According to research by realtor Knight Frank, the typical annual store growth rate for those already well-established in China is approximately 15-20 percent. Luxury retailers can often identify 4-5 suitable sites in Tier 1 cities, but many only find 1-2 suitable sites in Tier 2 cities. Interestingly, the prime locations in Tier 2 cities are usually occupied by local developers, so many international retailers find themselves partnering with the local players.
Generally, luxury brands that have a smaller presence in China are building more stores: Tod’s, Hogan, Brioni, Belstaff and Jimmy Choo. Ralph Lauren is ramping up its China presence, adding an estimated 50-60 additional stores from 10 stores at the end of the third quarter 2012. Burberry is the exception. It continues to expand aggressively, adding a projected 43 stores to its 57 existing stores.
For some luxury brands such as Chanel, Bottega Veneta, Fendi, Hermes, Dior and even Louis Vuitton, we are seeing a trend toward modest expansion in order to maintain exclusivity. Of course, there will be more new entrants who finally feel comfortable to enter the Chinese market.
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