BEIJING — Dolce & Gabbana, the latest designer brand to discover the possibilities of China, is being patient about expansion there.

“For our brands, China is more an opportunity than a threat,” Domenico Dolce said via e-mail. “In the midterm, China will represent for us a very interesting and developing market; so far, it’s still small, if compared to other countries where we have been present for many years, but it has a great potential.”

Although most fashion brands are bursting into the Chinese market, unrolling ambitious plans, Dolce & Gabbana is opting for a cautious approach. The company opened its second directly owned mainland store in Beijing’s Peninsula Palace Hotel in June, and is doing a soft launch of a Shanghai flagship this month.

“Our biggest challenge here has been ‘Don’t crack under pressure,’ because China so far has been too easy for us,” said Michel Gonzalez, Dolce & Gabbana’s Asia Pacific managing director. “We could open 10 stores right away, but we don’t want to. We want to wait until we can do it right, and keep to our own terms for location, timing and service and management. China is very hungry at the moment, but if you want to keep growing for the next 25 years, not the next three years, you must go slow and remain superprestigious and high quality.”

The company opened its first directly owned China store in April 2005 in Hangzhou, a flourishing city of six million people just south of Shanghai, and the capital of the wealthy Zhejiang province. “Hangzhou has been a surprise for us,” Gonzalez said. “It gave us a good trial in China…and allowed us to test for the mechanics and procedures, doing import-export. And we wanted to do so while keeping a low profile. But the business turned out to be a fantastic experience, is doing well and has the highest sales in the mall. Therefore, Hangzhou makes us a lot more confident.”

Gonzalez explained that the customer demographic at the Hangzhou store has reflected global trends for the brand: “Women aged 30 to 35 on up, affluent and very fashion-conscious.” Of those, local Hangzhounese are 90 percent, and Shanghainese on business trips constitute the remainder. Unlike most luxury sales in Hangzhou, tourists and businesspeople from the rest of Zhejiang province are negligible. Men’s and women’s wear contribute equally to overall sales, he said, but “men buy deeper; they are fewer customers but bigger buyers and will come once a year and stock up. Women are more flirty, like to try more things on and come more regularly.”

This story first appeared in the July 17, 2006 issue of WWD. Subscribe Today.

While casualwear dominates, Dolce & Gabbana’s customers in Hangzhou tend to buy a mixture of products. “They come for the jeans, but then we sell other things with them, and they leave with quite different items than what they came in for.”

Of the company’s Hangzhou clientele, Gonzalez added: “Surprisingly, in China we don’t see that many fashion victim customers. Most want what’s exclusive over what’s trendy, and instead of the logo part of the collection they are going for the elaborate look. People here are a lot more daring than even in Europe, they want people to notice them. It’s a way to improve and frame their personality.”

The 2,690-square-foot Beijing shop occupies the same location as a previous Dolce & Gabbana franchise, but was thoroughly remodeled after coming under direct company control. Gonzalez said the company expects the Beijing store to do double the sales of Hangzhou, despite its smaller size and basement location, because of Beijing’s greater size, affluence and enthusiasm for spending.

Dolce & Gabbana’s Shanghai flagship at Bund Six is slated for a soft opening on July 25, with a formal launch in September. The Gothic Twenties brownstone, painted canary yellow in defiance of local preservation laws and the Bund’s traditional aesthetic, will house an 8,000-square-foot store, 2,150 square feet of back-office area, an office section for 10 staffers and a martini bar. The company is deciding whether the bar will be self-managed or done with a partner.

“In terms of furbishing and general layout, there will be a consistency between the new Chinese shops and all the other Dolce & Gabbana shops in the world, including Hangzhou: our style, our concepts and our traditional mix of Mediterranean luxury and design will be fully reflected by both the Beijing and the Shanghai stores,” Stefano Gabbana explained in an e-mail.

Compared with many of its competitors, which had maintained footholds in Hong Kong for decades before nudging into the mainland, Dolce & Gabbana is also a relative newcomer to Hong Kong. The brand opened its first shop there last year, in Alexandra House on Chater Road, but will open a second, 6,000-square-foot store in early October on Canton Road. A 12,000- to 20,000-square-foot regional office, with as many as 35 staffers handling sales, marketing, shipping and administration, is in the works for Hong Kong. In Taiwan, Dolce & Gabbana’s one Taipei boutique, also opened last year, will be joined by another four by spring or summer, and the company will expand into Macao by 2008.

Gonzalez forecast that the company’s China sales will grow by a factor of five over the next three years. By 2008, the company also plans to launch Dolce & Gabbana in Guangzhou and Shenzhen, open second outlets in both Beijing and Shanghai and start selling the D&G label, which will go broader into smaller cities.

Dolce & Gabbana executives insist their company’s small presence on the mainland has not affected the brand’s image here.

“With regards to the brand awareness, it will for sure know an incredible rise after the next opening,” predicted Domenico Dolce. “Dolce & Gabbana is already well known among the Chinese VIPs and celebrities, but we plan to reach a wider — though always top-class — target through these strategic new windows.”

The Asian market remains a small one for Dolce & Gabbana, representing less than 10 percent of the company’s business. Of that amount, 70 percent is in Japan and South Korea, with 42 and 14 stores there, respectively. “It should be 50 percent, but that’s not the case, because we only just began positioning the rest one-and-a-half years ago,” Gonzalez said.

The company’s plans are to use China as a beachhead for expansion into other developing markets in Asia, and for the region to eventually represent 25 percent of sales.

“China and Asia in general represent two very important markets for the company,” Gabbana said. “We believe that these markets have a notable amount of unexploited potential for our brands, so we will continue to invest heavily in these regions.”

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