Last week was very exciting time in Beijing. China Fashion Week saw the domestic designers and media in a frenzy with fashion shows and events going on all over the city. Whether coincidence or deliberate planning, multiple international brands including Maison Martin Margiela, Marni, and Alexander McQueen all choose last week to open their biggest stores in the World. So how did Beijing become a prestige shopping city of the world and why are these brands all opening their amazing new flagship stores here?
As China continues along its trajectory of becoming the worlds biggest luxury market by 2015, fashion brands are scrambling to get into the country and they literally cant establish a presence soon enough. As I mentioned back in April amidst another flurry of store openings, in China a land grab is underway as brands compete to secure the best retail premises.
The fashion industry in China is fragmented between the two metropolises – Shanghai and Beijing. While Shanghai is generally more fashionable and most brands’ China headquarters are in Shanghai, all media (of any type or industry) is mandated by the Chinese National Government to be based in Beijing. The fact that Margiela, Marni and McQueen have all opened in Beijing first partly plays into the PR game. Brands new to China need ramp up their exposure, hype and recognition as much as possible (see related article) with regular store events, celebrity sightings and stock/samples on hand to lend out to the media for fashion shoots etc. Although a brand’s China strategy must take both cities into consideration and ideally open flagship stores in both Shanghai and Beijing, to be close to the media, the Capital often takes priority.
Despite massive demand, right now Beijing has a dearth of prime real estate available for fashion brands that are very particular with their location, neighbors, size and design requirements. With a new mall taking several years to build, brands that chose not to enter the market now when an opportunity arises risk waiting another two to three years before they have another chance to open a store. With the big brands such as LV, Prada, Hermes, Chanel etc. already dominating the scene in Beijing’s five existing luxury malls, new brands to China have been forced to look elsewhere and consider new and unproven retail zones for their flagship stores. Beijing’s Sanlitun North Village (mall) has taken advantage of this and has secured one of the best mid-upper luxury brand mixes I’ve ever seen. The fact that brands’ stores are the biggest in the world makes Beijing a designer brand Mecca for China, Asia and the world.
The top tier luxury players mentioned above and also including the likes of Gucci, Zegna and Giorgio Armani etc. have proved that there is strong demand for their lavish products. Equally impressive in terms of business performance and revenue in China are the fast fashion retails such as H&M, Zara and Uniqlo. Its really only the mid-upper priced luxury brand section that has yet to prove itself viable in China with only a few Hong Kong based multi-brand retailers such as Lane Crawford, Joyce and IT carrying this segment of designer brands to date.
This apparent gap in the market has been a hot topic all year with international retailers wanting to get into China, but also taking precautions lest it be too early. This is when timing becomes so crucial. Too early you may lose money and fail, too late you may miss the boat and have a much higher cost of entry. To avoid these pitfalls and share the risk, it’s no wonder that many of these new brands partner with Hong Kong’s experienced multiband retailers to help them open and operate their first independent China stores. Margiela’s new flagship store will be operated by IT. Alexander McQueen and D Squared (who opened earlier in the year) will be operated by Joyce Group.
Its a natural progression for China’s hyper developing fashion market that the mid-upper designer brand category will become the next high growth segment. I predict we see significant growth in the this sector over the next two to three years as consumers trade up from fast fashion and trade down from the top luxury brands in favor of something of great quality, but also with more individuality, a greater design aesthetic and less obvious logos.