LUXURY NEW STORE OPENINGS REMAIN ROBUST IN CHINA

Asia – China in particular – is expected to account for a larger share of international luxury retailers’ total global sales. So it comes as no surprise that many of the retailers raced to stake their claim in China last year, especially since the rest of the world was so bleak.

Many luxury retailers continue to expand, adding new Tier 2 cities. According to research from Knight Frank, “the typical annual store growth rate for those already well-established in China is approximately 15-20 percent. Luxury retailers can often identify 4-5 suitable sites in Tier 1 cities, but many only find 1-2 suitable sites in Tier 2 cities.” Interestingly, the prime locations in Tier 2 cities are usually occupied by local developers, so many international retailers find themselves partnering with the local players.

Generally, luxury brands that have a smaller presence in China are building more stores. Ralph Lauren is ramping up its China presence, adding an estimated 50-60 additional stores from 10 stores at the end of the third quarter 2012. Burberry is the exception. It continues to expand aggressively, adding a projected 43 stores to its 57 existing stores.

For some luxury brands such as Chanel, Fendi, Hermes, and even Louis Vuitton, we are seeing a trend toward modest expansion in order to maintain exclusivity. Of course, there will be more new entrants who finally feel comfortable to enter the Chinese market.

The following is a selected list of international luxury retailers’ projected expansion plans.

Expansion plans announced between 1Q-3Q 2012. Source: Knight Frank Research

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