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HO CHI MINH CITY — Bustling, tree-lined Dong Khoi Street, the central shopping hub of Vietnam’s economic capital, buzzes with sidewalk hawkers, busy tourist stores and the constant thrum of passing motorbikes.
But recently there have been some changes to the landscape. At the corner of Le Loi Street, a one-story-high Louis Vuitton advertisement dominates the facade of Opera View, a retail complex opening next month that will house the brand’s second Vietnam boutique as well as stores such as Burberry, Ermenegildo Zegna and Lacoste. Just down the street, there is a promise of more changes to come: An enormous brown storefront proclaims “Gucci: Opening Soon.”
Vietnam is quickly becoming one of the new hot spots for retailers, but the development signals a more significant trend. Brands in Asia, previously focused on building up their presence in major hubs such as Tokyo, Hong Kong and Singapore, are putting more emphasis on expanding into cities that were once regarded as second- or third-tier. Markets like Ho Chi Minh City, Kuala Lumpur in Malaysia and Jakarta, Indonesia, and — even more prominently — more than a dozen cities across China, such as Kunming, Shenyang and Chengdu, are now garnering keen attention from brands eager to infiltrate every corner of the increasingly wealthy region.
“Many of these cities are becoming so important that it is not accurate to classify them as ‘secondary’ anymore,” noted Nash Benjamin, chief executive officer of FJ Benjamin Holdings, a Singapore-based firm that operates various retail outlets across Southeast Asia for brands such as Gap, Guess and Celine, and will launch the region’s first Banana Republic store in Jakarta on May 11. “The situation is dramatically different than it was five years ago. They are strong markets and they are still growing.”
But the rapid development also brings new hurdles, particularly from a marketing perspective. With so many countries in development and retailers moving in, brands are constantly faced with finding the best way to stand out among the pack, particularly to consumers who may only be marginally aware of them. To reach out to new customers, many brands have focused on localized efforts — such as in-store events, promotions and other activities.
This story first appeared in the April 25, 2007 issue of WWD. Subscribe Today.
“The key to marketing in these cities is developing our knowledge of each locale and adapting [our strategies] to that,” said Maxime Elgue, managing director for Cartier Far East, which has been on an expansion drive and now maintains more than 15 stores in China alone. “The first step [when entering a new market] is developing a customer database and identifying who the potential customers are. The next step is finding ways to bring them into the store.”
Cartier is among the most active brands focused on expansion in the region, especially in China, where markets like Hangzhou, Chengdu, Dalian and Harbin — all cities of more than six million residents, on par with the size of Hong Kong — have become the new focus for retailers. It’s no longer a case of always being confined to the lobby of a five-star hotel; a surge of major retail developments in these cities recently has opened up the possibilities for greater expansion.
“The development of these markets has really been parallel to the development of the retail environments in them,” said Melvin Chua, the managing director of the Shanghai-based firm Ink Pak, which has worked with brands like Salvatore Ferragamo and Armani to organize events in second-tier markets across China. “Even in just the past year, they have grown considerably.”
Chua said the number of events his firm handles in second-tier cities has risen along with the number of stores. For now, marketing activities tend to be smaller, lower-key events — a more intimate environment than the extravaganzas that are common in Shanghai or Hong Kong — and aimed at enticing customers to come and explore the store. Some efforts are aimed at bolstering brand education: Tod’s, for example, recently brought a team of Italian artisans on a tour across China, holding in-store events so consumers could see the craftsmen in action.
“Often, we are building our brand awareness from scratch in these cities and our marketing strategies reflect that,” said Sabine Brunner-Franzosi, the general manager of Asia-Pacific for Tod’s. “In Hong Kong, we might just send out a mailer with a photo advertisement. But in China, any mailer we send will be much more detailed. We always do everything we can to repeat as much as we can about Tod’s — who we are, our history, our products, our celebrities. It is important for new customers to understand who we are and why they should choose us [over another brand].”
The effort seems to be paying off. Executives from various brands say that sales in second-tier cities are strong, and they expect it won’t be long before revenues from stores in Harbin or Hanoi could rival a store in a first-tier market.
“When you look at many of these markets, just 10 to 15 years ago it was a struggle for many people just to make ends meet,” said Benjamin. “For years, a lot of these people could not get anything they wanted, and now they want to get it — and fast. They are making up for lost time.”