* Small firms struggle to get global reach
June 29, 2012 by admin
Filed under Choosing Lingerie
(Corrects spelling of name throughout to de Royere, not de
Royer)
* Small firms struggle to get global reach
* Chinese customers attracted to big brand names
By Nina Sovich
PARIS, June 22 (Reuters) – Poupie Cadolle’s family has been
making handmade lingerie in a workshop on Rue Saint Honore for
five generations, with Qatari royals, American actresses and
Swiss bankers’ wives all crossing her doorstep in search of the
perfect bra or corset.
Now, with times tough and sales to French and American women
sluggish, Cadolle, like many small French luxury firms, finds
itself struggling to tap into a $191 billion global boom driven
by customers from emerging markets.
“The last four months have been difficult,” said Poupie
Cadolle, a small woman with a warm smile who spends her days
fitting 5,000 euro ($6,300) bustiers and 600 euro bras.
“We thought hard about how to get clients, beyond word of
mouth. It is not easy. We decided on going into Brazil, not
China.”
Unable to wield the financial firepower of conglomerates
such as LVMH, Richemont, or PPR, small
family-owned enterprises are finding modest and innovative ways
to attract new customers.
Some, like Cadolle, are choosing one country over another
and relying on invitation-only trunk shows and other private
events.
Others are opening stores in Hong Kong but not Shanghai,
while for a few the focus is on still rich markets in Japan and
the United States.
All are choosing carefully. The internet is not seen as a
route to market – few small luxury companies feel comfortable
selling goods online given the luxury experience is one where
items need to be handled to judge the quality and design.
“China is definitely the big prize and, by and large, the
customer there only wants big, recognizable brands,” said Pierre
Mallevays, a managing partner at Savigny Partners, a corporate
finance boutique specialising in luxury and retail.
“You cannot have a China-only market. For your brand to be
credible, the travelling Chinese will expect to see your stores
in Paris, Milan or New York.”
That kind of reach is difficult for smaller brands unable to
afford a presence in several European cities and major Chinese
cities where real estate prices are high, salespeople
increasingly scarce and the best distributors already engaged.
LVMH and other luxury giants, meanwhile, are tapping into
the Chinese market by scaling back in department stores and,
instead, opening giant flagship stores in large and mid-size
cities across the country.
Smaller European brands hope Chinese customers, as well as
the newly rich from Russia and central Asia, see the appeal of a
tasteful shop in Paris with an elite clientele in the French
tradition of discretion and craftsmanship.
Many are bringing design inhouse, eliminating suppliers and
ensuring clients know everything is handmade by French artisans.
“BIG, BIG, BIG”
This type of branding is vital to the appeal of French
luxury, yet it is not always easy to convince emerging market
clients that handmade is better. Many live in countries where
goods are only made in small shops out of necessity.
Corthay is a bespoke men’s shoe shop in the 2nd
arrondissement where Pierre Corthay works in the front room
making crocodile and elephant skin shoes that take six months to
complete and cost upwards of 3,000 euros.
It recently teamed up with Groupe Edmond de Rothschild to
sponsor a road trip for select clients through the Alps in
high-end sports cars. Chief executive Xavier de Royere said the
event was expensive for Corthay but worth it because it created
a sense of glamour around the brand.
“The Chinese do not always understand our store,” said
Royere, who joined from Louis Vuitton. “Small is not good there.
They want a big shop. Lots of options. Big prices. Big, big,
big.”
Royere, planning to open shops in Dubai and Hong Kong in
coming months, said he was in less of a hurry to go to China and
will not open there until 2013 at the earliest.
In the United States, the brand is confining itself to
department stores in New York, San Francisco and Beverly Hills
for the moment.
“We counsel companies to go to Hong Kong first. Learn about
the customer. Then go to mainland China,” said Ponsolle des
Portes, head of Comite Colbert, a luxury industry lobbying
group.
Chinese customers need to become acquainted with the notion
of truly high-end luxury, and smaller brands can still make a
lot of money from established markets, she said.
“It is hard to convince some Chinese women that she should
have wonderful undergarments,” said Poupie Cadolle. “This is not
a culture that even has nightgowns.”
Asia makes up 19 percent of the luxury market but is growing
faster than any other region, Bain research showed. By 2014, it
will be on a par with the Americas in size.
PRESENT BUT PRUDENT
Yet it will still lag Europe, the largest luxury market. And
while many customers in European shops may be tourists, small
companies still see money in established markets.
Luxury brand Camille Fournet began with watch straps and has
recently broadened out into handbags, wallets and pouches.
CEO Jean-Luc Dechery said opening a big store on stylish
Avenue Montaigne in Paris would lend the brand instant
credibility, but the cost was prohibitive.
Instead, he has invited well-heeled clients to a private
showing at the George V hotel at the end of June. Items sold
there, including a 34,000 euro alligator handbag, will not be
available in the store.
“We are hitting that good time during fashion week but
before Ramadan,” he said.
He remained mindful that half the brand’s clients in the
Paris store were French, and that a Chinese business will be
slow to start up. He is opening a store in Beijing this October.
“We want to be present,” said Dechery. “But also prudent.”
The advice is sound, say industry analysts, who note that
any change to the tax regime in China or Hong Kong could quickly
alter the dynamic and that the luxury market may be in a bubble
that could burst if the Asian market ever slowed down.
“Whenever companies tell me they are going abroad I ask one
question,” said Joelle de Montgolfier, a director in consultancy
Bain Co’s luxury practice. “Are you absolutely convinced that
French women have nothing more to spend?”
($1 = 0.7933 euro)
(Editing by Dan Lalor)
