SHANGHAI — In China’s major cities it’s now possible to have a luxury handbag, and eat the same brand’s cake, too.
With more and more luxury brands expanding their range to include hospitality offerings — from hotels to restaurants and cafés — Chinese consumers now have the option of taking their love of luxury to a new immersive level.
The broader slowdown in the luxury sector here is one possible explanation for the trend. Fewer consumers are wandering into local stores with the intent of purchasing luxury goods, now preferring to buy the majority of them overseas while traveling, or via e-commerce.
“All of these brands have invested a huge amount of money in the last 10-plus years to build their brand and establish their reputations. With the consumer buying online or overseas, the brands still need to monetize or recover that investment they’ve made in the past,” said Ken Grant, director at FDKG Insight in Shanghai. “If they can’t get it through selling bags or other products, they can still tap into the huge market for hospitality and entertaining in China.
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“Chinese consumers have shifted their [domestic] spending to lifestyle, which includes hospitality and entertaining their friends,” he continued. “The brands have a fairly good recognition amongst these people, so I think their reasoning is, let’s open a restaurant, a café or bar with our name on it because we’ve already got that cachet and that will attract people who are prepared to pay good money to eat and drink luxury food and wine at a luxury brand’s establishment.”
This year has seen a slew of hospitality-related openings and announcements from luxury and fashion brands in China, including the April opening of a Vivienne Westwood Café in Shanghai’s luxury-focused K11 mall, which is also home to the brand’s largest store in China, and the July launch of Gucci’s first full-service restaurant, 1921 Gucci, within a huge Gucci store just down the street from K11 in the IAPM mall. The brand also operates cafés in Florence and Tokyo.
These are just the latest two brands to jump onto the hospitality bandwagon in China, with Hong Kong-based label Shanghai Tang opening its first Shanghai Tang Café in Shanghai back in 2010, and Alfred Dunhill’s Alfie’s restaurant already operating in both Shanghai and Beijing.
Also on the horizon are hotel openings from Armani Group, which is scheduled to open its 65-floor Armani Art Residence in Chengdu in 2016, Bulgari Hotel openings planned for both Shanghai and Beijing in 2017 and hotel properties from Karl Lagerfeld and Versace, which are both under development.
Of the crossover establishments already opened by luxury brands in China, reviews from consumers have been mixed, with the initial excitement and fanfare that accompanies openings often quickly dying down.
“When Vivienne Westwood or Gucci opens their first restaurant in China, there’s huge attention on social media and people want to go there, to say they’ve been there, but ultimately that social media commentary can work back in the opposite direction if they don’t deliver on expectations,” Grant said.
“Chinese consumers haven’t historically had a great loyalty to anybody or anything. Although they may be loyal to Gucci, any initial poor impression of the Gucci restaurant will affect their feelings about the brand and their social commentary about the brand, so the message for brands is that if you are going to cross over into that market, you still need to execute.”
The buzz about 1921 Gucci, which boasted two-hour waits for tables just after opening, quickly cooled on social media, with reviews on Dianping — a wildly popular Chinese site and app, possibly best described as a mix between Yelp and Groupon — only so-so.
“The food was OK, it’s like a quality Italian restaurant. But if you want to tell it apart from other international restaurants, maybe the napkin [which features a 1921 Gucci logo] is the only indicator?” read one.
Though Gucci declined to comment on the public response to its Shanghai restaurant, a spokeswoman said the company’s business strategy does “not include brand extension through [further] expansion into food and beverage.”
For Shanghai Tang, its café crossover concept has proven to be relatively successful over the past five years since first opening in Shanghai, so much so that it is looking at expanding the concept to Beijing, and then perhaps beyond.
Part of Shanghai Tang’s success may be due to the fact that the restaurants serve Chinese food, which is obviously popular with local diners.
“Opening a restaurant is a very expensive thing to do and food, although it’s social pastime, Chinese are not always going to pay over the top for average quality products, they are a bunch of foodies, they know what they like and don’t like and they’ll always fall back on good quality Chinese food over international foods, which may present a problem,” Grant said.
Shanghai Tang’s two F&B properties in Shanghai serve high-end Shanghainese and Cantonese dishes in a dining room decorated in flashy colors, reminiscent of the signature bright silks featured in many of the brand’s clothes and accessories.
According to the company’s general manager for China Annie Ho, Shanghai Tang Café’s diners are a relatively accurate mirror of the brand’s retail customers.
“Similar to Shanghai Tang, Shanghai Tang Café enjoys the patronage of both mainland Chinese as well as domestic and international travelers. Fans of Shanghai Tang are interested in the restaurant concept, but actually a significant percentage of Shanghai Tang Café customers are not familiar with Shanghai Tang prior to trying the food experience. The sense of the palette becomes their first entry point into the world of Shanghai Tang,” she said.
“Retail is very competitive now and customers are looking for experiential luxury. To answer these two challenges, Shanghai Tang has developed a multisensory retail concept in which the sense of taste is one way to experience the brand’s DNA — modern Chinese chic,” Ho said.
As for whether other brands will find future success with hospitality crossovers, that all depends on how well the project suits the brand message, and how much the brand is willing to invest in ensuring the experience of a restaurant or hotel can live up to its existing image for luxury, according to Torsten Stocker, partner in the consumer goods and retail group at A.T. Kearney.
“I’m sure there will be others in different formats. For a number of years we’ve seen the foray of brands into different lifestyle ventures, it’s part of the landscape and it is something that will work for some but not for others. It depends on the execution and how well the brand lends itself to the hospitality area it’s trying to cross into. I definitely see it as something that is here to stay,” he said.