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SHANGHAI — Dolce & Gabbana is the latest designer brand eager to ride the business boom in this city on the banks of the Yangtze.

The Italian fashion house has opened its third store in mainland China, on the Bund here. The store was opened officially last month with a gala party, including a creative hip-hop reinterpretation of the traditional Chinese lion dance.

This story first appeared in the October 6, 2006 issue of WWD. Subscribe Today.

“The Bund is an extremely interesting area, in terms of shopping: so many nice bars, shops and restaurants are already there, and the architectural beauty of the street will for sure attract more and more tourists,” enthused Dolce & Gabbana chief operating officer Cristiana Ruella.

Shanghai’s waterfront is growing in popularity as the city’s most prestigious address for luxury brands, but many question its viability as a high-end commercial destination given that its foot traffic is dominated by low-income Chinese tourists.

In Ruella admitted success on the Bund might take time, adding “it may depend also on the project which the City of Shanghai is studying for the Bund — turn it into a pedestrian zone, move the bus stop, etc.”

However, she added, “In our opinion, in Shanghai nothing is already so ‘mature’ in terms of fashion and luxury items, so everything is still very fluid and with a great potential. And the Bund has for sure the best potential to become the shopping area for luxury items in Shanghai.”

The new shop occupies the ground floor of a three-story, Gothic-style edifice. Along with 8,000 square feet of retail space and 2,150 square feet of storage and office space, it includes a 915-square-foot Dolce & Gabbana Martini Bar. The traditional “Shanghai plaster” exterior was painted bright yellow during renovation, but then local preservation laws required the company to repaint it back to a more subdued gray.

The interior, designed by Ferruccio Laviani, is bisected into symmetrical sections for men’s and women’s wear, outfitted with Dolce & Gabbana’s signature black glass and purple chandeliers. The martini bar is situated at the back of the space, behind a winding staircase leading up to independently owned Japanese and Italian restaurants just opened on the second and third floors.

The store here is Dolce & Gabbana’s second mainland opening this year, following a Beijing reopening in June, giving the company a total of three shops. The brand will open a second Hong Kong location this month in Kowloon, along with a regional office and showroom, said international public relations director Carla Buzzi, adding business has been strong in the Special Administrative Region.

“Hong Kong has a different approach to fashion. The merchandise is the basics, the same as everywhere, but the age is younger than in the U.S. and Europe, like aged 20 to 40,” she explained. In China, “we are babies compared to the other designers, but the growth has been immediate.”

Added Ruella, “China is a great opportunity, a big market….It is the right time to come directly to China, in my opinion. With the number of people here, business of course will be big. We are a lucky company because we did not come many years ago. These years the companies here lost a lot of money, because only now is the market here more ready for luxury.”

The firm expects to see a return on its China investment within three years. There are still no plans to launch its secondary line, D&G, in China, however.

“Especially for a new market, customers need to first understand what is Dolce & Gabbana, and later, once that is established, we can introduce D&G,” Ruella explained. “It takes three or four seasons, then there’s the opportunity for D&G. Approaching a new market, we start at a higher level.”

Ruella added the brand plans to open stores in Guangzhou and Shenzhen by 2008. “The group’s expansion strategy for China is based on steady and balanced growth. For the Dolce & Gabbana brand, the group focuses on remaining super prestigious and high quality while expanding into the market, with special attention paid to the timing, location, service and management of stores,” she detailed. “Maintaining exclusivity and a complete focus on directly controlled retail operations are integral parts of the group’s expansion strategy.”

“It’s still a little premature to give figures about the performance of the Beijing and Shanghai stores,” Ruella said, but the company has begun to see some distinctions between its northern and two eastern Chinese locations. “What we know for sure is that the first weeks have been extremely rewarding in terms of sales: both the Beijing and the Shanghai shops have been reaching the foreseen budgets….We’re now working on the relation-building with the clients, who are extremely fond of the brand.

“In Hangzhou,” the prosperous Zhejiang Province capital where Dolce & Gabbana first opened in April 2004, “we have already arrived [at] a more ‘ordinary’ situation: The local clients are increasing, the sales are going well and we already have a very good database of clients who don’t come from Shanghai, but from other cities nearby Hangzhou,” said Ruella. “The men’s ready-to-wear, in particular, sells extremely well. With regards to Beijing and Shanghai, the clients are somehow different. In Beijing, they are maybe a little more conservative; in Shanghai, they prize the most stylish and eye-catching pieces of the collections.”

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