by upping prices.
For the past four years, luxury goods companies – many of them based in Europe -have had to contend with a dollar that was weakening against the euro. That meant that US revenues added less to their bottom lines in 2007 than in 2003, even if stateside sales had risen.
On 22 January, after Asian stocks had dropped 5% overnight and the European markets opened in free-fall, Lehmann Bros downgraded the entire luxury sector to ‘negative’. Meanwhile,
according to Luca Solca at Bernstein Research, problems in the general economy are certain to spill over into the luxury sector, especially for companies that have tapped into the aspirational luxury market.
All signs suggest that Mr Zegna may not be the only luxury brand CEO to be sweating into his high-tech fabric as the year chugs on.
In mid-January, at its gleaming new 8,000m2 Milanese headquarters – all polished stone floors, glass walkways and decked courtyards – Ermenegildo Zegna unveiled its autumn/winter 2008/09 collection. But while the men’s luxury clothing group talked up the latest, high-tech fabrics that adapt to temperature changes, its chief executive admitted that he expects the current economic chill to continue for some time.
Gildo Zegna said sales would slow this year partly because of US subprime credit fallout, and that his company is relying on emerging markets to take up the slack. “Sales will be up, but I don’t think they will be double-digit,” he predicted. “There is a slowdown in the American economy, Japan is flat, but we still can count on a decent increase in Europe, a stronger increase still in China, South-East Asia and Eastern Europe.” He added: “Thank God for emerging markets”.
Zegna’s hosanna joins a growing chorus from Europe’s luxury giants. At an industry conference in Moscow last November, Bernard Arnault, chairman of LVMH, forecast that sales of luxury products would double in the next five years to €300bn, mainly because of market growth in China, Russia and India, but also in Eastern Europe and Latin America. Arnault also expects more growth in Western Europe, Japan and North America, which he notes still consumes just 16% of luxury goods but accounts for 28% of world GDP. Indeed, it is precisely because parts of the underexploited US market have more in common with emerging luxury economies than developed ones that the Frenchman expresses such a confident long-term outlook.
According to Franck Petitgas, international investment banking chief at Morgan Stanley, despite the US downturn and slower sales growth in Western Europe, luxury companies posted results for the third quarter of 2007 that showed an average growth of 12% to 16%. Emerging markets, he says, played a substantial role.
The significance of China, with its population of 1.3 billion, cannot be understated. This is a luxury market that did not exist 20 years ago but which now boasts more than 300,000 millionaires and a middle class of around 250 million people. Ernst & Young reckons that €4bn was spent on luxury goods in 2006, while Goldman Sachs forecasts that by 2015 China’s consumers will account for 29% of all luxury goods sales – making it second only to Japan.
Also tantalising the luxury giants is Russia, where oil wealth has led to a retail revolution, evidenced by TSUM and GUM, Moscow’s most glamorous department stores, and the packed, boutique-lined streets of Stoleshnikov Pereulok and Tretyakovsky Proyezd.
However, while a breathless Forbes magazine fixates on Moscow being home to 53 billionaires, general incomes – and the size of the middle class – are rising throughout Russia. The 2005 opening of Luxury Village in Rublyovka underscored how upscale retail is growing outside the capital, and TSUM and GUM are both jostling for real estate in St Petersburg and the other nine Russian cities with populations exceeding a million.
Michele Norsa, chief executive of Salvatore Ferragamo, notes that the 15 countries of the former USSR account for 286 million people. “The Ukraine’s average spend in luxury stores in Europe is higher than Russia’s. The wealth in cities like Baku, Kiev and Vilnius is staggering,” he says. “This is why, while we hear of the mature market’s relative slowdown, we believe the growth and underexploited potential of the BRIC (Brazil, Russia, India, China) economies will guarantee the luxury goods industry an even brighter future.”
The brightest beacon is India, whose economy is growing at 8% and, in 2006, had around 1.6 million households earning over €70,000 and spending more than €6,000 on luxury. This, reports analyst Technopak, will grow 14% annually, while several other analysts predict that during the next five to 10 years, India could become luxury’s biggest market. Yves Carcelle, chief executive of Louis Vuitton, notes that a century ago the maharajahs were among the luxury brands’ biggest customers. “This is an important point because there are other countries where there is no luxury tradition,” he says. India’s luxury renaissance only began in 2006, when its government allowed FDI of 51% in single-brand retail operations. It is estimated that India will have 300 new malls by 2010. From this month consumers on New Delhi’s outskirts will be able to visit the Emporio mall, with its luxury annex. More than 70 international labels have signed up and Emporio’s developer DLF plans similar malls in Hyderabad, Chennai and Mumbai.
Nevertheless, some analysts are sceptical that booming sales in emerging markets will offset downturns in the US and European economies in the short term – particularly with a possible recession approaching. Melanie Flouquet, head of luxury research at JPMorgan Securities, notes that the Middle East, Russia, China, Latin America and India may be rapidly developing, but combined they still account for only 18% to 20% of global luxury goods sales. China represents 6% to 7%; the Middle East 5%; Russia 4%; and other emerging markets about 2%, she says.
Flouquet points out that the large luxury goods conglomerates, such as LVMH and PPR, are counting on emerging markets for 15% to 22% of their revenue. She warns that India – which still has poor basic infrastructure – was more a potential than a current source of abundant revenue for luxury firms. “Japan and Europe must grow,” she says, adding that the whole financial community was also watching for signs of whether the decline of the dollar against leading world currencies and the credit crunch would lead to an economic decoupling from the US.
Many doubt that Europe or Japan can escape America’s gravitational pull. Flouquet says Japan is still the leading market for luxury, despite signs that aside from the ultra high end the sector may be losing its pricing power – the ability to offset currency swings by upping prices.
