MILAN — The luxury market might be improving, but don’t expect a full recovery until 2005.
This story first appeared in the November 18, 2003 issue of WWD. Subscribe Today.
That was the view of representatives from luxury goods firms who met here for roundtable discussions Thursday and Friday during the Milan Fashion Global Summit. Executives said the geopolitical situation remains significantly unstable and a cause for caution on the part of most companies, even as they believe the worst of the downturn in the luxury market is behind them.
Meanwhile, industry executives said they are exploring new markets and, once again, China emerged as the most promising geographical area.
“China is the future,” said Gucci president and chief executive officer Domenico De Sole in a phone call from the Philippines.
“We’ve seen a dramatic change, with Chinese tourists replacing the Japanese,” said De Sole, who noted that business will benefit from the fact that people in Hong Kong and Macao now have permission to travel individually rather than only in groups. De Sole also cited South Korea, Taiwan and Singapore as important Asian markets for Gucci. “Excluding Japan, in 10 years, the area, which now accounts for 16 percent of luxury goods sales in the world, will account for 30 percent of sales, propelled by China,” said De Sole.
Tod’s chief Diego Della Valle, who is planning to open two boutiques in China next year, said “nobody can afford to ignore Asia and China.”
Unlike many Italians who fear competition from China and its low-cost labor, Della Valle sees the country as an “opportunity” that should not be missed. “We must move quickly and act now before costs increase there; we should set the foundations for when the Chinese will really travel extensively,” he said. Della Valle urged his Italian peers and the government to set up joint ventures, to present the “Made in Italy” lifestyle to the Chinese, and to bank on tourism as a vehicle to attract Chinese business.
“We should connect the two worlds and sell our know-how instead of waiting for [China] to ‘steal’ it,” he said. “I think it would be a good idea to organize an exhibition to present our Made in Italy products, and trade know-how and experience.”
Excluding China, Della Valle said Asia accounts for 8 percent of Tod’s sales and is growing at a 35 percent rate per year.
Della Valle and De Sole said Asians love quality, labels and items that are recognizable status-symbols, thus making it easier for Italian luxury goods groups to gain and maintain a foothold in that market. De Sole said accessories, in particular, are bestsellers in Asia.
“Attraction to luxury in the East starts earlier [in age], but our bestsellers — the monogram bags, which account for more than half of our sales — are the same all over the world,” said Yves Carcelle, president of Louis Vuitton, who was attending a conference in Italy for the first time Thursday, indicating his group’s ever-growing interest and presence in the country.