Luxury Brands Shift China Focus From Store Size To Service

European brands such as Tod's are focusing less on expansion, and more on customer service as sales flee overseas due to high local luxury taxes. (Tod's)

European brands such as Tod’s are focusing less on expansion and more on customer service as sales flee overseas due to high local luxury taxes. (Tod’s)

While most luxury companies have been constantly pushing to expand their presence in China over the past decade, a new era of slower growth has some brands opting to focus on delivering impeccable service rather than adding increasingly massive flagships to Chinese cities. Chinese media recently reported that the keyword with luxury brands in China these days is not “bigger” shops, but “better” customer interaction and management.

In the past, most big luxury brands fought to open flagships in major cities, according to a recent article in Chinese business news site Winshang taken from Japanese source Nikkei. However, losing business to overseas locations and the government’s anti-corruption campaign has caused brands in China to rethink their expansion strategy. With less focus on a shop’s square footage, more attention is being paid to how to retain customers and convert their patronage into sales. The article says that shops are embracing several key strategies, such as separating men’s and women’s apparel and putting women’s wear upfront because sales volumes for women’s clothing are higher.

“Customers in China are not looking for grand-looking shops,” says Edoardo Vittucci, manager of China’s division of Italian shoemaker Tod’s. “What’s more important these days are the one-on-interactions with shop assistants and a speedy, comfortable shopping experience.” Vittuci said that the company is committed to investing in customer service and not just facades. To achieve that, Tod’s will bring eight employees to Italy for three months to understand the Italian retail experience.

While Louis Vuitton, Gucci, and Zegna all have stores in mainland China that are over 1,000 square feet, the article says that customers will still flee for Hong Kong and overseas locations with lower taxes if there is no incentive for them to stay in mainland China. The Tod’s group feels that since mainland China’s prices are at a disadvantage due to high luxury taxes, customer service is crucial for making sales.

A consultancy firm CEO says in the article, “When you segregate your customers in the store, it’s easiest to identify and target the customers’ needs.” He says that the mass expansion of shops by various brands prior to this luxury slowdown has led to an abundance of stores that are not equipped on the customer service front.

However, not all brands are shying away from physical expansion. Burberry recently opened its largest flagship store in Asia-Pacific in Shanghai, while Louis Vuitton opened its largest flagship in Shanghai as well two years ago.

 

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