August 16, 2022

Luxury Brands Follow the Money to Asia

Neither of the two men professed much interest in investing in the Italian luxury fashion house Prada, whose shares began trading amid much fanfare on the Hong Kong stock exchange Friday. But both were out shopping on the luxury-store-studded Canton Road in Hong Kong a few days ago.

“My favorite brands are Prada and Gucci,” said Mr. Lin, who comes from Fujian Province, on the southeastern coast of China, and was visiting Hong Kong. “Today, I bought a pair of shoes and a bag for myself from Gucci.”

His friend Mr. Chen was carrying a Gucci shopping bag containing a light brown leather purse that he had bought for his girlfriend for about 9,000 Hong Kong dollars, or $1,155.

Consumers like these have been flocking to shops all over Asia.

Their spending power and tastes, and their willingness to show off their increasing wealth, are behind a sea change that has taken place in the global luxury industry over the past few years.

With the West struggling with weak economies, Paris, Milan, London and New York are no longer the dominant centers of global luxury spending. Increasingly, that center is shifting eastward, to booming cities like Seoul, Shanghai, Mumbai and Hong Kong, whose glitzy malls now easily rival Bond Street, the Champs Élysées or Fifth Avenue in terms of high-end shopping opportunities.

“We are positive that the Greater China region is going to be one of the most interesting markets for the future of the luxury industry,” Patrizio Bertelli, the chief executive of Prada, said amid a blizzard of camera flashes and jostling journalists and bankers at a ceremony for the listing of the company in Hong Kong on Friday. “This is a very important moment for our company, and it’s an accomplishment after many years.”

Prada’s decision to list in Hong Kong, rather than in Milan, where it has been based for nearly 100 years, is in part the result of a desire to tap into a deep-pocketed group of Asian investors — funds and wealthy individuals — who feel more comfortable putting their money in stocks listed here, and not in faraway Europe.

But it also reflects a desire to be closer to an area that is fast gaining significance for the luxury industry as a whole. For some luxury and consumer goods companies, the region now contributes a third or even half of global sales and earnings, a sharp increase from just a decade or two ago.

Many brands have responded with a rapid expansion of their store networks, turning what were once economic and fashion backwaters in China and South-East Asia into high-end shopping havens.

Take LVMH Moët Hennessy Louis Vuitton, the biggest luxury group in the world. Last year it generated about €6.9 billion, or $9.7 billion, in revenue in Asia, where it operates more than 800 stores. That compares with €4.6 billion and 570 stores in the United States.

Ermenegildo Zegna, the Italian menswear company, which opened its first shop in Beijing in 1991, has more than 70 stores in Greater China — mainland China, Hong Kong and Taiwan — now Zegna’s biggest international market.

Prada has lagged behind others somewhat in terms of expansion in mainland China in recent years. But about half the company’s 319 outlets around the world are in the Asia-Pacific region, more than a dozen of them in Hong Kong.

Prada, whose handbags and Miu Miu dresses can set shoppers back more than $1,000, plans to open dozens more, using some of the proceeds from its $2.1 billion stock market debut.

Market nervousness about the protracted debt crisis in Greece and the world’s economic growth prospects meant that Prada’s debut, and that of the luggage maker Samsonite earlier this month, did not raise as much money as those companies had hoped for.

Article source: http://www.nytimes.com/2011/06/25/business/global/25iht-luxury25.html?partner=rss&emc=rss

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