For the past four years, luxury goods companies – many of them based in Europe -have had to contend with a dollar that was weakening against the euro. That meant that US revenues added less to their bottom lines in 2007 than in 2003, even if stateside sales had risen.
On 22 January, after Asian stocks had dropped 5% overnight and the European markets opened in free-fall, Lehmann Bros downgraded the entire luxury sector to ‘negative’. Meanwhile,
according to Luca Solca at Bernstein Research, problems in the general economy are certain to spill over into the luxury sector, especially for companies that have tapped into the aspirational luxury market.
All signs suggest that Mr Zegna may not be the only luxury brand CEO to be sweating into his high-tech fabric as the year chugs on.
Purveyors of chic luxury makers look east
Despite the economic slowdown that has suppressed U.S. makers of high-end goods such as Tiffany & Co. and Coach, European luxury behemoths LVMH and PPR, the parent company of Gucci and Puma, are withstanding the downturn. Crucial to their success has been relatively small exposure to the weak U.S. market, and robust growth in the emerging economies of China , Russia, and India. Indeed, LVMH Chairman Bernard Arnault predicts one-third of all luxury goods will go to these three countries in the next 10 years
Burberry
After Burberry said in January that sales had fallen short of expectations in the quarter ended Dec. 31 and would not meet analyst forecasts for the year, its shares dropped nearly 16%. Sales in Spain, a key market, declined over 2006, contributing in part to growth of just 6% in stores open more than one year, below predictions of 8%. Perhaps Burberry’s new store in Hong Kong and two new shops in Russia will help turn things around.
Coach
In late January, Coach announced plans to launch a flagship store in Hong Kong in the summer and to enter the Russian market by opening at least 15 stores in Moscow and St. Petersburg over a five-year period. But in the U.S., Coach sales at fullprice stores fell 2% last quarter while sales at factory outlets increased 18%. Here, Coach Chief Executive Lew Frankfort poses at Coach’s 100th store in Japan, in Tokyo’s Marunouchi business district; the location opened in 2004.
Louis Vuitton
LVMH Chairman Bernard Arnault expects global spending on luxury goods to double in the next five years to nearly $440 billion. If the French company’s Louis Vuitton label stays on course, it will no doubt score big—the fashion house placed No. 17 on the BusinessWeek/Interbrand list of Best Global Brands in 2007 for the second straight year. A recent ad campaign featuring the likes of Mikhail Gorbachev, Catherine Deneuve, and husband-and-wife tennis champions Steffi Graf and Andre Agassi has proven a hit.
Gucci
These suede and patent leather sport shoes with gold trim will be sold only in Hong Kong and mainland China, along with seven other limited-edition items designed to epitomize sporty luxury. China and other emerging markets, notably Russia and India, are proving crucial to luxury goods companies as big spenders out West cut back. The collection also includes a stuffed leather panda, a Mah Jong set, and a red bicycle.
Tiffany & Co.
Its iconic blue box may be legendary, but in the two months leading up to New Year’s , Tiffany saw sales at stores open at least a year fall short of company expectations, slipping 2% over the same period in 2006. In the previous quarter, sales had risen 8%. The New York flagship store got a boost from sales to tourists, who make up 20% of Tiffany’s U.S. revenues.
Hermès
The resilience of luxury leather goods during economic downturns, as well as the rise of the yen against the euro, signal prosperous times ahead for the French company, which generates 24% of its sales in Japan. “The company’s steady growth, somewhat uninspiring when the industry is booming, regains its luster in downturn periods,” states a Feb. 1 report from bank HSBC. Pictured here is a $129,000 crocodile Birkin bag at the new Hermès store on Wall Street.
Christian Dior
Its couture is worn by the likes of Sharon Stone and Charlize Theron, and the pink, heart-shaped Dior bauble French President Nicolas Sarkozy gave his new bride, Carla Bruni, has been the talk of tabloids for months.
Now the company aims to enter the thriving luxury mobile-phone market, with plans to launch handsets later this year. In this shot, a model presents a design by John Galliano during the Christian Dior haute couture fashion show in Paris last month.
Cartier
The French jewelry maker’s parent company, Switzerland’s Richemont, has pleasantly surprised investors over the last three years, with Cartier making a strong showing.
It opened a boutique in Hong Kong last November, and plans to operate some 24 shops in China by the end of the year, up from 14 in 2007. Time will tell whether Cartier holds its own after Tiffany and Swatch begin selling new, co-produced luxury watches.
Courtesy: Businessweek
Burberry
After Burberry said in January that sales had fallen short of expectations in the quarter ended Dec. 31 and would not meet analyst forecasts for the year, its shares dropped nearly 16%. Sales in Spain, a key market, declined over 2006, contributing in part to growth of just 6% in stores open more than one year, below predictions of 8%. Perhaps Burberry’s new store in Hong Kong and two new shops in Russia will help turn things around.
Coach
In late January, Coach announced plans to launch a flagship store in Hong Kong in the summer and to enter the Russian market by opening at least 15 stores in Moscow and St. Petersburg over a five-year period. But in the U.S., Coach sales at fullprice stores fell 2% last quarter while sales at factory outlets increased 18%. Here, Coach Chief Executive Lew Frankfort poses at Coach’s 100th store in Japan, in Tokyo’s Marunouchi business district; the location opened in 2004.
Louis Vuitton
LVMH Chairman Bernard Arnault expects global spending on luxury goods to double in the next five years to nearly $440 billion. If the French company’s Louis Vuitton label stays on course, it will no doubt score big—the fashion house placed No. 17 on the BusinessWeek/Interbrand list of Best Global Brands in 2007 for the second straight year. A recent ad campaign featuring the likes of Mikhail Gorbachev, Catherine Deneuve, and husband-and-wife tennis champions Steffi Graf and Andre Agassi has proven a hit.
