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Jun
2015

Fashion & Accessories November 2013

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Lafayette is back in town

On 18th October, the Galeries Lafayette opened its first store in China in the Xidan area of Beijing, a return after a 15 year absence. The new building which covers 47,000 sqm over 6 floors took 3 years to construct and complete.

Back in 1997, Lafayette already had a store near Wangfujing the most popular commercial zone for Beijingnese. But one year after opening, the Lafayette store silently closed, it was ahead of its time and out of Synch with local sentiment and understanding at that time. The western word ‘luxury’ was not understood by the Chinese and few could afford the products it sold at that time.

15 years on, and Chinese luxury consumers are the engine of the industry, and much has changed. This time around Lafayette is partnering 50/50 with the I.T. Group to re-establish a presence in the country. Unlike other department stores or shopping malls in Xidan, Lafayette has adopted the in-house buying model it uses in France and supplements this by renting some concessions space, which is the standard department store model in China. The adoption of the relatively rare operational model may undoubtedly bring cost pressures to the company, and time will tell whether the decision was correct.

Contradictory brand positioning

What is interesting about this venture is the way the brand has positioned itself in China, and how this contradicts its recognised international positioning. We often see premium brands stretching up to be seen as luxury, but we don’t see luxury brands moving down the ladder. Take the location for instance, Xidan is a middle class, middle market fashion shopping location. The neighbouring stores are mass market fashion brands such as H&M, Jack Jones and Metersbonwe, and it is also estimated that over 70% of the footfall in the area is made up of non-local tourists visiting what they consider a ‘famous’ part of Beijing. Being close to a number of universities, a large proportion of local footfall is made up of students, so this is not a hang out for the wealthy.

At the opening, a manager from the store is reported to have said, “Xidan Lafayette will target the middle-class. Our positioning is different to that of the store in France, its not that luxury, but more suited to the taste of young people,” a surprise to anyone who knows the Galeries Lafayette in Paris.

One obvious challenge is that although they may be targeting younger consumers, the store offers no cinemas or other entertainment facilities that are offered by other malls, an essential piece of the Chinese shopping experience. Chinese consumers demand more than just a shopping place, they want to play with friends and expect shopping, entertaining and other services in the one place. If Lafayette is a pure department store, rather than a one-stop shopping mall, it may be again have a localisation issue as it did in 1997.

Was the positioning a choice, or was it pushed by the market?

There is an argument that Lafayette is late to market, and had no choice but to target younger buyers. Lets face it, those consumers with more money will fly to France to experience the real thing. The cooling of the market, and the resultant reduced spending on luxury may too have forced their hand to consider that their name was strong enough to support the introduction of a more cost competitive stock profile. They are in effect now competing head on with many well-known and well-established brands for less money, and risk being purely seen as a department store to which the wealthy rarely visit, not having the patients to wait in line, or suffer perceived poor service.

Although the objections and market conditions present challenges, Lafayette is still full of confidence. “The Beijing store is a test for us, but we have confidence in the Chinese market. Over the next five years, we will open 16 stores in mainland China. We are currently selecting the location for our second store.” The Galeries Lafayette Group Marketing department announced. Philippe Houze, CEO of Galeries Lafayette Group, said he expects each of its stores in the Mainland to reach average annual sales of 50 Million euros.

Galeries Lafayette in Xidan stocks brands such as Coach, Fossil, Juicy Couture, Bottega Veneta, Balenciaga, Chloe, Fendi, Furla, Givenchy, Jimmy Choo, Kenzo, Longchamp, MCM, Sergio Rossi, Stella Mccartney, Valentino, Mcq Alexander Mcqueen, Lanvin, Pierre Balmain, Valentino etc..

What do consumers think?

On opening day, consumers were asked for their first opinions of the store

I think there are not enough brands here. The price is OK, because we can get 10% off.
It’s so-so. I’ve been to a lot of first-line shopping malls in Guangzhou, Shanghai and Shenzhen, and Lafayette is similar to them, nothing particularly unique. The advertising was too exaggerated, so I had an overestimated perception of the store. Actually, it’s far worse than the Paris one.

The products are too expensive to me, but the entire shopping environment is really good. The brands in this mall are the same level as those in Lane Crawford.

The price is a little expensive here. At first I thought all the products were from France, but I can find Malaysian, Indian or even domestic products. It’s different from my original expectation.

Only time will tell

It was always going to be a challenge to take a globally recognised brand like Lafayette and execute it in China, and the risks of doing this are high no matter how famous the brand name may be here. But as with much of life, perception plays a big role in consumer attitudes and behaviour. The brand appears to be a bit of a misfit, it is neither luxury or mainstream, and it risks confusing the Chinese consumer and has done so based on the previous comments. Whether Lafayette can find a unique position in the minds of the consumers here as a famous brand delivering quality and value remains to be seen, but I wouldn’t be planning 16 stores in China because I will have lost the unique identity I built over 100 years.

Store opening and activities

October, a Bottega Veneta store opened in Wuhan.

7th Nov, the new extended Hermes store opened in Hangzhou covering an area over four times that of the original.

14th Nov, Valentino opened a flagship store in the iamp mall in Shanghai.


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