By  on May 20, 2013

The growing importance of Chinese consumers to luxury retail worldwide means luxe brands can’t afford to ignore Shanghai.

As well as catering to the needs of the city’s increasingly wealthy and sophisticated luxury consumers, having a retail presence in Shanghai means international luxury brands can introduce themselves to a population that is increasingly likely to spend its yuan overseas.

According to Paul French, chief China markets strategist for Mintel, international travelers are not the only important tourists for Shanghai’s luxury retail sector. Nouveau riche tourists from second-, third- and fourth-tier Chinese cities also travel to Shanghai in large numbers to access brands that are yet to make their way inland.

“We know that many Chinese come to Shanghai and see many brands for the first time that they would not see in their hometowns. Additionally, as people travel more, they are looking for brands and spending. Luxury brands need stores to showcase their brands and educate the public so that when they travel abroad, they are already partially familiar with them,” he said.

Luxury openings in the city over the past 12 months include West Nanjing Road’s Reel Department Store, selling brands like Saint Laurent, Stella McCartney, Balenciaga, Alexander Wang and Lanvin; Vera Wang’s Xintiandi flagship; Louis Vuitton’s first Chinese Maison, also on West Nanjing Road, and Huai Hai Road’s K11 Art Mall.

Traditionally, West Nanjing Road (known locally as Nanjing Xi Lu) and Huai Hai Road have battled for supremacy as Shanghai’s premier shopping strip, with the latter more focused on high-street labels and West Nanjing Road dominating at the luxury end of the market.

Despite recent high-profile and high-end international brand openings at the eastern end of Huai Hai Road, West Nanjing Road is still considered the leading player at the highest end of the retail sector.

Swiss watch brand Hublot opened its Shanghai flagship on West Nanjing Road in 2012. The brand’s chairman, Jean-Claude Biver, likens the location to a magnet for international luxury brands.

“Nanjing Xi Lu is like Madison Avenue or Fifth Avenue, in the sense that it has an extraordinary concentration and presence of prestige brands from all over the world. As such, it was logical that Hublot would want to establish a flagship there,” he said.

One of the defining characteristics of luxury consumers in Shanghai is how quickly they are evolving. It seems their only unwavering characteristic is a constant desire for newness.

“We have in general, but even more in Shanghai, very young millionaires and entrepreneurs who have recently made their fortune and want to connect with the future and not with the standards of their fathers. These young people are completely connected to Western culture and understand and want to wear our watches,” Biver said.

French added that the level of sophistication among luxury shoppers in Shanghai is “higher than many think.

“It’s not all bling and logos anymore. It is more about the quality of materials — fine leather, good stitching. This is why brands like Bottega Veneta and Loewe are attracting a lot of interest,” he observed.

Joel Stephen, head of retailer representation for CBRE in China, points to the proliferation of new luxury retail projects in traditionally residential neighborhoods as one of the most interesting trends affecting Shanghai’s high-end retail scene.

Shanghai’s traditional luxury retail spots, including West Nanjing Road, the eastern section of Huai Hai Road and, in recent years, Lujiazui (home of the high-end IFC Mall), are all business districts, but recently projects with a luxury positioning have opened in affluent residential area such as LVMH Moët Hennessy Louis Vuitton’s L’Avenue, a 140,000-square-meter (1.5 million-square-foot), 28-floor retail and office project, in the suburban district of Hongqiao.

Currently in its soft-opening phase, L’Avenue, which is affectionately known among Chinese netizens as “the boot,” due to the building’s unusual shape, is expected to cater to affluent locals, as well as the high number of Japanese and Korean expatriates based in the area.

 

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