Gucci
These suede and patent leather sport shoes with gold trim will be sold only in Hong Kong and mainland China, along with seven other limited-edition items designed to epitomize sporty luxury. China and other emerging markets, notably Russia and India, are proving crucial to luxury goods companies as big spenders out West cut back. The collection also includes a stuffed leather panda, a Mah Jong set, and a red bicycle.
Tiffany & Co.
Its iconic blue box may be legendary, but in the two months leading up to New Year’s , Tiffany saw sales at stores open at least a year fall short of company expectations, slipping 2% over the same period in 2006. In the previous quarter, sales had risen 8%. The New York flagship store got a boost from sales to tourists, who make up 20% of Tiffany’s U.S. revenues.
Hermès
The resilience of luxury leather goods during economic downturns, as well as the rise of the yen against the euro, signal prosperous times ahead for the French company, which generates 24% of its sales in Japan. “The company’s steady growth, somewhat uninspiring when the industry is booming, regains its luster in downturn periods,” states a Feb. 1 report from bank HSBC. Pictured here is a $129,000 crocodile Birkin bag at the new Hermès store on Wall Street.
Christian Dior
Its couture is worn by the likes of Sharon Stone and Charlize Theron, and the pink, heart-shaped Dior bauble French President Nicolas Sarkozy gave his new bride, Carla Bruni, has been the talk of tabloids for months.
Now the company aims to enter the thriving luxury mobile-phone market, with plans to launch handsets later this year. In this shot, a model presents a design by John Galliano during the Christian Dior haute couture fashion show in Paris last month.
Cartier
The French jewelry maker’s parent company, Switzerland’s Richemont, has pleasantly surprised investors over the last three years, with Cartier making a strong showing.
It opened a boutique in Hong Kong last November, and plans to operate some 24 shops in China by the end of the year, up from 14 in 2007. Time will tell whether Cartier holds its own after Tiffany and Swatch begin selling new, co-produced luxury watches.
Courtesy: Businessweek
Gucci sarees for the wardrobe!
After Banarsi, Kota and Kanjeevaram, women will soon be able to add Gucci sarees to their wardrobes. The Italian luxury brand is open to working on traditional Indian clothing and creating a limited domestic collection using local tradition and design.
“We are open to the idea of working with Indian designers and traditional Indian clothing and creating a limited edition India collection, though I cannot say when. It will depend on how the Indian market for Gucci grows,” Gucci chief executive officer Mark Lee said, adding that the company was open to the idea of hiring Indian designers in its design centre in Italy.
Gucci, which has a turnover of 2,175 million Euros, has already launched a similar experiment in China where it has 18 stores. Apart from red bags, it has come out with a stuffed panda toy and a bicycle using traditional Chinese colours. At the moment, Gucci has two stores in Mumbai and Delhi and is planning to open two more, one of which will be in Bangalore. Gucci offers a range of products including bags, footwear, ready-to-wear, perfumes and watches.
Lee, who joined the company as the CEO in 2005 after his stint in Yves Saint Laurent (another luxury brand and a part of Gucci Group NV), said that high rentals for retail outlets in the country were a key issue for expansion of luxury brands. Still, Lee said Gucci (unlike many other international brands) will go into smaller cities beyond the metros.
The Gucci group has a range of brands under its fold. Apart from Gucci, its other brands include YSL, Sergio Rossi, Stella McCartney, Bottega Veneta, watch brand Bedat & Co and perfume brands like Roger & Gallet.
However, according to Lee, most of these brands do not compete with each other. “All the brand heads meet four times a year and openly share strategies. The aim is not to compete with each other, but with other luxury brands,” he said.
“We are open to the idea of working with Indian designers and traditional Indian clothing and creating a limited edition India collection, though I cannot say when. It will depend on how the Indian market for Gucci grows,” Gucci chief executive officer Mark Lee said, adding that the company was open to the idea of hiring Indian designers in its design centre in Italy.
Gucci, which has a turnover of 2,175 million Euros, has already launched a similar experiment in China where it has 18 stores. Apart from red bags, it has come out with a stuffed panda toy and a bicycle using traditional Chinese colours. At the moment, Gucci has two stores in Mumbai and Delhi and is planning to open two more, one of which will be in Bangalore. Gucci offers a range of products including bags, footwear, ready-to-wear, perfumes and watches.
Lee, who joined the company as the CEO in 2005 after his stint in Yves Saint Laurent (another luxury brand and a part of Gucci Group NV), said that high rentals for retail outlets in the country were a key issue for expansion of luxury brands. Still, Lee said Gucci (unlike many other international brands) will go into smaller cities beyond the metros.
The Gucci group has a range of brands under its fold. Apart from Gucci, its other brands include YSL, Sergio Rossi, Stella McCartney, Bottega Veneta, watch brand Bedat & Co and perfume brands like Roger & Gallet.
However, according to Lee, most of these brands do not compete with each other. “All the brand heads meet four times a year and openly share strategies. The aim is not to compete with each other, but with other luxury brands,” he said.
Fourth Edution Top Marques Shanghai will launch this Aum
After the great success in Shanghai last year, the fourth international celebrities' personal possession exhibition will open in this autum..
With Spyker C8 Laviolette BI2 (Basic Instinct2) Limited Edition and Beckham's Wiesmann as spearheads, more than 70 international famous brands treat the 2nd Top Marques Shanghai as testing water for their new releases in the Chinese market, including Escalade of Cadillac and motorcycles of Harley-Davidson. The exhibition will also be a contest for them to show their excellent design and deep cultural background.
Statistics show that there are more than 160 million luxuries consumers in China. Shanghai being the most economically developed city, is the best place for an exhibition of these high-end products.
In the first Top Marques Shanghai alone, more than 250 million yuan worth of luxuries were sold, which was quite an amazing figure.
www.borrison.com
The world's most exclusive luxury show.
