This week in the news, Max Mara sees no reason to change its strategy in China, e-commerce in China struggles with gray-market goods, China remains a top target for international retailers, China’s e-commerce giants vie for dominance, and China’s Wanda Group buys property in Beverly Hills with an eye on Hollywood.
With the opening of its biggest Asian flagship store in Beijing, as well as double-digit year-on-year growth in 2013, Max Mara’s CEO sees no reason to change its expansion strategy in China. The Italian luxury fashion house, founded in 1951 by Achille Maramotti, has opened 320 stores in mainland China in the fourteen years since entering the Chinese market. Its first store opened through a local distributor in Beijing’s China World Mall in 1999. In 2009, Max Mara created a joint venture with GBMax limited, and currently plans to add 25 to 35 stores per year in China. Because Max Mara is privately held, it doesn’t need to deliver growth every quarter to appease investors. The company’s approach to China is to respect creativity and to invest accordingly.
Gray market luxury goods in China, composed of counterfeits and illegally imported goods, have long been a problem for international luxury brands, both online and offline. A look at the number of foreign luxury brands for sale on Tmall.com reveals that the online gray market is thriving. With so many thousands of goods from each luxury brand available for sale on Tmall, the numbers most likely include some counterfeits or daigou imports. Burberry, which opened its official Tmall store in April of this year, saw the number of gray market goods drop precipitously after the debut of its store. This suggests that given the choice, Chinese online consumers would prefer to buy directly from a luxury brand’s official online store.
The internationalization of the retail sector continues and China remains a key target for cross-border retailers. Many Chinese cities saw an increase in new market entrants in 2013 with Beijing placing sixth in the global ranking of new entrants. Shanghai landed in ninth place, while Hangzhou had the largest increase due to new shopping centers. Tier 2 Chinese cities provide some of the biggest opportunities. Beijing attracted 34 new entrants, up from 14 in 2012, many of them were luxury retailers. Paul Smith and Stella McCartney opened their first store in Beijing. Shanghai had 31 new entrants, including Vera Wang, Maje, and 10 Corso Como. Michael Kors and Zara Home entered more new cities than any other retailer last year.
Alibaba is currently China’s most successful e-commerce platform, but its place at the top is becoming increasingly uncertain in a growing, competitive market. According to the Boston Consulting Group, China has more online shoppers than any other country in the world — an estimated 242 million. By next year, consumers are projected to spend about $1,000 online annually, making e-commerce a $242 billion market and accounting for 8 percent of all retail sales in the country. By 2020, that figure may rise to 2.7 – 4.2 trillion yuan ($420 billion to $650 billion at current exchange), according to data from McKinsey. Though foreign retailers have been attracted to the rich market, Chinese companies are those that have found the most success.
With an eye on Hollywood, China’s Wanda Group has outbid over 10 bidders to acquire 9900 Wilshire Boulevard, the site of the former Robinsons-May department store in Beverly Hills. Wanda said the project, “is expected to aid in China’s entry into Hollywood’s film industry and generally promote Chinese culture abroad.” While the sales price was not disclosed, the company indicated that it will invest $1.2 billion into developing the site. Wanda announced that it will also set up a Los Angeles office to handle entertainment-related investments, including “local film production companies or global theatrical releases”. Wanda has been trying to raise its profile in Hollywood, donating $20 million to the Academy of Motion Picture Arts and Sciences’ new film museum on the LACMA campus.
image credit: the luxury hub