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D&G Scales Back in Japan

Dolce & Gabbana SpA said it plans to concentrate the company’s investments in Japan on its signature brand.

Cristiana Ruella

MILAN — Dolce & Gabbana SpA said it plans to concentrate the company’s investments in Japan on its signature brand and end distribution of the D&G ready-to-wear, leather accessories and footwear collections in that market starting with the fall season.

D&G is the latest fashion brand to exit Japan, which has seen its demand for luxury goods and apparel tumble over the past few years against a backdrop of economic crisis. Last year, Versace said it was unhappy with its retail network there and was shutting its stores in the hopes of reentering the market at a later time. The United Kingdom’s French Connection also closed its 21 stores in Japan.

But there are indications the Japanese fashion market has begun to stabilize. Yano Research Institute Ltd. said last week sales of imported clothing and accessories in Japan tumbled a record 15.9 percent last year but sales growth in 2010 is expected to inch up less than one percentage point. Sales this year are seen coming in at 902.8 billion yen, or $9.75 billion at current exchange.

Dolce & Gabbana’s managing director and board member Cristiana Ruella told WWD that D&G stores in Japan do not reflect the new positioning of the brand, initiated three years ago when the company took production and distribution in-house. “We’ve worked on quality and image, and developed a new store concept to better illustrate the changes,” said Ruella.

The new store concept was unveiled in Milan last year. In Japan, stores are either too small or located in the wrong context, said the executive, who noted London’s New Bond Street D&G store, for example, is currently being revamped with the right neighbors and with the right square footage.

“It would be disorienting for our customers if our stores in Japan were not in line with the others around the world,” said Ruella. “This does not mean it is for good, but we can’t forecast the timing.”

There are currently 15 D&G stores in Japan. By the beginning of next year, Dolce & Gabbana will shutter the two freestanding D&G stores in Tokyo and Osaka and the 13 shop-in-shops in department stores throughout the country.

Ruella also said D&G is “one of the most copied brands in Japan,” which undermines the repositioning of the brand. However, clothing, leather goods and shoes will be available for sale online. Ruella said the company plans to communicate that its Web site will be the only provider of original merchandise in Japan. “We isolate counterfeits this way and add authority and strength to our online provider,” said Ruella.

On the other hand, D&G fragrances, eyewear, watches and jewels will maintain their presence in Japan, “as they respond to different distribution needs,” said Ruella. These are licensed products and their distribution channels are different, noted the executive.

Ruella underscored that the economy in Japan has “nothing to do” with D&G’s new strategy.

“We’ve already seen positive retail signs in the first few months of the year,” said Ruella. Indeed, the company’s subsidiary Dolce & Gabbana Japan K.K., established in August 2001 and based in Tokyo, will not cease operations with the goal of “strengthening and increasing attention on” the Dolce & Gabbana brand, she said. Japan accounts for 34 percent of the group’s total sales in Asia. In the 2008-2009 fiscal year, Asia accounted for 12 percent of the group’s wholesale sales. Wholesale revenues in the period totaled 1.59 billion euros, or $2.26 billion.

Both Dolce & Gabbana and D&G were launched in Japan in April 1996 through a distribution agreement with Osaka-based apparel distributor Misaki Shoji, which ended in May 2002.

Ruella said Japan continues to be “very important for Dolce & Gabbana and further investments are expected in the region.” There are 16 Dolce & Gabbana stores in Japan.

At the same time, the company is highly focused on the Asia-Pacific market. Excluding Japan, the group counts 41 points of sale, of which 22 are for Dolce & Gabbana and 19 for D&G. In China, there are eight Dolce & Gabbana stores and 13 D&G banners.

This spring, coinciding with Shanghai’s Expo, new Dolce & Gabbana and D&G boutiques opened in the city. The two-level, 8,348-square-foot Dolce & Gabbana venue will be officially inaugurated on May 28 at commercial complex Plaza 66. With eight striking Murano chandeliers and floors paved with Sicily’s typical Basaltina stone, this is the brand’s largest retail space.

The two new D&G boutiques in Shanghai, at Plaza 66 and Times Square, were modeled after the new store concept. Each covers 2,484 square feet. “China is super effervescent, and we are investing heavily in our directly operated stores,” said Ruella, noting she was “expecting” China’s rapid growth.