LAS VEGAS — Top luxury brand and retail real estate executives said at a conference here that they are focused on China as the key market for expansion, while suggesting that revenue growth from that country will take years to reach its potential.
They also expressed concerns about the impact of counterfeiting in China on the identities of their brands.
The second annual Financial Times Business of Luxury Summit, at the Ritz-Carlton Lake Las Vegas brought together leaders from companies such as Gucci, Fendi, Valentino SpA, Coach, Bottega Veneta and the Simon Property Group to examine the state of the category.
“We believe in the China market and are starting construction there,” David Simon, chief executive officer of Simon Property Group, the largest publicly traded retail real estate company in North America, said in a speech. However, he added that “developing in China has been arduous. Even though it’s a developing country, you expect returns to be higher than they are. From a financial perspective, we had expected better returns. The price of land there is really high, but generally, the ability to do business is really straightforward.”
The company’s strategy is to “start moderately and slowly move up to luxury … we can’t have a center that will compete with Wal-Mart,” Simon said. “We would be in a world of hurt.”
Matteo Marzotto, chief operating officer of Valentino SpA, said that China, and Asia in general, represent “the main opportunity to grow for us.” Sales in Asia constitute 10 percent of Valentino’s total revenue, with sales in both Europe and the U.S. each comprising 35 percent.
The ceo of Fendi, Michael Burke, said “China will be much more like America, and it will be much bigger than Japan.”
Fendi’s retail expansion in China, including a new flagship in Beijing, has been hassle-free. “It’s very easy to apply our vertically integrated model there,” Burke said. “Licensing requirements are actually easier to [navigate there] than in Europe.”
“The Chinese [soon will] be spending the same as the Japanese consumers,” Robert Polet, president and ceo of Gucci Group, said in a speech on the second day of the two-day event.
“These countries [China and India] are extremely important to our future.”
The executives acknowledged the challenges presented by China’s lucrative counterfeiting business.
“[Counterfeiting] is based in China … The problem comes when our real customer sees the fakes on the streets,” Burke said.
Lew Frankfort, chairman and ceo of Coach, said the company is pursuing legal action against counterfeiters in Asia and elsewhere. “We vigorously protect our trademark and design by actively combating infringement,” he said.
Patrizio di Marco, president and ceo of Bottega Veneta, said, “[Counterfeiting] is bad in terms of inflation — visual inflation in the market.”