Although China’s luxury slowdown is still going strong as the government’s anti-corruption campaign continues, it definitely isn’t stopping Italian luxury brand Salvatore Ferragamo. In 2014, China’s appetite for the brand remained solid with 18 percent year-on-year retail growth for the 2014 fiscal year. China is vital for the brand, since the Asia-Pacific market made up 37 percent of its total sales for the year.
Right before Ferragamo’s ready-to-wear runway show during Milan Fashion Week, Jing Daily held an exclusive interview with Ferragamo Parfums CEO Luciano Bertinelli to get his opinions on the state of the Chinese luxury market and the opportunity for fragrance sales in China. Read the interview below to see his explanation of the company’s future development and expansion plans in China—especially in the country’s growing second-and third-tier cities.
What is your opinion on the luxury fragrance market in China and its evolution?
As you can imagine, the Chinese market is one of the leading markets for us. I just came back from China two weeks ago in order to have a deeper understanding of the second-, third-, and fourth–tier cities. With Salvatore Ferragamo, we started 20 years ago in China, and with the fragrance business, we started quite recently—more or less seven years ago.
Despite this, we are having extremely positive results. However, we believe that China still has huge potential, especially in the second- and third-tier cities. The business is still there for Shanghai and Beijing, however, the cost of operation and communication is starting to skyrocket. We believe the second- and third-tier cities [hold] more potential today. The prices for operation, communication, and advertising are becoming more and more similar to the U.S. market.
For what concerns China’s evolution, every year, we receive double-digit growth—not only us but the whole brand in general.
However, the population that currently actually uses fragrance is still minimal, some say 1-2 percent, so there’s really a huge potential that we can oversee and I believe we can also state that there’s no limits for the growth in the next five to 10 years to come.
Since the fragrance market is not fully mature in China, how do Chinese consumers perceive Ferragamo fragrances and who is your main target market?
The fragrance concept is still not very well-known amongst the Chinese population, however, the consumers are learning; interest and understanding are evolving very fast. Before, many bought the fragrance as a gift, but today, an increasing amount of people—especially women—purchase for themselves, so this is really a huge potential and huge business for the future.
What are the differences between first- and second–tier cities for your market?
First-tier cities are huge. We already have our distribution channels established in some of the biggest department stores; we are also attracting an international and wider array of clientele. In second-tier cities, however, there is a lot of potential but [we’re] geared toward a 100 percent local Chinese market. Hence, this takes a lot of time and it’s a matter of education from our side to communicate and attract this type of Chinese clientele. However, I believe 100 percent that the business and the potential is absolutely in the second- and third–tier cities.
The communication for China is coherent and the same throughout nationwide China. We use almost the same communication tools and channels such as TV, social media, PR and events, [and] we’re starting to use a more paperless communication framework.
What are your forecasted expansion plans for China and APAC?
As a fragrance business, we’ve started quite recently in China; we are present in the major cities with more than 200 cities whom we do business with, as well as our own counters, where we only sell Ferragamo products at more than 120 personalized counters. We also invest heavily in traditional and online media. Recently, we [have been] thinking of selling on our digital platform via e-commerce.
How do social media, key opinion leaders (KOLs), and celebrities affect your business?
I was recently in Beijing specifically for this one month ago, where we had a press conference to launch our new product, Acqua-Essenziale Blue for men. Together with our PR department, we invited many KOLs. Today, they have become increasingly important for us. I’d like to emphasize that we have a good brand; we have good products, but we need KOLs to share our story.
Yanie Durocher is a lifestyle and fashion blogger at The Marginalist.