With Spyker C8 Laviolette BI2 (Basic Instinct2) Limited Edition and Beckham's Wiesmann as spearheads, more than 70 international famous brands treat the 2nd Top Marques Shanghai as testing water for their new releases in the Chinese market, including Escalade of Cadillac and motorcycles of Harley-Davidson. The exhibition will also be a contest for them to show their excellent design and deep cultural background.
Statistics show that there are more than 160 million luxuries consumers in China. Shanghai being the most economically developed city, is the best place for an exhibition of these high-end products.
In the first Top Marques Shanghai alone, more than 250 million yuan worth of luxuries were sold, which was quite an amazing figure.
www.borrison.com
The world's most exclusive luxury show.
Audi reports 25% rise in China car sales in Q1
BEIJING, April (Xinhua) -- Audi, Volkswagen's high-end line, reported it sold 30,000 units in China in the first three months, a 25 percent increase over the same period a year earlier.
The sales figure in the first two months was 19,188 units, and March sales were about 11,000, according to Zhang Xiaojun, Deputy Managing Director of the FAW-Volkswagen Audi Sales Division.
"As the largest overseas market for the brand, China accounted for 10.5 percent of global sales of Audi vehicles," he said here on Monday.
The luxury auto maker has set an annual sales target of 200,000 units in China before 2015, but it is very likely the goal will be accomplished before then.
Audi sold 964,000 units in the global market last year, ranking third in luxury car sales after BMW and Mercedes Benz. The two leaders sold 1.28 million and 1.19 million units respectively.
Audi realized 33.62 billion euros (52.6 billion U.S. dollars) in sales worldwide last year, and reported a pre-tax profit of 2.92 billion euros.
The sales figure in the first two months was 19,188 units, and March sales were about 11,000, according to Zhang Xiaojun, Deputy Managing Director of the FAW-Volkswagen Audi Sales Division.
"As the largest overseas market for the brand, China accounted for 10.5 percent of global sales of Audi vehicles," he said here on Monday.
The luxury auto maker has set an annual sales target of 200,000 units in China before 2015, but it is very likely the goal will be accomplished before then.
Audi sold 964,000 units in the global market last year, ranking third in luxury car sales after BMW and Mercedes Benz. The two leaders sold 1.28 million and 1.19 million units respectively.
Audi realized 33.62 billion euros (52.6 billion U.S. dollars) in sales worldwide last year, and reported a pre-tax profit of 2.92 billion euros.
City cull will be no luxury
Ceri Jones
Estimates for job losses in the City seem to grow by the day. Last October the Centre for Economics and Business Research predicted that in 2008 the London financial sector would make 6,500 redundancies, but it has since raised that figure to 10,000.
Research group Experian Business Strategies has said that the cull from the City's 350,000 workforce could go as high as 20,000, nearly 20% more than the 17,000 killed off by the dotcom bubble in 2000.
Although the big groups have each already cut between 500 and 1500 jobs so far this year, there is no sense that the worse is over. As Lehman began to shed 18% of its staff last week, top job head-hunter Battalia Winston International estimated that 25-30,000 jobs will be lost in London over the next eight to 12 months.
Even those who stay in position can kiss goodbye to the bonuses they have become accustomed to. Instead of a typical structure of 70% cash and the remainder in shares, this year's bonuses will largely consist of shares.
Apart from the ramifications of this blow to corporate confidence on the wider economy, City lay-offs could have specific impact on certain stockmarket sectors. The obvious contenders are luxury goods companies and it will be interesting to see if the flotations of Prada and Salvatore Ferragamo, penciled in for the summer, still go ahead.
The 'Ultra Rich' are unlikely to be so affected by the economic downturn that they rein in their spending habits. Research by the Harrison Group estimates that the top 5% of US households now control $32,000 billion in assets, against $7,000 billion for everyone else, and this disparity is bigger in countries such as Russia, for instance, where at least 6,000 individuals are said to be worth upwards of $40 million. One indicator that the great wealth sloshing about the system - if any were needed - is the revenues still streaming into the banks' private wealth businesses, as indicated by the first quarter results of UBS and Credit Suisse.
Growth in Asia
The big growth in demand for luxury goods is coming from the new middle classes in Asia, however, and this make a real difference to the sector because these markets are so huge. Chinese social science researchers have coined the phrase 'Zhong Chan', meaning 'middle property', and talk about the growth of 'little Emperors', the thousands of singletons growing up who have come to expect the latest gizmo. Goldman Sachs predicts that China could take 29% of the global luxury goods market by 2015 - surpassing even Japan.
"The sector that traditionally does worse in cyclical downturns is watches," says Ian Ormiston, fund manager of the Resolution European Growth fund. "In the last cycle the margins of Swiss watch-maker Richemont contracted by 1000 basis points because it is highly operationally geared."
Cartier brand-owner Richemont, the third largest luxury goods firm after French giants LVMH Moët Hennessy and Gucci-owner PPR, has reported slowing demand in recent months but by contrast, Swatch, the Swiss owner of the Omega and Breguet brands, posted an 18% rise in sales last year with no apparent sign of a tail-off, partly because it has a more diversely priced product range and Omega is the IT brand for watches in China.
"I would prefer to be exposed to a luxury goods company that was sufficiently diversified in terms of geographic sales so that emerging market growth, particularly in Russia and China, could compensate for weakness elsewhere," says Catie Wearmouth, investment director at Scottish Widows Investment Partnership. "In the event of consumers trading down generally then the company I would want to own would need to have a product range that would capture that.
"The Swatch Group is an example of this, with its range of watches from the low through to mid and high end watches, LVMH is another with its highly diversified collection of luxury products. Within its accessories business and outside of its highly profitable Louis Vuitton fan base, bag lovers have brands like Marc Jacobs or Fendi to choose from. Both companies have sensible capital expenditure commitments and solid balance sheets to support their growth which will provide a structural strength in this difficult environment."
