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Jun
2015

The 2013 Brand Reach Review: Part 2

In part one of the Brand Reach Review we plotted the progress of brands into the top 15 cities in China in terms of the density of retail across four sectors: Fashion and Accessories, Watches, Jewellery and Luxury cars. In part two, we have extended the list to look at those ranked 16 to 30, to review those brands move into tier two and three locations aiming to reach the growing luxury consumers in developing geographies. The map below lays out the rankings of 33 cities across the four sectors.

Brand reach into tier 2, tier 3 cities and beyond

When compared to the other three sectors, luxury car brands have increased their footprint into new territories. In terms of dealership coverage for these brands, there are a number of third or lower tier cities such as Baotou (Neimenggu Province), Jinhua(Zhejiang Province), and Tangshan(Hebei Province) that have yet to appear in the top thirty cities at all for the sectors.

What is apparent from the map is that northeastern China is weaker in terms of car dealership presence if compared to that of the watch and jewellery sectors, which is at first sight unusual, as the culture is male dominated. This region has a higher aging population and a decreasing young population when compared to the China average. There are no clear and specific reasons for the low number of luxury car dealers however, some of the reasoning might be due to the lack of a racetrack or motor sport activities in that area and the regional weather conditions.

Liaoning province for example, can have snow for four to five months of the year a fact that might determine which types of vehicle are chosen by the wealthy. Given the local climate, it is also probable that the roads are not be well maintained, which would certainly make them less than suitable for many luxury cars. By contrast to the majority, Land Rover is a brand with a higher than average number of dealerships in the region, which is perhaps given the reasoning above is understandable.

For the watch brands the tier three cities of Anshan and Nanning make the top 30 list yet no new stores were opened in either city in 2012. Urumchi the capital Xingjiang Province only appeared among top 16 to 30 rankings list in terms of watches and jewellery, while fashion and car brands have a very limited city presence possibly due to its remote geographic location, isolation from other developed cities, and a relatively poor population. Wenzhou by contrast is known by many for its wealthy residents who are considered very successful business people, and has a high density of retail, in particular that of luxury cars. However, it does not appear in the top 30 cities for watch stores. Local luxury consumers are still inclined towards conspicuous consumption in terms of luxury cars, fashion and accessories, but appear to be less sophisticated when it comes to the more traditional professional watch brands, many of which have yet to move into the city. Guiyang by comparison only makes the top 30 cities fashion brands, and may be the next point of development for larger luxury brands
as they move west.

 

On the map below, the distribution and density of stores by city across the fashion and accessory, watch, jewellery and luxury car sectors can be seen. The darker the city circle the greater the number of new stores last year.

 

The new store density distribution for 2012

Perhaps unsurprisingly, the eastern and northern regions still demonstrated the greatest activity overall, but we saw a good level of attention being given to tier two and three cities that do not fall into the top 20 nationally in terms of GDP.

Overall, new store openings of luxury brands were concentrated on Beijing and Shanghai. The tier two city of
Shenyang, and the capital of Liaoning Province also continued to be a focus of luxury brands from all sectors. Elsewhere, Wuhan in central China saw many openings for brands across four sectors, when compared to other smaller cities. Hermes for example, chose the city for its first store in the central region.

 

Luxury cars

Kunming and Zhengzhou lead the number of new dealership openings in the luxury car sector in 2012. The indication is that the luxury car brands have continued their focus on the smaller or less targeted cities such as Changsha, Hefei and Ordos, which are comparatively poorly served across the other luxury sectors, a general expansion pattern established previously.

Geographically, the Northeastern and Central regions have benefitted from greater attention from luxury car makers in the past year, while the east and north of China are still the key markets for these brands.

 

Watches

Benefiting from its position as the cultural and political center in China, Beijing was dominant for all the watch brands when opening their first or subsequent store(s) in 2012. Even though the political legislation related to the gifting market had an impact on consumers, there are still demands for watches as one of the main choices to give to others. Shanghai, Chengdu, Shenyang and Zhengzhou were more active in the watch market in terms of store opening than other cities.

 

Jewellery

Shanghai remains the preference for jewellery store openings especially for the newer brands due to the volume of sophisticated and experienced luxury consumers who live there. The northeastern city of Shenyang followed Shanghai, as stores were opened by many well-established jewellery brands’, and of the tier two cities, Nanjing and Wuhan were the most popular.

Looking geographically, there is a trend for jewellery brands to expand from North to Northeast China and Southwest to Central China, when compared to the current overall distribution of jewellery stores across the country.

 

Fashion & Accessories

The first tier cities of Beijing and Shanghai still lead the fashion sector in terms of store opening in 2012 as those brands with fewer total stores are expected to expand and consolidate their position in China by opening more stores in first tier cities, rather than moving into tier 2 or tier 3 locations.

Shenyang continued to attract many fashion brands’, while some of the top names in fashion such as Hermes, Dolce & Gabbana, Gucci and Burberry opened in Wuhan and Suzhou for the first time. Nanning a lesser-known city (in Guangxi province) also shows signs of becoming popular among luxury brands.

The North and East China regions remained the most popular for openings. However, we can see luxury brands increasing their penetration in the west, principally in Chengdu, Chongqing, Kunming and Nanning.

 

 


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