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H&M Heads East With First Unit in Shanghai

Hennes & Mauritz has landed in China with a splash.

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SHANGHAI — Hennes & Mauritz has landed in China with a splash.

A particularly bright, turquoise splash of images for the brand’s new summery Kylie Minogue collection, which was promoted on thousands of billboards around this city leading up to the April 12 launch of the fast-fashion retailer’s first store in Mainland China.

The marketing activity seems to have proven successful for the company, taking it from virtually unknown in the Chinese market to immensely popular within a few weeks. The Shanghai store’s opening day attracted lines around the block.

“It is the opening of the brand, not just of a store,” said spokeswoman Kristina Stenvinkel. “Ad spending here represents what we normally spend on a new market. We spend 3 percent to 4 percent of our annual turnover on marketing, and this is part of that. We did Madonna in Hong Kong, and Kylie here. We are about new fashion everyday, and we already did Madonna, so here we did what is the next thing, out of respect for our Shanghai customers.”

The H&M Loves Kylie collection made its debut in China four weeks ahead of its global launch.

H&M celebrated the launch with a gala disco party on April 11 at Pudong’s Science and Technology Museum, where Minogue performed to over 1,000 guests.

Following the first store, located in a four-story building at 645-649 Huaihai Zhong Lu at the corner of Sinan Lu, H&M will open another one in the Super Brand Mall in Pudong’s Lujiazui on April 25. “Within 2007, we will have four Hong Kong stores and two in Shanghai,” said Stenvinkel. “We will do a big Asian expansion: Japan is next year, and Taiwan, we don’t know yet.”

She said H&M was relatively late to arrive in the Far East because the retailer was preoccupied with expansion in other markets, and because of its perception of when Asia would be ready for the brand. Starting with Hong Kong and Mainland China was predicated on 30 years of manufacturing experience here: H&M sources about 30 percent of its production from China. Last year, it opened a greater Asia office in Hong Kong with 20 to 25 staff members.

H&M’s first Hong Kong store, which opened in March with a similar marketing blitz, has proven to be more successful than the company expected. “The Hong Kong reaction has been amazing, with customers in queues, lining up for eight hours before the opening, and the lines are still there,” said marketing director Jorgen Andersson. “It is extraordinary; we’ve never seen it before.”

Mainland China had long been an unfriendly market for mid-range fashion, since consumer tastes tend to split into the extremes of mass and luxury. United Colors of Benetton, the prior occupant of H&M’s Huaihai Lu building, entered the market early on, struggled and subsequently left. However, in recent years, a swelling demographic of young, white-collar, lower-middle-class women has created a demand for mid-price fashion, as evidenced by the success of Zara’s launch last year.

But H&M executives said they were confident of the market’s potential for the brand. “I don’t know why Benetton left, but we believe in doing things as a big concept,” said Greater China manager Lex Keijser. “Chinese people want to buy fashion.”

Stenvinkel said the shift in consumer taste here was representative of a global trend, and not unique to the China market. “Fashion is not a matter of price. People tend to mix high- and low-priced items. It is a shift in customer attitude that is happening all over, including here.”

Location was considered one reason for Benetton’s struggles. While Huaihai Lu has since the Thirties been synonymous with high fashion in Shanghai, certain sections of it are more retail-friendly than others. The Sinan Lu section is primarily residential, several blocks removed from the hubs of retail activity centered around the subway stations at Shaanxi Nan Lu to the west and Huangpi Nan Lu to the east. Huaihai at Sinan remains mostly lower-end local stores selling books, comforters, and food and beverages more than fashion. However, a long-empty property across the street from H&M recently reopened as a high-end mall, with a Max Factor and a Starbucks, and there is also a Sephora store on the block.

Super Brand Mall in Pudong represents another gamble for H&M because China’s largest mall has been a white elephant since its 2001 opening, struggling to attract shoppers and retain tenants while undergoing several makeovers. It seems likely, though, that H&M’s stores will become destinations in themselves, regardless of their locations.

“We always look for the best location, both on the streets and in shopping centers, with special attention to the street and the building,” said Keijser.

He said H&M had yet to be pirated in China. While many brands appear in the black market only after their China launch raises brand awareness here, H&M’s lower pricing may spare it from being copied to the extent that luxury brands are. “We will keep our eyes open,” Keijser said. “We are not afraid of it, and will find the best way to deal with it, by finding the parties involved and having a dialogue with them.”

H&M executives repeatedly stressed their belief that China was not unique as a market for fashion or other cultural products. “We focus on the similarities,” said Stenvinkel. “If you look for the differences, you will find them, but we look for the similarities. Look at young girls — you can’t tell the difference between Shanghai, Hong Kong, New York and Tokyo, in how they consume film, fashion and music. You see a lot of similarities.”

“The China market is now overrun with superbrands,” Keijser added. “H&M is a super brand, as well, but with a large customer group, so there is a space for us. The economy is booming in China, people are aware of the world, on the Internet, and in their tastes in movies and music, they are looking at abroad. Young Chinese are just like young Europeans. On the street here, it is the same as in Europe; the fashion is the same, only the people are speaking Chinese. They are shopping in the same stores, going to Starbucks, buying the same things as in Europe. Hong Kong and Shanghai are two different cities, but it is the same as two different European cities.”

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