Is the ‘1st in Shanghai’ strategy attracting global luxury brands?

What Happened On a rainy afternoon in May, Shanghai was buzzing with excitement as the Balenciaga Spring 2025 collection show kicked off outside the Pudong Art Museum. Despite the drizzle, 800 guests — among them French actress Sophie Marceau, Academy Award winning actress Michelle Yeoh, and Chinese actress and singer Yang Chaoyue — attended the event, while an estimated 96.6 million netizens worldwide watched the live broadcast, with the show’s video replayed 220 million times. This marked Balenciaga as the first international luxury brand to debut its latest season’s fashion show in Shanghai, aligning with the city’s “First in Shanghai” strategy. Announced earlier this year, First in Shanghai aims to make the city a leading business and fashion hub by attracting debut China stores for global brands, supporting high-profile shows and exhibitions, and building a professional services ecosystem to compete with the likes of Beijing and Hong Kong. Since the announcement of these measures, luxury and fashion brand activity in Shanghai has surged. In April, Louis Vuitton held its “Voyager Show” Women’s Pre-Fall 2024 Collection at Shanghai’s Long Museum, and in the following weeks, Anta unveiled its first net-zero carbon mission store on Wukang Road, Arc’teryx opened its inaugural brand experience store on West Nanjing Road, and American Vintage, Anine Bing, and Mugler made their mainland China retail debuts. Also this year, Shanghai welcomed Loewe’s first public exhibition, “Crafted World,” and saw the launch of the first Supreme store in China, a Gucci pop-up, and the reprise of Hermès’ men’s show. For brands looking at expanding into the China market or holding major events there, Shanghai is investing heavily in making the city a leading contender. The city’s First in Shanghai initiatives include substantial financial incentives to attract brands, offering a one-time payment of 1.2 million RMB ($165,389) for brands to open their first Asia stores in the city, and up to another 1.2 million RMB in subsidies for internationally promoted events. Incentives continue at the district level, with Jing’an launching a special fund for brand building and Xuhui supporting international brand events with up to 10 million RMB ($1.37 million) and night-time events and activations receiving up to 2 million RMB ($276,000). Two things seem to be at play here: boosting Shanghai’s global prestige at the city level, and boosting local consumption and tax income at the neighborhood level. The Jing Take These efforts have reportedly already borne fruit, with Shanghai seeing the establishment of 489 “first stores” from January to April 2024, including three at the global or Asian level and 55 mainland China debut stores, according to Ju Xinping of the Shanghai Municipal Commission of Commerce. This marked a 55% increase YoY, indicating the city’s incentives are working. The question is whether other cities in mainland China, or even Hong Kong and Macau, could invest in similar initiatives, creating a new battleground to become the country’s top fashion and luxury hub. So far, considering the success of events since January – and Beijing’s desire to play down luxury consumption along the lines of Xi Jinping’s Common Prosperity policy – Shanghai’s could be too far in the lead for anyone else to catch up. If other cities in Greater China fail to invest at the same level as Shanghai, this could continue for years to come. According to two working reports issued by the Shanghai government, the city plans to exceed 2 trillion RMB (approximately $274 billion) in creative and design industry output by next year. By 2030, Shanghai aspires to be a world-class “design city,” leading fashion trends and creating a 520 billion RMB ($71.2 billion) consumer market with an annual growth rate of 5%. This could dovetail with the city’s efforts to be a luxury fashion magnet, helping Shanghai better compete with the likes of Tokyo and Seoul for brand activations and creative launches. This doesn’t mean there isn’t competition for high-profile retail openings in mainland China. Luxury brands are increasingly expanding into lower-tier cities in China to tap into the rising consumer demand in less saturated markets. For instance, last year American brand Coach expanded to the Shanxi Province industrial city Baoji, marking its second foray into a fourth-tier city following its 2022 opening in Daqing. This strategy aligns with the broader trend of targeting tier-three and tier-four cities, which house 70% of China’s population and offer significant purchasing power potential. The growth prospects in these regions are underscored by reports of over 500 new shopping malls expected to be built by 2025, highlighting the untapped market potential. The Jing Take reports on leading news, presenting our editorial team’s analysis of the key implications for the luxury industry. This recurring column covers everything from product launches and mergers to significant discussions on Chinese social media.

Is the ‘1st in Shanghai’ strategy attracting global luxury brands?

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Published June 21, 2024

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Is the ‘1st in Shanghai’ strategy attracting global luxury brands?