By  on June 5, 2006

PARIS — Fast-growing Balenciaga is about to seriously tackle one of the most fashion-obsessed markets in the world: Japan.

The French fashion house has formed a joint venture with Japanese retailer Restir to build a network of 20 to 25 shop-in-shops and freestanding boutiques over the next five years, aiming for Japan to account for up to a quarter of its global business.

“It’s a big new market to access,” James McArthur, Balenciaga’s chief executive officer, told WWD. “And it’s clear that the Japanese market is a retail game.”

At present, Balenciaga sells ready-to-wear and accessories to some 35 wholesale accounts, including Restir, a multibrand luxury emporium with an expansive flagship in Tokyo’s bustling Ginza district and a unit in Kobe.

“In the next two to three seasons, we will see the first major Balenciaga flagship in Japan, more than likely in Tokyo,” McArthur said.

Since Gucci Group acquired Balenciaga in 2001, giving a 9 percent stake in the brand to creative director Nicolas Ghesquière, the brand has focused its energies on Europe and America, where growth rates are in the triple-digit range.

Japan currently accounts for less than 5 percent of the business, and until the fall 2003 season, the market had been handled by Sanki, a distributor. Since then, Balenciaga has directly built a network of wholesale accounts, including Isetan and Hankyu, in Kobe, Osaka and Nagoya. But it’s hardly enough to meet demand, according to McArthur.

“There’s tremendous resonance and buzz about the brand,” he asserted. “But when you have only 35 wholesale doors, the products are hard to find. Ready-to-wear, bags and men’s wear sell very well in Japan.”

McArthur said the Japan push would be supported by a communications effort, yet to be defined, but clearly involving Ghesquière. “He will be in Japan at some point,” McArthur said.

A chief executive for the new entity, Balenciaga Japan KK, has yet to be named, but potential candidates are said to be already known to both Restir and Gucci Group. The partnership, with Restir holding a 51 percent share, commences with the spring 2007 fashion season, he noted.All products sold in Japan will be imported from Europe. “It’s exactly the same product as anywhere else in the world,” McArthur said. “There will be no local production.”

Long a darling of the fashion press, Balenciaga has recently become a business one, too, reaching profitability two years ahead of schedule. McArthur has said the business has the potential to do above 200 million euros, or about $256.5 million at current exchange. Market sources estimate Balenciaga’s sales volume already exceeds 60 million euros, or $76.9 million.

Outside Japan, Balenciaga is also growing quickly in the rest of Asia, recently opening a freestanding store in Hong Kong and shop-in-shops in Singapore, Taipei and Seoul, among other cities. McArthur reiterated the brand is hunting for real estate to open shops in Europe and the U.S., too.

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