Polo Ralph Lauren is the latest luxury brand to announce that it’s opening its own company-owned stores in China. The move to go brick & mortar in China is part of its direct to customer approach in the country. The company is scouting the right places to set up shop and aims to start an e-commerce model in China as well.
The move places Polo Ralph Lauren as a somewhat belated arrival to the party of luxury retailers who are abandoning Asian licensee models, where they were selling their clothing in concessions or leased space in department stores, in favor of their own standalone stores.
Coach did this early on. After entering the China market in 2003 through license agreements, Coach bought back all its locally managed retail stores in 2009, as Coach felt direct control was important.
Last year Burberry bought back its network of stores in 30 Chinese cities from its franchisee.
Luxury retailers are in what economists say is a retailer’s gold rush. China is now the world’s second larget luxury goods market (US $9.6 billion) according to Bain. Polo’s president Roger Farah described China as a “once-in-a-lifetime opportunity.”
Where will the Polo Ralph Lauren stores be? Shanghai? Beijing? Of course, but the company will take a hard look at other cities.
Market saturation, high costs of retail space and competition for attractive sites are some of the factors making luxury retail brands look beyond Tier One. What’s more, its city dwellers are seeking better housing deals in lower-tier cities.
Today economic development is happening at a blistering pace. Farah told analysts, “A lot of second and third-tier cities are now beginning to gel and exhibiting customer demand and so we are going to have to look at those at the same time we’re looking at the primary cities for key locations.”
China watchers at Wharton say that the deomographic growth of Tier 2 and Tier 3 cities, along with a rise in people’s incomes, are luring multinational retailers to disperse their presence in China.
Case in point: Louis Vuitton recently opened a store in the provincial capital of Inner Mongolia, Hohhot, and another in Urumqi, capital of Xinjiang.
photo credit: polo ralph lauren