While Richmont has essentially declared that China isn’t buying, prestigious London department store Harrods is preparing to unveil an exclusive club in Shanghai. This step not only marks the luxury retailer’s first venture into international territory but also contradicts the wishy-washy buying patterns observed among Chinese consumers.
Just this week, PYMNTS reported, “China, once hailed as the savior of the luxury sector, is no longer providing the same support as before, at least for now.” PYMNTS also reported that the industry had been banking on a resurgence in China to counterbalance the sluggishness in the U.S. market. That lifeline is no longer viable, as sales within the sector continue to decline, posing challenges for industry stakeholders.
That said, with the ongoing sluggishness in consumption recovery, this strategic decision aims to leverage the steadfast demand from affluent Chinese consumers.
Image courtesy of Harrods
Dubbed “The Residence,” the forthcoming club is set to open its doors by the end of this year, occupying the second floor of Cha House, a historic landmark situated in the vibrant center of Shanghai. Within the same building, visitors can already enjoy a Harrods tearoom and bar, accessible to the general public.
The club will feature the inaugural Chinese establishment of renowned British celebrity chef Gordon Ramsay. Membership fees will commence at 150,000 yuan ($21,000) per year.
In addition to the exclusive perks offered at The Residence, members will have the exceptional privilege of acquiring rare and limited bottles of alcohol through Harrods’ collaboration Scottish whisky company, Edrington Group.
Members will also enjoy the global concierge services for which Harrods is known. The club plans to commence operations with an initial membership capacity of 250 individuals, ensuring an exclusive and intimate environment for members.
Harrods Managing Director Michael Ward told Bloomberg that Chinese customers accounted for 16% of the store’s sales in the preceding year. Nevertheless, the pandemic prompted a shift in buying behavior for Chinese luxury shoppers, who typically favored overseas purchases. They have now turned their focus toward domestic options due to the increasing variety of offerings within China and escalating global prices.
“Harrods services the top 1% of the world’s wealth,” Ward said. “If I was in the mid-market at the moment, I wouldn’t be doing this. But we know that the wealth in China will grow. And we will just continue to focus on those relationships with the very top of the top.”
During an earnings call in April, LVMH Chief Financial Officer Jean-Jacques Guiony expressed optimism regarding the company’s prospects in China for 2023.
At the time, the owner of Louis Vuitton reported a 17% rise in sales for the first quarter, driven partially by the resurgence of shopping activities among Chinese consumers after the easing of strict pandemic restrictions in the country.
The optimism conveyed by Guiony this week echoed the sentiments expressed by LVMH Chairman and CEO Bernard Arnault back in January.
“We have every reason to be confident — indeed optimistic — on the Chinese market,” Arnault said. “In Macau, where the Chinese can now travel to, the change is quite spectacular. The stores are full and it’s really come back at a very strong pace.”
Learn more: LVMH ‘Extremely Optimistic’ on China as Luxury Sales Leap
Additionally, Hermès has been actively enhancing its presence by either opening new stores or revamping existing ones. As reported by WWD, Hermès made its return to Tianjin, China on Wednesday (July 12) with the inauguration of its 28th store in the prestigious shopping complex MixC. The reopening marks the brand’s return to the city after a 12-year absence.
Meanwhile, online luxury retailer Mytheresa has inaugurated its first Asian office in Shanghai, with the objective of providing personalized shopping experiences to local customers who were unable to travel to overseas luxury destinations due to COVID-19 restrictions.
“The company [globally] has grown 20%-plus in recent years, and our expectation from China in coming years is double that,” CEO Michael Kliger said in April. “Because we are so small here, this doesn’t even mean we are going against the big guys, it’s still a very special customer we focus on.”
Kliger further noted that Mytheresa has the potential to attract “mature” luxury shoppers in China. He said the top 3% of Mytheresa’s customer base contributes to a significant 35% of its total sales, indicating a strong appeal to high-end clientele.
See also: Mytheresa Hopes to Carve Space in China’s Luxury Market
To keep their core customers, luxury retailers are emphasizing exclusivity. Drawing inspiration from renowned brands like Hermès, retailers such as Saks and Gucci have implemented initiatives tailored to their top clients.
In April, PYMNTS reported that Saks expanded its exclusive top-client program, Saks Limitless, which offered its members access to luxury fashion through a range of unique services and benefits.
The Saks Limitless program caters to thousands of clients within the Saks Fifth Avenue ecosystem and strives to use its personal styling capabilities to foster brand loyalty, both in digital and in-person interactions.
Read more: Luxury Retailers Like Saks and Gucci Lean Into Exclusivity
PYMNTS also reported that Gucci unveiled a luxury boutique in Los Angeles dedicated exclusively to its VIP clients and A-list celebrities. The new Gucci Salon store will operate by appointment only.
The Gucci Salon marks a shift in focus for the brand, which had previously sought to connect with the Gen Z demographic. Now, Gucci aims to cater to consumers who can spend freely. VIP clients are offered a personalized shopping experience, as they can book appointments and have the store stocked with products that align with their unique preferences and tastes.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More