Shanghai Tang, Richemont´s secret weapon

Swiss-based Richemont Group has made a strong bet for its Shanghai Tang brand, a core part of its Chinese portfolio. Aimed to double the number of Shanghai Tan stores in two years, Richemont recognizes and praises the rising power of China's

shoppers on the global stage.

The Shanghai Tang fashion boutique chain currently boasts 17 outlets in China, and Richemont expects this figure to hit 30 in the next two years, as the firm taps into increasing affluence levels in the country. As part of this process, it will open a new flagship branch, the Shanghai Tang Mansion, in Shanghai next year, covering four floors and 20,000 square feet. However, Richemont plans does not want to stop its spoilt child´s expansion and already announced its plans to unveil a Shanghai Tang branch in Paris by 2013, alongside a similar outlet in Tokyo by 2014, appealing to Chinese consumers travelling overseas.

"China is the number one luxury market in the world," Raphael le Masne de Chermont, Richemont's executive chairman, told Bloomberg in a recent interview. Chermont argued that the hardening demand for big-name products such as Louis Vuitton among Chinese shoppers is reshaping the trading climate both at home and abroad. "Who do you think will queue for LV in Paris?" he said. "Not Westerners."

According to Richemont, the proportion of customers making purchases at the 42 Shanghai Tang sites worldwide who are from mainland China has grown from 2% to 18% in three years.
This total still falls behind the 22% logged by American clients at present, but Chermont predicted Chinese buyers would assume a leading role within the next 18 months.

Richemont Group, owner of luxury watches and writing instrument brands such as Cartier, Piaget and Montblanc, beat analysts' estimates and posted a 29 per cent growth in sales in the April-August '11 period, buoyed by demand in China, though the European and American regions too showed strong growth. Richemont, however, was only cautiously optimistic over performance for the rest of the year, citing difficulty in predicting the effect of the Euro zone fiscal deficits, remind analysts.

Matt Marsden, director of consumer and retail research at Daiwa Capital Markets, the investment bank, suggested in declarations to Bloomberg that Richemont's strategy was likely to be a profitable one.  "Shanghai Tang has done a fantastic job of building brand equity and has become a genuine luxury brand in Hong Kong and the West," he said. "This will help give it credibility and increase the chances of success as the company expands in China."