Weak dollar remains a threatLouis Vuitton is doing well in establishing its own shops and cutting out the middleman, a trail blazed by Coach which now has 500 outlets in the US. However, the brand has been somewhat overexposed and the company has just launched a TV ad campaign to try to regain its association with the height of luxury. It remains most counterfeited brand in the world with perhaps only 1% of the items bearing the LV logo now thought to be authentic.
Another threat to the European luxury goods companies trying to export to the US is the continuing weakness of the dollar, putting US homegrown brands such as Tiffany's at an advantage. It has always been said that a 10% decline in the dollar results in a 10% drop in operating profits for these companies, all else being equal, but many now hedge at least some of their currency exposures in the derivatives markets.
Other sectors that could be affected are luxury yachts makers. At the very top of this market where yachts cost £20-30 million apiece and order books for companies such as Bank of Scotland-backed Sunseeker are bulging. But in the middle market, Rodriguez, quoted in Paris, is having a tough time already; its shares have fallen by 70% since June and earnings estimates for 2008 have fallen 30%.
Spectacles in the shade
Another area of high discretionary spend that traditionally suffers when consumers trade down is spectacles, particularly designer sunglasses. Two Italian spectacle frame makers are Luxottica, which supplies Ray-Ban, and Safilo, which makes specs for top brands such as Max Mara and own label Carrera. Their shares have fallen by 45% and 58% respectively since last summer. It is difficult to find a niche top-end player in travel or leisure. Cruise specialist Carnival (CCL) addresses the middle market, for instance and was also subject to a unique take on iBall - watch the episode here.
In drink, the only sector not buoyed by growing demand from Asia is beer, but the brewers report that their leading specialist brews are enjoying growth. While high end whisky exports traditionally relied on the Japanese market, they are now being widely exported across Asia.
Companies that are ahead in foraying into China include Nasdaq's Wal-Mart, which acquired the Taiwanese big-box retail chain Trust-Mart, New York-listed Home Depot, which acquired Chinese home improvement retailer Home Way to cater for the massive growth in homeownership, the ubiquitous Tesco (TSCO) and Kingfisher's (KGF) B&Q chain. In fact, why not watch iBall's look at Tesco.
However, Kingfisher said last week it has suffered in China from government legislation to take the steam out of the property market, and had expanded too quickly opening 42 stores in China in the past three years.
Companies such as the Nasdaq-listed Estee Lauder, Christian Dior, Procter & Gamble, and Japan's largest cosmetics producer Shiseido could benefit as Chinese women start to purchase skin creams and cosmetics, a market estimated to be $5.5 billion per year and growing at an annual rate of 10-15%. Richard Hunter, head of UK equities at Hargreaves Lansdown, also likes personal care company Reckitt & Coleman (RB) on the basis that people won't cut down on basic toiletries no matter how deep the recession.
Estimates for job losses in the City seem to grow by the day. Last October the Centre for Economics and Business Research predicted that in 2008 the London financial sector would make 6,500 redundancies, but it has since raised that figure to 10,000.
Research group Experian Business Strategies has said that the cull from the City's 350,000 workforce could go as high as 20,000, nearly 20% more than the 17,000 killed off by the dotcom bubble in 2000.
Although the big groups have each already cut between 500 and 1500 jobs so far this year, there is no sense that the worse is over. As Lehman began to shed 18% of its staff last week, top job head-hunter Battalia Winston International estimated that 25-30,000 jobs will be lost in London over the next eight to 12 months.
Even those who stay in position can kiss goodbye to the bonuses they have become accustomed to. Instead of a typical structure of 70% cash and the remainder in shares, this year's bonuses will largely consist of shares.
Apart from the ramifications of this blow to corporate confidence on the wider economy, City lay-offs could have specific impact on certain stockmarket sectors. The obvious contenders are luxury goods companies and it will be interesting to see if the flotations of Prada and Salvatore Ferragamo, penciled in for the summer, still go ahead.
The 'Ultra Rich' are unlikely to be so affected by the economic downturn that they rein in their spending habits. Research by the Harrison Group estimates that the top 5% of US households now control $32,000 billion in assets, against $7,000 billion for everyone else, and this disparity is bigger in countries such as Russia, for instance, where at least 6,000 individuals are said to be worth upwards of $40 million. One indicator that the great wealth sloshing about the system - if any were needed - is the revenues still streaming into the banks' private wealth businesses, as indicated by the first quarter results of UBS and Credit Suisse.
Growth in Asia
The big growth in demand for luxury goods is coming from the new middle classes in Asia, however, and this make a real difference to the sector because these markets are so huge. Chinese social science researchers have coined the phrase 'Zhong Chan', meaning 'middle property', and talk about the growth of 'little Emperors', the thousands of singletons growing up who have come to expect the latest gizmo. Goldman Sachs predicts that China could take 29% of the global luxury goods market by 2015 - surpassing even Japan.
"The sector that traditionally does worse in cyclical downturns is watches," says Ian Ormiston, fund manager of the Resolution European Growth fund. "In the last cycle the margins of Swiss watch-maker Richemont contracted by 1000 basis points because it is highly operationally geared."
Cartier brand-owner Richemont, the third largest luxury goods firm after French giants LVMH Moët Hennessy and Gucci-owner PPR, has reported slowing demand in recent months but by contrast, Swatch, the Swiss owner of the Omega and Breguet brands, posted an 18% rise in sales last year with no apparent sign of a tail-off, partly because it has a more diversely priced product range and Omega is the IT brand for watches in China.
"I would prefer to be exposed to a luxury goods company that was sufficiently diversified in terms of geographic sales so that emerging market growth, particularly in Russia and China, could compensate for weakness elsewhere," says Catie Wearmouth, investment director at Scottish Widows Investment Partnership. "In the event of consumers trading down generally then the company I would want to own would need to have a product range that would capture that.
