TOKYO — Gleaming luxury towers keep springing up in Ginza here, and Bulgari is the latest to join the crush.
The Italian jewelry and leather goods brand has taken things a step further, however, opening not one, but two major stores in Tokyo in the last few weeks. On Wednesday, Bulgari feted its largest store in the world, in Ginza, which followed the opening earlier this month of a flagship in the Omotesando region.
The stores signal the brand's commitment to Japan, a stagnant yet strategic market for jewelry and other luxury goods. They also show that, when it comes to the Japanese market, a store alone is no longer enough to lure consumers. The 10-floor Ginza tower features a glass facade, rooftop lounge and panoramic restaurant, while the 6,500-square-foot Omotesando store has a cafe and gourmet chocolate shop.
"Japan remains an enormous market, the biggest market in the world. It's very important to be a leader here," Bulgari chief executive officer Francesco Trapani told WWD in an interview on the Ginza tower's bridal floor, which carries everything from modest engagement rings to diamond tiaras.
Trapani said the Omotesando store is performing "very well" in its first month of operation and his expectations for the Ginza tower, featuring more than 10,000 square feet of selling space, are just as high. The ceo said the retail portion of the tower, excluding the bar and restaurant, should break even as early as next year.
"These two [flagships] are both image statements, but their overall purpose is to do business so we're hoping that they generate great results in terms of sales and profits right away," he said. The two stores commemorate the 20th anniversary of the brand's debut in the Japanese market.
Bulgari's Ginza tower, across the street from rival Cartier and down two doors from Tiffany & Co., opens to the public Friday. Jewelry and watches occupy the ground floor, while handbags, eyewear, scarves and accessories are displayed on the second level. The third floor houses the bridal salon and VIP shopping rooms for high-end jewelry. Bulgari Japan's corporate offices are located on the fifth, sixth and seventh floors of the structure, which is designed to resemble a jewel case.Bulgari inaugurated the store on Wednesday morning with a special performance featuring a traditional Japanese drummer and a pair of Kabuki performers sporting face paint, gilded costumes and floor-length manes of hair. Later that evening, model Ai Tominaga, a handful of geisha and local celebrities, including actresses Yoshino Kimura and Kurara Chibana, toured the tower.
In 2009, the Ginza tower will also feature a special area dedicated to Bulgari's new skin care line and in-store beauty treatments, Trapani said. An in-house team of architects designed the flagship's interiors of Trani marble and oxidized steel.
The restaurant and cocktail bar occupy the top three floors of the tower, offering stunning views of Ginza's electric skyline by night. Chef Michele dell'Aquila, who migrated here from Bulgari's resort in Bali, turns out a menu of Italian fare like tagliolini with porcini mushrooms and a few notable variations like a Caesar salad with artichokes.
To fete the Ginza location, Bulgari is displaying vintage jewelry in its windows and more than a hundred one-of-a-kind jewelry pieces throughout the store. These special gems include a 144-carat sugar loaf-cut sapphire necklace fetching nearly 713 million yen, or $6.6 billion.
Bulgari is also offering a line of special products exclusive to the Ginza store, including two diamond-studded models of the Asimov D watch, jewelry pieces featuring inlaid antique Roman coins and clutch bags in crocodile.
Products unique to the Japanese market are another lure brands are using to try to jump-start sales in the country. While luxury executives have been more optimistic in recent weeks about business in Japan, it follows a year of stagnant growth in what is the largest single market for many brands.
Meanwhile, it's surprising there is any room left in Ginza for another luxury megastore. The opening of Bulgari's 10-story tower follows the launch earlier this month of Giorgio Armani's 12-story flagship with much fanfare and a $20 million price tag. Gucci and Bottega Veneta also added major stores here recently, joining the likes of Chanel and Christian Dior. Bulgari declined to disclose its investments in the Ginza or Omotesando spaces, both of which it is renting. However, capital expenditures this year, including the two Tokyo flagships, will total 100 million euros, or $149 million at current exchange.These flagships for luxury brands are proving to be a costly game of one-upmanship and sparking plenty of debate among industry observers.
"[Bulgari] needs to convince the market that its new stores due in [the fourth quarter] are enough to sustain a reversal of current declines," Morgan Stanley analyst Louise Singlehurst wrote in a research note last month. "We believe capital consumed by these stores may have been better deployed in higher growth markets (China and Russia)."
However, Noboru Ikeuchi of Yano Research Institute Ltd. justified the ongoing building blitz in Ginza. In tough times, European luxury brands need to reassert their presence at the forefront of hesitant consumers' minds, he said.
"They had to do it now to avoid finding themselves in a worse situation," he said. "It's risky, but they had to do it."
In fact, competition is intensifying here as luxury brands face static demand and a weak yen that is curbing consumer spending power. Bain & Co. estimates Japan's market for luxury goods will grow just 2 or 3 percent this year. In 2006, the market inched forward by just 1 percentage point to 22 billion euros, or $33 billion.
"Regardless, given the importance of this market in terms of tradition, aspirational spending and sales volumes, we definitely expect a recovery [at some point]," said Claudia D'Arpizio, a partner with Bain.
Trapani said he is hoping the Ginza and Omotesando flagships, along with additional plans to expand other stores in the country, will help Bulgari steal market share from its competitors.
Japan is currently Bulgari's second biggest market after Europe, accounting for almost 22 percent of revenues. Third-quarter sales in Japan recovered slightly, but were flat at 56.3 million euros, or $77.1 million. Despite Japan's sluggish performance of late, an aging population and the destructive power of a weak yen, Trapani stressed the importance of succeeding here given the sheer size of the market and the intensity of its wealth.
To wit, Bulgari used to focus on its more affordable jewelry lines like its gold coil Bzero jewelry, but the company is shifting its strategy to higher-end jewelry pieces costing upward of $100,000, Trapani said."We don't just cater to the vast Japanese client base, but also to the more sophisticated part of this market," he said.
Still, Bulgari isn't exclusively targeting the superrich, as the restaurant and cafe can attest. Bulgari already has some credibility in the restaurant world through its hotel ventures in Milan and Bali. Trapani noted how Bulgari's chocolates, made in-house at the Omotesando store, are generating both foot traffic and cash register receipts. Each chocolate features a unique filling, such as truffles from Alba or limoncello from Amalfi, both in Italy, and can fetch as much as 1,500 yen, or about $14, for a single piece.
"We sell as many as 700 to 800 of them a day during the weekends," Trapani said. "We are in luxury and, in the end, luxury is entertainment."
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