Gathering of the brands

As belts tighten on luxury spending in China, Italian high-end outlet mall eyes big expansion

Though recent government austerity measures have dampened the expansion plans of several foreign luxury brands in China, it has not led to a decline in the demand for such products. Lower prices for the recognized brands are proving to be an irresistible draw for Chinese shoppers.

No one knows this better than Florentia Village Jingjin Designer Outlets, a high-end outlet mall on the outskirts of Tianjin. The joint venture between Italy's Fingen Group and the Waitex Group of the United States recently celebrated its second anniversary in Tianjin and announced a slew of plans to further expand its presence in other Chinese cities.

"We will expand our brand mix by accommodating 60 more international brands from the current 159 at the Tianjin mall, including Polo, by the Spring Festival of 2014," says Maurizio Lupi, managing director of construction and operations with Fingen Group Asia.

Florentia Village outlets have been planned in Shanghai and Guangzhou next year, along with more such facilities in second- and third-tier Chinese cities.

"We have added well-known high-end brands like Jimmy Choo and Etro to our line-up. The new brands have been introduced after repeated demand from consumers," Lupi says, adding that the Tianjin outlet offers luxury, international premium, sports and outdoors, as well as leisure brand products.

"About 20 percent of the products are high-end brands, such as Prada, Gucci, Bulgari and Celine," Lupi says.

"The recent austerity measures have not affected us as we are selling branded goods at discounted prices. Customers who used to buy these products at boutique stores prefer to buy from us now as they get them for reasonable prices along with a good environment and the same quality."

Despite the global financial woes, the mall has managed to stay above the water through sustainable partnerships with leading global brands and its outlet business management concept, Lupi says, indicating that they are poised for steady growth in China.

"We keep changing our product line-up frequently and on average replace 5 to 6 percent of the brands in the village each year," he says.

Apart from big international names, the Italian-style village is also trying to rope in some exceptional domestic brands."Local brands only account for 10 percent of the total shops in the village," Lupi says.

"The outlet industry should not hinge its future only on international luxury brands. In smaller cities, local clothing brands cannot be ignored as it may be difficult to get sufficient leftover or off-season products from the big brands," says Guo Zengli, president of the China Shopping Center Development Association of Mall China.

Florentia Village is located in the Wuqing development area, roughly between Tianjin and Beijing. Covering an area of 60,000 square meters, with 42,000 square meters of gross leasing area, the village attracted more than 2 million tourists and fashion enthusiasts last year.

"Last year our revenues were in excess of 1 billion yuan, a 20 percent year-on-year growth. China accounts for 10 percent of our global business currently and we expect it to increase further," says Lupi. Globally, the company has developed five Florentia Villages in Italy and 21 throughout Europe.

Guo from Mall China says factors like convenient transportation, brand mix and discount levels have been important for the success of Florentia Village.

However, with other developers like Yansha Outlets, the first outlet mall in China, planning outlets in Tianjin, competition will intensify.

"The number of such outlets in a city is restricted as these are for a niche market. In a city like Beijing or Shanghai, there will be an oversupply if there are more than four outlets, " Guo says.

According to current estimates, there are around 300 outlet centers in 81 Chinese cities. However, there is world of difference between them when it comes to quality.

"Outlets are not just places for consumers to buy discount goods. It is not a lower-end business model in retailing. It needs to provide a good shopping environment and get the best possible leftover products from the limited suppliers," Guo says.

With more developers and retailers joining the sector, the risks in the industry are also growing, he says.

"There are still enough growth opportunities for good outlets, depending on whether they have stable goods supply channels, reasonable planning, good location, brand line-up etc."

The real game-changer, Guo says, will be when outlets start focusing more on improving the shopping experience, rather than just adding products. "Creating an excellent shopping environment and improving service will be the future direction," he says.

Lupi says that he is confident of his company succeeding as it is blending its European experience with Chinese preferences.

"Chinese consumers are paying more attention to aspects like brand awareness and consumption ability. They are also focusing on quality service and shopping environment. This is what makes us confident," he says.

yaojing@chinadaily.com.cn

(China Daily Africa Weekly 08/02/2013 page22)