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Asian Ambitions

As Chinese demand for Western glamour increases, Armani is set to open the door to luxury goods.

A flagship, by definition, is the finest or largest of a group.

Using those terms, it’s telling that Giorgio Armani SpA has not one but three flagships in China: the Peninsula Palace in Beijing, Three on the Bund in Shanghai and Chater House in Hong Kong.

The three stores reflect the three pivotal cities in China, said Robert Triefus, the group’s executive vice president of worldwide communications.

Perhaps it also reflects Armani’s intentions to expand to 30 shops in China by the end of 2007.

The first half of this year will see four new shops in China, bringing the total to 14. Giorgio Armani and Armani Casa will open in Hangzhou and Emporio Armani is set for Shenyang, while Beijing will see an Armani Collezioni at its World Trade Centre. The most recent opening was an Emporio Armani store in Chongqing.

While the focus is on China, Triefus said the group has expansion plans throughout Asia and the Pacific, including Japan, Taiwan, Malaysia and Australia. There also are some relocations and reopenings scheduled in Hong Kong.

In Japan, five shops will bow in department stores this spring.

Taiwan will see nine shops opening between March and April; Malaysia will get a Giorgio Armani boutique, and Australia has a boutique opening in Melbourne and a shop relocation in Sydney.

Sales in Japan account for 6 percent of total volume, while the rest of the Asia-Pacific region makes up 12 to 13 percent, Triefus said. China saw a 47 percent increase in direct sales in the first half of 2004 compared with 2003.

Also in the first half of the year, Giorgio Armani will visit Tokyo and Seoul in April, similar to his first-time visit last year to Hong Kong and Shanghai.

Although 30 shops by the end of 2007 might sound ambitious, Mohan Komanduri, principal and regional director of East Asia at management consulting firm Kurt Salmon Associates, said it’s a realistic number, adding that “there’s no question about” whether or not the mainland Chinese are ready for luxury brands.

Armani will open 30 stores, close four to five, then open another 10 to replace them, he said. He emphasized that it was all about location in the top-tier cities, such as Beijing and Shanghai, and that there will be more turnover at “nonpremium locations.”

After 30 years in business, Armani is such a powerful global brand in the world, Triefus said, that an Armani shop opening is an indication that “location is the destination in terms of luxury.”

Indeed, Handel Lee, co-chairman of House of Three, which owns and operates Three on the Bund in Shanghai, said recently at the IHT luxury conference here that Giorgio Armani was chosen for the space because Lee thinks Armani is the true emperor of luxury.

Armani “and his fashion will affect the fashion-consciousness in China,” he said, even though the brand hadn’t yet entered the market in a big way.

However, the expansion into China and nailing down locations isn’t necessarily driven by a single brand, Komanduri said. “Most luxury brands are in China already…or they’ve announced plans to enter China,” he added.

The driving ambition is to stake out a spot in the cities before the prime locations disappear, and this is especially true of the second- and third-tier cites in China, Komanduri said. “For premier locations, it’s about getting there first,” he said.

Mary Yan Yan Chan thinks Armani has what it takes to be a trailblazer. Giorgio Armani can sustain its business; and its presence gives a shopping area “weight,” said Chan, who is the director of StyleCentral Ltd., the exclusive agent of trend agency Peclers Paris for Hong Kong, Singapore and Thailand.

It also doesn’t hurt that the group spans different segments of the consumer market with different brands.

People in China are understanding that luxury is more than clothing — it’s accessories and their home, Chan said. Burning candles, for example, might be strange to the Chinese because it isn’t part of the custom, but they’ll try it because “the lifestyle of Giorgio Armani embodies high glamour and a Western lifestyle.”

As with all brands, Armani is selling an emotion. “The lifestyle of Giorgio Armani is more of a luxury brand now,” Chan said. “The consumer wants to be associated with that feeling….It’s a brand they want because it gives them confidence.”

Even with the thrill of a new frontier, there still are challenges in a new market. They range from finding partners for franchises, Armani’s chosen direction, to struggling to train retail staff to a quality level. One challenge, however, isn’t the product.

“You represent yourself as you are elsewhere,” Triefus said. “Clients in Beijing want the Armani of Milan.”