"The Swatch Group is an example of this, with its range of watches from the low through to mid and high end watches, LVMH is another with its highly diversified collection of luxury products. Within its accessories business and outside of its highly profitable Louis Vuitton fan base, bag lovers have brands like Marc Jacobs or Fendi to choose from. Both companies have sensible capital expenditure commitments and solid balance sheets to support their growth which will provide a structural strength in this difficult environment."
Weak dollar remains a threatLouis Vuitton is doing well in establishing its own shops and cutting out the middleman, a trail blazed by Coach which now has 500 outlets in the US. However, the brand has been somewhat overexposed and the company has just launched a TV ad campaign to try to regain its association with the height of luxury. It remains most counterfeited brand in the world with perhaps only 1% of the items bearing the LV logo now thought to be authentic.
Another threat to the European luxury goods companies trying to export to the US is the continuing weakness of the dollar, putting US homegrown brands such as Tiffany's at an advantage. It has always been said that a 10% decline in the dollar results in a 10% drop in operating profits for these companies, all else being equal, but many now hedge at least some of their currency exposures in the derivatives markets.
Other sectors that could be affected are luxury yachts makers. At the very top of this market where yachts cost £20-30 million apiece and order books for companies such as Bank of Scotland-backed Sunseeker are bulging. But in the middle market, Rodriguez, quoted in Paris, is having a tough time already; its shares have fallen by 70% since June and earnings estimates for 2008 have fallen 30%.
Spectacles in the shade
Another area of high discretionary spend that traditionally suffers when consumers trade down is spectacles, particularly designer sunglasses. Two Italian spectacle frame makers are Luxottica, which supplies Ray-Ban, and Safilo, which makes specs for top brands such as Max Mara and own label Carrera. Their shares have fallen by 45% and 58% respectively since last summer. It is difficult to find a niche top-end player in travel or leisure. Cruise specialist Carnival (CCL) addresses the middle market, for instance and was also subject to a unique take on iBall - watch the episode here.
In drink, the only sector not buoyed by growing demand from Asia is beer, but the brewers report that their leading specialist brews are enjoying growth. While high end whisky exports traditionally relied on the Japanese market, they are now being widely exported across Asia.
Companies that are ahead in foraying into China include Nasdaq's Wal-Mart, which acquired the Taiwanese big-box retail chain Trust-Mart, New York-listed Home Depot, which acquired Chinese home improvement retailer Home Way to cater for the massive growth in homeownership, the ubiquitous Tesco (TSCO) and Kingfisher's (KGF) B&Q chain. In fact, why not watch iBall's look at Tesco.
However, Kingfisher said last week it has suffered in China from government legislation to take the steam out of the property market, and had expanded too quickly opening 42 stores in China in the past three years.
Companies such as the Nasdaq-listed Estee Lauder, Christian Dior, Procter & Gamble, and Japan's largest cosmetics producer Shiseido could benefit as Chinese women start to purchase skin creams and cosmetics, a market estimated to be $5.5 billion per year and growing at an annual rate of 10-15%. Richard Hunter, head of UK equities at Hargreaves Lansdown, also likes personal care company Reckitt & Coleman (RB) on the basis that people won't cut down on basic toiletries no matter how deep the recession.
Hilton maps out expansion blueprint in China
(China Knowledge) - Hilton Hotels Corp, the leading global hotel chain company, said on Tuesday it will double its portfolio in China in the coming few months through introducing new hotel brands. It aims to extend its presence in China to 12 within the year and raise the number to 26 by 2011, said Timothy Soper, vice president for operations in China and Mongolia.
Global auto makers report soaring Q1 China sales
BEIJING, April 9 (Xinhua) -- Global auto makers reported soaring first-quarter sales in China as they stepped on the accelerator to jostle for position in the world's fastest growing vehicle market.
The sales growth of almost all the big global names far outpaced the industry average in China; passenger car sales rose 20.4 percent to 1.85 million in the first three months and 24 percent in March, the biggest monthly rise since August.
In contrast, their sales experienced double-digit declines in the United States last month as demand fell and consumers held back amid concerns about gas prices, the subprime mortgage crisis and tightening credit.
U.S. auto maker Ford Motor Co. announced on Wednesday that its combined sales in China -- including the Ford, Volvo, Mazda, Jaguar and Land Rover brands -- surged 47 percent in the first quarter to 90,791 vehicles.
The results were mainly buoyed by its venture with Changan Automotive Group, China's fourth largest automaker, and Japan's Mazda Motor Corp. The Chinese venture boosted first-quarter sales by 58 percent to 61,789 vehicles.
Ford has recorded fast growth in China for four consecutive years and the first-quarter results were prognostic of a bumper harvest for 2008, Ford China CEO Robert Graziano said.
The auto giant would keep a close watch on the global and Chinese economy, he said. "We will accelerate ours steps in introducing new products and technologies to further expand the business in China."
Europe's largest auto maker, Volkswagen AG, reported a 32.5-percent jump in China sales in the first quarter to 268,200 vehicles. Its two Chinese ventures -- FAW Volkswagen and Shanghai Volkswagen -- topped the domestic sales rankings.
Sales of Audi, Volkswagen's high-end line, climbed 25 percent to 30,188, while Bentley sales soared 137.8 percent to 126 units.
Volkswagen China CEO Winfried Vahland said the German auto giant would see its China sales break the 1 million unit mark this year and maintain its position as an industry leader.
Volkswagen moved 910,500 vehicles in China last year, up 28 percent. In 1985, it became the first multinational auto maker to produce in China when Shanghai Volkswagen was established.
German premium car maker BMW AG, whose brands include BMW and Mini, saw first-quarter sales in China surge 43.2 percent to 14,574 units, compared with a 5.7-percent rise globally and a 9.2-percent decline in the United States.
