Finding comfort in the lap of luxury

As Chinese spend on high fashion worldwide, local firms go shopping for brands to expand

Retailers and investors say China's luxury goods industry still has a bright future despite a second consecutive year of losses in 2015, according to consulting firm Bain & Co.

Research by the Fortune Character Institute appears to confirm this optimistic outlook, too.

Last year, the Chinese bought 46 percent of the luxury goods sold worldwide - but 78 percent of that was purchased outside China.

Chinese consumers of high fashion and luxury goods are also becoming increasingly discerning - even emerging as trendsetters, industry insiders say.

To ride this wave, Shandong Ruyi Group, a Chinese textile producer, recently joined the bidding for French fashion group SMCP, according to Bloomberg.

SMCP is estimated to be worth more than $1 billion (916 million euros) and owns affordable luxury brands such as Maje and Sandro, which have surged in popularity among China's middle class.

Ruyi Group is ranked among the top four of China's 500 textile enterprises, and its consolidated annual revenue hit a record 30 billion yuan ($4.5 billion; 4.1 billion euros) in 2013. The group declined to comment on its reported interest in SMCP.

Any such acquisition would be "just a drop in the bucket, as the Chinese are fast climbing on to the upper chain of the luxury industry", says Zhou Ting, director of the Fortune Character Institute. "The (luxury) market remains one of the most lucrative for now and (shall remain so over) the next decade.

"This means, if Chinese companies and investors want a share, they should be more involved in every link of the supply chain, from design and manufacture to marketing and retail."

Things have been moving in that direction of late. For instance, Chinese fashion e-retailer Vipshop Holdings, known for its discounts, invested millions of dollars in November for a minority stake in British company Brand Alley, to introduce more British brands in China.

A month earlier, the company's competitor, Secoo, opened the first cross-border experience store at Piazza Del Duomo, a popular shopping area in Milan.

Li Rixue, founder and CEO of Secoo, established the website seven years ago in Beijing. He calls the Milan store "part of a 10-year globalization plan".

Industry insiders say Secoo's expansion reflects a strategy to target high-spending Chinese tourists in Europe.

Zhou says what, where and how the Chinese buy will likely determine where Chinese investors, and global investors, spend their money.

Michele Alberti, CEO of Luxemporium Investments, a Swiss fashion trading company partly owned by Shanghai Spring Bamboo Group, a wool and cashmere manufacturer, says Chinese consumers are becoming more sophisticated.

Yet there is no need to draw a circle around Chinese people and study them differently, he says. "I'm always asked what's the most distinguishing feature of Chinese consumers. I think it's (that) they're growing more similar to consumers from other countries, if not leading the industry."

Alberti, who has previously worked for Bally and Salvatore Ferragamo, joined Luxemporium in 2014 and played a key role in the opening of its first multibrand store, on the second floor of Tianjin's Friendship Department Store, in January.

The shop sells footwear, bags and accessories from more than 80 brands, including sought-after designer brands such as 3.1 Phillip Lim, Charlotte Olympia and Sophie Hulme.

He says one-third of the products are designer brands that are rising in popularity in China, as well as globally. "It's happening everywhere, especially China. ... Even the richest people are pairing H&M or Zara clothes with much-pricier chic bags and shoes. People are looking for style instead of statement."

Over the next decade, Luxemporium plans to open at least one store a year in China, a country whose luxury industry is "not shrinking, but evolving", Alberti says. He adds that the company's fashion buyers in Milan will help select the brands to be sold at its outlets in China. "(Despite a slowdown), people are still buying, and buying lots (in China)."

He believes the expansion of Luxempourium, mainly to smaller cities, could fill the gap in the luxury retail landscape of China created by the closure of stores by other luxury brands.

Zhang Jie, CEO of Luxemporium International Trading (Shanghai) Co, the local arm of the Swiss firm, says an ambitious plan is taking shape. "Luxemporium caters not just to Chinese customers. It starts in China, but we want to bring it to other countries in Asia, Europe and the United States."

xujunqian@chinadaily.com.cn

( China Daily Africa Weekly 03/04/2016 page29)