Longchamp's cautious optimism
By Sun Yuanqing(China Daily)
Updated: 2015-04-17 08:00:00
The economic downturn in Europe and the United States and corruption clampdown in China have left many luxury retailers struggling, but at the more affordable end of the market, some brands are enjoying strong sales. Sun Yuanqing reports.
It might not be the most prosperous time for luxury retail worldwide, but for certain brands, the outlook is not so grim.
French luxury house Longchamp reported global sales of 495 million euros ($462 million) in 2014, an 8 percent rise from 2013, thanks to a strengthening global retail network and expanding product ranges.
The growth outperforms the global personal luxury-goods segment, which increased 5 percent last year, estimates management consulting firm Bain & Company.
The leather goods and clothing brand is best known for its folding nylon tote bags mostly priced from 4,000 yuan ($645) to 8,000 yuan. It is usually placed in the affordable luxury sector with competitors like Italian brand Furla and New York-based Coach.
While Europe accounts for about 60 percent of its total sales, half of which are in France, the brand has been actively expanding its global retail network in a bid to avoid the impact of regional economic fluctuations.
The company opened a new subsidiary in Russia last year. Aside from a new flagship store on the Champs-Elysees in Paris, it opened stores in Barcelona, Rome and Munich.
"The string of new openings has supported the sales," Jean Cassegrain, CEO and grandson of Longchamp's founder, tells China Daily during a recent trip to Beijing. The company is still family-owned.
"We will continue to seek out new markets and invest in our existing retail base," he says.
This year, the company is planning to open stores in Florence and Macao. It is planning entry into new markets including Austria, Canada, Cambodia, Peru and Paraguay.
Meanwhile, the brand is consolidating existing stores by turning them into wholly owned ones, a strategy that started in 2006. The existing five stores in Singapore will be integrated into wholly owned stores. The brand now owns 287 stores and subsidiaries globally.
"Owning them means that we can control the way that our products are sold, the standards of the retail environment and the level of service that our customers receive," Cassegrain says.
At the same time, the brand added to its product ranges with Le Pliage Heritage, a leather remodel of the classic Le Pliage line. New training workshops started in Western France. It also invested 22 million euros in the logistics center in Segre.
China has already overtaken the United States and Japan to become the home of the second-biggest consumer group for the brand, Cassegrain says. France has the biggest consumer group.
Jean Cassegrain, CEO and grandson of Longchamp's founder, says China has become the home of the second biggest consumer group for the brand. [Photo/China Daily]
The brand saw a 25 percent increase in sales in China last year. In comparison, the overall Chinese luxury market declined 1 percent in 2014 due to economic slowdown and the government's crackdown on corruption, according to Bain's China Luxury Market Study.
The continuing government crackdown on gifting could actually create an opportunity for accessible luxury brands such as Longchamp, says James Roy, associate principal of China Market Research Group in Shanghai.
"There is a climate that people are not opting for expensive brands that stand out. Brands like Gucci and Louis Vuitton have become too widespread for them. Rather, they are looking for low key and more affordable brands. And they are buying for their own use," he says.
Longchamp recently opened stores in Shenyang of Liaoning province and Qingdao of Shandong province. The brand now has 20 stores in China, a modest number compared to other brands. The plan for new stores in China this year is not set yet as the brand cautiously looks for the best locations.
"We need to expand to get more visibility but we want to do so very cautiously. If you set your goal at five or 10 stores, you end up opening in any location just to meet the objective. The objective is to improve under the existing locations and open selective new locations if we can," Cassegrain says.
The brand offered a limited-edition design for Chinese New Year, combining Chinese red with suede, Chinese customers' favorite material. It is also introducing the ready-to-wear line in the larger stores.
"A lot of Chinese know about Longchamp. We want them to know us not just because of nylon folding bags, but also leather and ready-to-wear and shoes. There is still a lot of work to make more Chinese customers truly understand Longchamp," says Josephine Liang, the brand's China general manager.
For 2015, Cassegrain says he expects the global growth to be in the high single digits.
"We are supporting it with a lot of new activities, products and stores. It's not just waiting for growth. We have to push for it."