This week in the news, China is driving strong Asia-Pacific sales for Tiffany & Co., Macy’s is eyeing expansion in China, fast fashion brands are displacing China’s local casual wear retailers, China’s wedding industry is booming, and international retailers are expanding into Hong Kong’s New Territories.
Tiffany & Co. released its second quarter earnings yesterday, and its net sales worldwide were up 7 percent to $993 million for the quarter compared to the same period last year due to growth in the Americas and Asia-Pacific. Greater China and Australia had particularly strong growth in the second quarter, driving net sales for the Asia-Pacific region, excluding Japan, up 14 percent for the quarter to $237 million. Sales for the first half of 2014 rose 15 percent overall in the region to $498 million with comparable store sales up 7 percent for the quarter and up 9 percent for the first half of the year. Asia accounts for 37 percent of Tiffany’s global sales with China accounting for over half of the company’s non-Japan Asia sales, estimated at 12 percent of global sales.
Macy’s has been eyeing China for a while, planning on either opening a Macy’s department store or a series of specialty stores featuring popular in-house brands like Alfani, American Rag, Material Girl, Charter Club, and INC. The company has been testing the Chinese market through e-commerce — initially through its macys.com website and then, in 2012, through a partnership with Chinese e-commerce firm VIPStore, the operator of omei.com. Localization isn’t the only hurdle that Macy’s would have to overcome to find success overseas. The $28 billion department store chain would also have to worry about China’s limited real estate opportunities, which may require the involvement of a partnership with a pre-existing store in China.
Popular Chinese brands, including Meters/bonwe, Espirit, Giordano, and Baleno, are finding it hard to compete with the low prices, high product variety, and quick turnover of international fast fashion brands. Due to risks from a slowing economy and increased foreign competition, China’s Meters/bonwe recently sold a third of shares to Chang’An Fund for US$17 million. Baleno saw its net income drop by 9 percent last year to US$86.2 million. Hong Kong-based retailers Giordano and Jeanswest closed 45 and 253 shops respectively. Etan Paris shuttered 88 shops, and Espirit closed 38. Conversely, Japan’s Uniqlo opened 77 stores in China last year, while Sweden’s H&M opened 60, US-based Gap opened 34, and Spain’s Zara opened 20.
With around 20 percent of Chinese being single, and the growing middle class, businesses from dressmakers to dating websites and marriage headhunters to real estate developers and travel agents are getting in on the action. Weddings in China are already a $57 billion industry, and that is only expected to increase due to the rising wealth in the country. According to the China Wedding Industry Development Report, $12,000 is spent on average on each wedding, and with over 10 million weddings in the country each year, the industry could reach $120 billion. Property developer Qixi Group recently spent $400 million on a one-stop-shop for weddings, a “love manor” in Beijing and has teamed up with China’s biggest online dating website, Baihe.
As rent increases, retail commerce slows, and space becomes scarce in Hong Kong’s four primary shopping centers, many companies are looking to take their businesses to Hong Kong’s New Territories. Brands like H&M have taken to setting up shop on the outskirts of the city, In fact, H&M’s newest store in the Tai Po Mega Mall boasts 20,000 square feet (its largest store in the northeast New Territories). Retailers moving to the New Territories have found the decision profitable. The new towns can offer over 10,000 square feet (the minimum square footage international brands are looking for), lower rent, comparable shopper traffic, and customers with considerable spending power.
image credit: retail design blog