By  on June 13, 2007

Tokyo — Swatch Group is the latest luxury player to place a big bet on Tokyo.

The world's largest watch firm has joined the rush of companies opening megastores in the Japanese capital, which, in the last nine months alone, has included Gucci, Bulgari and Bottega Veneta. And at a reported cost of $140 million, the store represents Swatch's largest single investment outside of Switzerland.

Seven main brands — Swatch, Omega, Blancpain, Glashutte, Breguet, Jaquet Droz and Leon Hatot — have their showrooms and boutiques inside the sprawling Nicholas G. Hayek Center in Ginza, as well as customer service for each, the Swatch Group Japan office and an event space for exhibitions and receptions.

The Hayek Center consists of 14 floors above and one floor below ground. A surprising aspect of the well-lit space is that each of the small showrooms for all seven brands turns into an elevator, taking customers into each brand's boutiques located on floors above and below.

For instance, if customers enter the Omega showroom and find something they like, they press the button for an upper floor and the whole showroom turns into an elevator and takes them to the Omega boutique on the second floor. The showrooms-elevators are visible from the street.

"It is always difficult to take customers to boutiques not located on the first floor," said store architect Shigeru Ban. "I wanted to make all the seven brands have the same advantages."

Swatch purchased the Ginza location in 2004. Although sales in China recently have exceeded business in Japan, the company believes it is important to have an Asian flagship in a location with a strong retail reputation like Ginza.

"When we bought the location three years ago, we started to work on this project right away," said Arlette-Elsa Emch, a member of the executive group management board of Swatch Group and president of Swatch Group Japan.

Emch said the company considers the Tokyo complex a good investment, since the price for the real estate already has increased by more than 40 percent.

"Ginza is one of the best locations in the world," Emch said. "It is a good place to show the world of the Swatch Group."Swatch joins the rush to Tokyo even though growth in the Japanese market for major luxury and fashion brands is beginning to slow from its peak. Executives from Bernard Arnault of LVMH Moët Hennessy Louis Vuitton to François-Henri Pinault of PPR and Francesco Trapani of Bulgari have admitted market conditions have become tougher in Japan, but believe the country still offers significant growth potential. Arnault this spring cited a "slight weakness" in the market before adding: "But I still think that it will pick up."

Others agree. Tom Ford just signed a deal with Lane Crawford Joyce Group for major Asian expansion, including Japan, and Anna Sui expanded her deal with Isetan for a line aimed at Japanese teens.

Bottega Veneta opened its largest store in the world in Tokyo last month, on a quiet, chestnut tree-lined street off Ginza's main drag. The five-floor, 9,700-square-foot complex houses three levels of retail space and the brand's full product range of apparel, leather goods, fine jewelry and home furnishings. The company's Japanese offices and showroom occupy the upper floors of the building. Bottega Veneta saw first-quarter sales jump 57 percent in Japan, its biggest single market.

Last year, Gucci unveiled a towering retail and office complex here, while Hermès expanded its 10-story flagship to add retail space and a cafe. New megastores for Giorgio Armani and Bulgari are also on tap. Armani's flagship will include the designer's first spa, a joint collaboration with longtime beauty partner L'Oréal, as well as an Italian restaurant and rooftop bar.

Swatch Group's 2006 net profits jumped 33.7 percent to 830 million Swiss francs, or $684.9 million based on the currency exchange when they were reported in March. Operating profits were up 32.4 percent to 973 million Swiss francs, or $803 million.

Full-year sales, reported in January, grew 12.3 percent to 5.05 billion Swiss francs, or $4.17 billion based on the exchange rate at the time. The firm cited additional growth potential for its watch and jewelry brands in all geographic regions.

Sales of watches and jewelry last year grew the fastest, up 13.8 percent to 3.72 billion Swiss francs, or $3.07 billion. The company cited growth across all brands and price ranges. The group stable includes Breguet, Blancpain, Leon Hatot, Longines, Rado, Tissot and Hamilton, as well as the fashion-driven Swatch.

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