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Luxury brands shut shop as Chinese buyers become prudent

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Many middle-of-the-road stores at the high and main streets are starting to shutter their outlets. This will be less severe than the closures that are to come in future.

Compared to the past decade, the Chinese customer demand and the new store openings have jointly turbo-charged luxury sales. The new storage space totaled to 55 percent of the global luxury revenue growth in the past eight years. These were revealed by the analysts at Mainfirst.

The Chinese nationals covered two-thirds of the growth of the luxury market over the past decade, stated Exane BNP Paribas.

Now, both the forces are running of the steam. Given the slump faced in Hong Kong, and the slowdown in China, the stores are the major focus of attention.

Zegna and Gucci were some of the luxury brands to cut the store footprint in this year’s first quarter. Hugo Boss already announced that plans to shut 20 of the 131 stores that are owned directly in the mainland.

The vendor is in talks with landlords, so many outlets will close. However, it is expected to announce the number of shuts later this year.

As of now, there is no clue on where the selective store cuts might fall, but the strategy has expanded in Asia in an aggressive way.

Last week, Richemonth, the maker of Jaegar-LeCoultre stated that it was reviewing the retail network that exists in Macau and Hong Kong. This might include closures, lease renegotiations or moving to cheaper premises.

Seeking rent reductions is a notable alternative to outright closure. In mainland China, tenants have the maximum bargaining power in new malls, especially in the tier 2 cities. While the attention might be on the Chinese market, brands across the world are focusing on making the stores work hard. Instead of planning large scale openings, the existing outlets are refurbished. However, there exists a winning formula in the market for many categories.

 

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