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LVMH Outlines China’s Expansion Plans at IHT

LVMH has ambitious plans for China over the next year, executives revealed at the International Herald Tribune’s luxury conference in Hong Kong.

HONG KONG — LVMH Moët Hennessy Louis Vuitton has some ambitious plans for China over the next year.

Its Louis Vuitton brand is expanding the size and visibility of its stores here, said Yves Carcelle, chief executive of Louis Vuitton, including the reopening of the Lee Garden store, which will be three times larger; the Landmark store will be enlarged in 2005, and in January, there will be a watch and jewelry store opening in the Peninsula Hotel. Louis Vuitton currently has 13 shops in China.

The group’s Dior stores also will be increasing in size, said Dior chief executive Sidney Toledano, without providing details.

The plans were revealed at the fourth annual International Herald Tribune conference here, “Luxury 2004: The Lure of Asia,” which opened Wednesday.

Bernard Arnault, LVMH chairman, said in a speech that expansion takes time and patience. The goal is to identify the uniqueness of each market and wait for the best deals to come.

He said the next country that will become a huge luxury market is India, but it will take time. It may take a generation just for the Chinese and Indian consumer to reach maturity, he said. “We don’t want to rush.

“The consequences of China in particular waking up as a consumer superpower are far-reaching,” he said.

Some see the country as a cheap source of labor with mass-production techniques, but there is no long-term benefit in that because consumers will associate those brands as low-cost, mass market and lacking appeal, according to Arnault. A more profound option is for China to offer consumers value products with high quality and design creativity. However, he believes the luxury market still will retain its ties to Europe.

“This is not a competition, but a mutually supportive evolution,” said Arnault.

Part of a mutually supportive relationship also includes fighting the production of counterfeit goods. That battle is difficult, Arnault said, adding that, when you fight, you have to be powerful and cautious because “counterfeiting is in the hands of organized crime.”

Louis Vuitton and Dior each spend about 15 million euros, or $20 million at current exchange, a year to combat counterfeiting worldwide. In China, the government has made clear it wants to destroy pirates, Arnault said. He insisted piracy doesn’t affect profitability nor steal customers from luxury brands, but it does hurt the image of a brand.

Counterfeiting is a risk to be faced, said Dickson Poon, the group executive chairman of Dickson Concepts International, because China is probably “the sweetest music” to luxury brand owners.

Other hurdles in China include understanding rules and regulations, retail licensing and remittance of sales proceeds, which all can be helped by having a local partner, Poon said. Access to the press also is an issue when it comes to advertising. As a result, opening shops may be the best way to introduce an image, lifestyle and luxury brand to the Chinese consumer, he said.

Alfred Chan, ceo and managing director of Canada’s Ports Design, echoed those hurdles and agreed that knowledgeable partners can help guide the way. Following China’s entry into the WTO, changes include direct foreign ownership and reduction of duties and taxes, but the change “won’t be significant,” Chan predicted.