BMW's result included a 20.4 percent rise in sales by its Chinese venture with Brilliance Automotive Co. to 8,035 locally-made 3 Series and 5 Series sedans. Sales of imported BMW sedans, including the much-more expensive 7 Series flagship cars, jumped 83.9 percent.
Mercedes-Benz also reported strong growth, with sales up 40 percent in China. The fast economic growth in the country had resulted in a growing rank of nouveau riche and made luxury cars, such as Audi, BMW and Mercedes-Benz, affordable to more people.
Foreign brands held a 74.2 percent share of the Chinese sedan market in the first three months, according to data from the semi-official China Association of Automobile Manufacturers.
Japanese brands took 29 percent, German brands 21.3 percent and American brands 13 percent.
Vehicle production and sales both surged more than 20 percent to a record 8.8 million units in China last year, in contrast to weakening sales worldwide. The country produced 6.38 million passenger cars and sold 6.3 million units last year.
The sales growth of almost all the big global names far outpaced the industry average in China; passenger car sales rose 20.4 percent to 1.85 million in the first three months and 24 percent in March, the biggest monthly rise since August.
In contrast, their sales experienced double-digit declines in the United States last month as demand fell and consumers held back amid concerns about gas prices, the subprime mortgage crisis and tightening credit.
U.S. auto maker Ford Motor Co. announced on Wednesday that its combined sales in China -- including the Ford, Volvo, Mazda, Jaguar and Land Rover brands -- surged 47 percent in the first quarter to 90,791 vehicles.
The results were mainly buoyed by its venture with Changan Automotive Group, China's fourth largest automaker, and Japan's Mazda Motor Corp. The Chinese venture boosted first-quarter sales by 58 percent to 61,789 vehicles.
Ford has recorded fast growth in China for four consecutive years and the first-quarter results were prognostic of a bumper harvest for 2008, Ford China CEO Robert Graziano said.
The auto giant would keep a close watch on the global and Chinese economy, he said. "We will accelerate ours steps in introducing new products and technologies to further expand the business in China."
Europe's largest auto maker, Volkswagen AG, reported a 32.5-percent jump in China sales in the first quarter to 268,200 vehicles. Its two Chinese ventures -- FAW Volkswagen and Shanghai Volkswagen -- topped the domestic sales rankings.
Sales of Audi, Volkswagen's high-end line, climbed 25 percent to 30,188, while Bentley sales soared 137.8 percent to 126 units.
Volkswagen China CEO Winfried Vahland said the German auto giant would see its China sales break the 1 million unit mark this year and maintain its position as an industry leader.
Volkswagen moved 910,500 vehicles in China last year, up 28 percent. In 1985, it became the first multinational auto maker to produce in China when Shanghai Volkswagen was established.
German premium car maker BMW AG, whose brands include BMW and Mini, saw first-quarter sales in China surge 43.2 percent to 14,574 units, compared with a 5.7-percent rise globally and a 9.2-percent decline in the United States.
BMW's result included a 20.4 percent rise in sales by its Chinese venture with Brilliance Automotive Co. to 8,035 locally-made 3 Series and 5 Series sedans. Sales of imported BMW sedans, including the much-more expensive 7 Series flagship cars, jumped 83.9 percent.
Mercedes-Benz also reported strong growth, with sales up 40 percent in China. The fast economic growth in the country had resulted in a growing rank of nouveau riche and made luxury cars, such as Audi, BMW and Mercedes-Benz, affordable to more people.
Foreign brands held a 74.2 percent share of the Chinese sedan market in the first three months, according to data from the semi-official China Association of Automobile Manufacturers.
Japanese brands took 29 percent, German brands 21.3 percent and American brands 13 percent.
Vehicle production and sales both surged more than 20 percent to a record 8.8 million units in China last year, in contrast to weakening sales worldwide. The country produced 6.38 million passenger cars and sold 6.3 million units last year.
Armani 2007 oper profit surges, shrugs off crisis
EDTMILAN, April 10 (Reuters) - Giorgio Armani's operating profit rose 17 percent last year, pulled by a surging China market, and it expects growth in 2008 despite a credit crunch, the Italian luxury goods and fashion designer said on Thursday.
Armani, known for his classically elegant lines and muted colours in clothes, had earnings before interest and tax (EBIT) of 289 million euros ($457.9 million). Consolidated sales rose 8 percent to 1.6 billion euros, with the rise 12 percent at constant exchange rates.
Investors are closely watching fashion and luxury goods companies for any slowdown in spending on premium items as a credit crisis and falling financial markets rattle consumers.
"Although in 2008 there is a more uncertain economic climate, I anticipate another year of growth supported by the 7 percent increase in our wholesale orders ... for our autumn/winter 2008 season," the 73-year-old designer said in a statement.
Armani said it planned to open 50 more outlets this year to add to its 471 outlets comprising franchises and directly-owned stores.
Chinese sales grew 24 percent last year, leading regions around the world, while European sales outside Italy rose 19 percent. North American sales were up 7 percent, with the rise 17 percent at constant exchange rates.
Known for his softer, flowing version of the business suit, Armani has pushed the marketing power of a famous name to the limit by expanding into hotels and interior design as well as sunglasses, ceramics and perfumes.
Armani rival Versace said last month its high-end position meant it was not feeling the impact of the global economic slowdown.
Gucci Group, which is owned by PPR (PRTP.PA: Quote, Profile, Research), turned in a jump of 29 percent in operating profit in 2007 to 731 million euros and said it expected this year should show further growth.
And Bernard Arnault, chairman of the world's largest luxury goods group LVMH (LVMH.PA: Quote, Profile, Research), said in February he had not yet seen any impact on high-end spending although he acknowledged it should come some time. (Reporting by Ian Simpson; Editing by David Cowell)
Armani, known for his classically elegant lines and muted colours in clothes, had earnings before interest and tax (EBIT) of 289 million euros ($457.9 million). Consolidated sales rose 8 percent to 1.6 billion euros, with the rise 12 percent at constant exchange rates.
