In recent years, Chinese luxury brands have held appeal for international luxury groups, but Richemont’s recent sale casts doubt on their viability. On Monday, the Swiss luxury group sold Hong Kong-based high fashion brand Shanghai Tang to Italian fashion entrepreneur Alessandro Bastagli and Cassia Investments after a nearly 20-year stint.
This sale by Richemont, whose chairman Johann Rupert recently indicated that it would be restructuring its portfolio in the coming months to optimize performance, suggests the brand wasn’t resonating with Chinese consumers. Hurun’s Best of the Best Awards from this year shows that Chinese women tend to favor luxury brands from Europe—Shanghai Tang ranked tenth behind a list of Western luxury brands that included Gucci and Chanel.
Since its founding in 1994, Shanghai Tang’s founder, billionaire Sir David Tang, hoped its signature East-meets-West designs, modern takes on mandarin collars and Cheongsam-inspired evening wear would catch on with consumers in the West. However, it never really gained momentum outside of Hong Kong. More recently, the brand has found fans in Hollywood celebrities like Nicole Kidman and Kate Moss.
Richemont first bought a controlling stake in Shanghai Tang in 1998 and later took the remainder of the fashion company in 2008. In 2011, Shanghai Tang had to close its store in Hong Kong due to rising rents, but a few years later made a decision to begin pivoting its designs to the growing millennial Chinese middle class market.
Aside from his fashion line, Tang also opened a lifestyle boutique Tang Tang Tang Tang. That also closed in Hong Kong, but it’s website suggests there may be further plans in the works.
However, just because Shanghai Tang’s performance hasn’t worked for Richemont, doesn’t mean these types of investments aren’t bearing fruit for the luxury industry. Hermès-backed high-end Chinese lifestyle brand Shang Xia is beginning to take off with Chinese consumers after a rocky start as the market starts to appreciate Chinese-made designer goods, according to Shang Xia’s artistic director and chief executive officer Jiang Qiong Er. The brand has chosen to expand its reach this year, with a new e-commerce platform on Tmall in addition to its physical retail stores in Beijing, Shanghai, and Paris.