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MILAN — The new owner of Italy’s La Rinascente department stores is tapping into the increasingly wealthy tourists from emerging markets, with plans to promote the chain internationally, leveraging Italian design and quality.
This story first appeared in the October 21, 2011 issue of WWD. Subscribe Today.
“La Rinascente draws a combination of tourists and local customers, it’s the perfect scenario,” said Tos Chirathivat, chief executive officer of the Thailand-based Central Retail Corp., which took control of the Italian chain in May. “Europe is the number-one destination for the aspiring population with a rising income from emerging countries. They are traveling more and more, they are becoming bigger than Americans and Italy offers four cities that are top locations: Milan, Rome, Venice and Florence. This is exactly what we want, major cities, with a mix of domestic and international visitors.”
In particular, Asians are looking for luxury brands, he added, which are the cornerstone assets put in place by La Rinascente ceo Vittorio Radice, who joined the chain five years ago to revamp the format.
Sitting in one of the several restaurants on the top floor of the company’s Milan unit overlooking the gothic pinnacles of the city’s cathedral, Chirathivat and Radice outlined future strategies for the retailer on Thursday, hours before the official unveiling of an improved men’s floor, which now carries designer brands ranging from Fendi and Dolce & Gabbana to Jil Sander and Ermenegildo Zegna.
“This is what tourists expect from an Italian department store, this is what La Rinascente offered in the Sixties, before it moved into private labels and more mass market displays,” said Radice, noting that tourist business for the location was “negligible five years ago.” Radice said Russians now are “the biggest group” for La Rinascente, including shoppers from the former Soviet Union countries, followed by Chinese. “But this is bound to change,” he added, expecting Chinese visitors to overtake Russians in the near future.
Neither executive was concerned about the economy. “In this situation, department stores are even stronger, with shoppers finding pieces ranging from 60-euro jeans to 600-euro coats ($83 to $827), and each customer attended to with the same service and packaging,” said Radice. “Only in department stores do you have such variety. You can enter without buying anything, it’s an open place where you don’t have to dress up, and where your wealth or lack of it do not necessarily show.”
Next year, Radice hopes La Rinascente will reach sales of 300 million euros, or $413.6 million.
Chirathivat said he was organizing press trips from Asian countries to spend days here. “We will promote La Rinascente as an Italian, Milanese brand. These trips are not about telling them that Central Retailing owns the group, except perhaps with Thais, who are proud to have a store in Milan,” he remarked, with a smile.
Agreeing with Radice, Chirathivat challenged the idea that the concept of department stores is “dying. It’s a matter of execution, if it’s done right, it’s exciting.” With sales of $4 billion, the Bangkok-based Central Retail owns 41 stores in Thailand, and three in China, and its business also includes property, hotels and restaurants. The group is in the process of upgrading a number of these stores, with the addition of brands such as Gucci and Bottega Veneta, said the executive.
Radice, who will keep his position under the new owners, was pleased with the transaction that saw Central Retail take control of the retailer for 260 million euros, or $358.4 million at current exchange, 11 times the store’s 2010 earnings before interest, taxes, depreciation and amortization. Previous shareholders included real estate developer Prelios with a 20 percent stake; investment fund Investitori Associati (46 percent); RREEF-Deutsche Bank Group (30 percent) and Tasso, controlled by chairman Maurizio Borletti (4 percent).
“[Central Retail is] bringing commitment to retail as opposed to finance. There is more financial attention, but this is a long-term player with vision, that is willing to take on more risks,” said Radice.
Central Retail plans to invest 10 million to 15 million euros, or $13.7 million to $20.6 million, a year in the refurbishing and renovations of La Rinascente’s 12 stores. Next year, Milan’s La Rinascente will revamp the women’s floor, followed in 2013 by the casual, denim and sportswear area, completing the renovation plan initiated in 2006. La Rinascente was founded in Milan in 1917 with the first store opposite the city’s imposing cathedral.
Next up are the restorations at the Rome, Venice and Florence stores, equally strategically located in central and prestigious streets. “Each is entirely different, depending on the building and the mood of the city. We are not building a chain, but a collection of stores,” said Radice. “Local department stores are as big as a museum tourist destination. Last year, the Milan unit totaled 8.8 million visitors, as many as the Louvre,” he noted.