Investors are closely watching fashion and luxury goods companies for any slowdown in spending on premium items as a credit crisis and falling financial markets rattle consumers.
"Although in 2008 there is a more uncertain economic climate, I anticipate another year of growth supported by the 7 percent increase in our wholesale orders ... for our autumn/winter 2008 season," the 73-year-old designer said in a statement.
Armani said it planned to open 50 more outlets this year to add to its 471 outlets comprising franchises and directly-owned stores.
Chinese sales grew 24 percent last year, leading regions around the world, while European sales outside Italy rose 19 percent. North American sales were up 7 percent, with the rise 17 percent at constant exchange rates.
Known for his softer, flowing version of the business suit, Armani has pushed the marketing power of a famous name to the limit by expanding into hotels and interior design as well as sunglasses, ceramics and perfumes.
Armani rival Versace said last month its high-end position meant it was not feeling the impact of the global economic slowdown.
Gucci Group, which is owned by PPR (PRTP.PA: Quote, Profile, Research), turned in a jump of 29 percent in operating profit in 2007 to 731 million euros and said it expected this year should show further growth.
And Bernard Arnault, chairman of the world's largest luxury goods group LVMH (LVMH.PA: Quote, Profile, Research), said in February he had not yet seen any impact on high-end spending although he acknowledged it should come some time. (Reporting by Ian Simpson; Editing by David Cowell)
BMW first-quarter sales in China rise 39 percent
BMW, the world's largest maker of luxury cars, boosted first-quarter sales in China 39 percent as economic growth fueled demand.
Emerging markets and the internet are the future for luxury
By Katie Bird 4/10/2008
Emerging markets and internet sales are the future for luxury brands according to a panel speaking at the World Retail Congress in Barcelona yesterday.
The discussion focused on the particular challenges the current economic climate posed for the luxury market, and warned that the sector is by no means immune to the global credit crunch.
'Trading up' may be going down
According to Estee Lauder group president Patrick Bousquet-Chavanne the tendency for 'aspirational' consumers to move from mass market products to luxury brands could be slowing.
"Nobody has a crystal ball, but we have seen a softening of demand across the retail market in the US," he said.
Instead, the current economic climate may drive consumers to downgrade, leading them to search for budget versions of their favourite luxury items.
A number of manufacturers already seem ready for the trend with budget versions of luxury products hitting the market such as Dr Semel's Timelapse Wand released this week, which, at $25, provides a budget alternative to expensive anti-aging treatments that can retail anywhere between $100 and $150.
Emerging markets are booming
According to Bousqet-Chavanne the only markets experiencing a boom at present are the emerging markets of India, China and Russia, however he did warn that success in these countries requires significant investment and takes time.
"I believe that it is very likely that for all of us in the branding world it [emerging markets] will be a big share of earnings in the coming years," he said.
The middle classes and the younger generation were cited as the biggest drivers of luxury and brand awareness in such markets.
In its second quarter results publicised early February, Estee Lauder reported sales of $2.31bn on the back of strong performances in the emerging markets.
In particular the company highlighted the Asia Pacific region and China where most of its brands sold out during the period and sales reached $347.4m.
Internet provides growth opportunity
In addition, the panel agreed that the internet provided another big opportunity for the luxury sector, however, creating a luxury shopping experience on the web can be challenging.
"The emotional aspect is the most critical one to address," said panel member Graziano De Boni from Valentino.
The luxury sector has often been slow to provide websites through which consumers can purchase goods, with luxury cosmetics group Clarins only adding transactional power to its site in 2007.
The France-based company cited the renovation of the website as a major marketing and promotional cost that affected the year's profit figures, illustrating the financial significance of a move into the online sphere.
Emerging markets and internet sales are the future for luxury brands according to a panel speaking at the World Retail Congress in Barcelona yesterday.
The discussion focused on the particular challenges the current economic climate posed for the luxury market, and warned that the sector is by no means immune to the global credit crunch.
'Trading up' may be going down
According to Estee Lauder group president Patrick Bousquet-Chavanne the tendency for 'aspirational' consumers to move from mass market products to luxury brands could be slowing.
"Nobody has a crystal ball, but we have seen a softening of demand across the retail market in the US," he said.
Instead, the current economic climate may drive consumers to downgrade, leading them to search for budget versions of their favourite luxury items.
A number of manufacturers already seem ready for the trend with budget versions of luxury products hitting the market such as Dr Semel's Timelapse Wand released this week, which, at $25, provides a budget alternative to expensive anti-aging treatments that can retail anywhere between $100 and $150.
Emerging markets are booming
According to Bousqet-Chavanne the only markets experiencing a boom at present are the emerging markets of India, China and Russia, however he did warn that success in these countries requires significant investment and takes time.
"I believe that it is very likely that for all of us in the branding world it [emerging markets] will be a big share of earnings in the coming years," he said.
The middle classes and the younger generation were cited as the biggest drivers of luxury and brand awareness in such markets.
In its second quarter results publicised early February, Estee Lauder reported sales of $2.31bn on the back of strong performances in the emerging markets.
In particular the company highlighted the Asia Pacific region and China where most of its brands sold out during the period and sales reached $347.4m.
Internet provides growth opportunity
In addition, the panel agreed that the internet provided another big opportunity for the luxury sector, however, creating a luxury shopping experience on the web can be challenging.
"The emotional aspect is the most critical one to address," said panel member Graziano De Boni from Valentino.
The luxury sector has often been slow to provide websites through which consumers can purchase goods, with luxury cosmetics group Clarins only adding transactional power to its site in 2007.
The France-based company cited the renovation of the website as a major marketing and promotional cost that affected the year's profit figures, illustrating the financial significance of a move into the online sphere.
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