Galeries Lafayette defies luxury in China
On my recent trip to Paris, one of the few retail destinations I insisted on seeing was Galeries Lafayette (GL). With very few visits to Europe under my belt, I really had no concept of what GL was except that they were coming to China. GL sounded very big, French and important and if they were coming to China then it was a big deal for fashion and retail. GL is somewhat of a fashion institution in France and according to Mr. Paul Delaoutre, CEO of Department Stores division of Galeries Lafayette the GL flagship store in Paris is the second most visited landmark in Paris (after the Eiffel Tower), has the highest sales turnover for any department store in the world for the last 10 years, and is visited by over eight million tourists per year. Altogether GL operates over 70 stores globally.
The question is then, that if a well travelled and fashion conscious individual such as myself doesn’t know so much about GL then what about Chinese shoppers? And if Chinese shoppers don’t know the brand name Galeries Lafayette then what will be the draw card that entices consumers into the China GL stores?
It seems Chinese do know GL well enough to swarm to the Paris flagship store on Boulevard Haussmann for some high energy shopping tours. Whether or not these Chinese deliberately go on tours with a trip to GL included, or the tours simply take them there and say “Two hour to spend all your money, then back on the bus” is uncertain.
Low and behold the busiest shop in the entire GL Paris Flagship store was Louis Vuitton, which had a line of over 20 Chinese waiting to get in. While LV’s business and branding power rarely fail to impress me, it does bore me that Chinese will fly half way around to simply buy something they could have got at home. Now if they are buying LV in Paris because it’s a French brand and it has a special meaning to buy a brand in its original country, then that is something I can appreciate. When wearing it you may even think to yourself, “I bought this in Paris” and have fond memories. I know many countries’ consumers who have reached this enlightened level of consumerism, yet, alas; I doubt that many of the Chinese have.
Most Chinese I’m sure are simply splurging on luxury goods outside China to avoid the high luxury consumption taxes in China. This is great for the big brands that draw the consumers, but I would prefer to see the consumers delving in to the more designer and independent brands to buy things that you cant find in every shopping mall in China. This would add to the overall fashion sense and sophistication of China instead of just repeating the same monotonous logo heavy looks over and over again. I also paid a visit to the world famous Collette (select) store on Rue Saint-Honore and found it packed with customers from round the world, yet no Chinese.
After securing a prime piece of real estate in Beijing’s Xidan district, Galeries Lafayette will be open in China in 2012 through a joint venture with Hong Kong’s I.T Limited. Being close to the university district and supporting a major subway interchange Xidan is crowded with markets and shopping malls targeting teenagers and young adults. It is the most lucrative shopping district in all Beijing for mid-end and fast fashion retailers such as H&M, Metersbonwe, Moussy and Jack Jones etc.
Initially, GL’s decision to China in a mass-market retail environment was intriguing. Why wouldn’t they go high-end and replicate something like their flagship store in Paris? The answer is that GL can’t compete with the luxury brands already well established in China. In France GL has the customer base – people will go to GL to shop and so the luxury brands want to be in GL. However, in China all the top luxury brands are already well established and have their own stores and customer base so they don’t need to open in GL or any other foreign department store that enters China.
Therefore any department store wishing to enter China cannot just simply recreate the same store as in their home market, but must use a different positioning and branding etc. strategy. As described in this previous post on Chinese department stores, the department store business must evolve in China if it is to survive.
Considering this, I would say that GL do have a higher chance of succeeding in China if they target the youth market that is undoubtedly the future fashionistas of China. Its exactly these youth who will be bold enough to create their own identities though fashion and wear independent designer labels, shop at the Collettes of the world and though they will likely have logo emblazoned items in their wardrobe, it wont be the mainstay of their aesthetic. So in a sense this solves the issue I was talking about above. Chinese will still shop and LV etc in Paris and buy products available in China, yet hopefully young consumers will start to catch onto to the smaller foreign brands which will become available through stores like GL in China.
At the recent 2011 Beijing Xidan International Fashion Gala, Mr. Delaoutre, had this to say about their entry into China:
….Today we embark on the first leg on what is by far the most ambitious plan – the launch of GL in China through a 50/50 venture with I.T Limited from Hong Kong, who currently operated around 200 fashion stores in China. This joint venture will open the GL China flagship store, located in Beijing Xidan and then roll out a large-scale chain of stores across China where our aim is to open 15 stores, within five years.
Through I.T’s deep knowledge of fashion retailing in China, together with GL’s experience in department store layout, we plan to create a new kind of fashion store in China. The stores will be very focused on fashion and will feature a clear selection of the main styles and segments. GL China stores will include a large share of new and exclusive brands, combined with Western fashion and luxury lines, but also Asian designers and many Chinese designers and brands. GL’s ability to spot new trends, find up and coming designers and source new merchandise is our core competitive advantage.
Xidan’s dynamism and energy is absolutely in tune with our brand’s objective of turning fashion into a lively and fun experience. In other words, the latest in luxury and fashion will form the basis of a new fun creative shopping and entertainment destination for everybody in Beijing and China to enjoy….