Four ways to rethink the luxury retail location
Key points to remember:
Retail rental activity in Shanghai for the first quarter of 2021 showed no signs of fatigue related to COVID-19, with net absorption reaching a record 28,562 m².
When searching for real estate, brands can take advantage of associations with distinctive neighborhoods, like Beijing’s 798 Art District, a creative hub that is starting to attract luxury brands.
Pop-up stores can be effective for luxury brands that want to do something unusual for dial-up engagement because they have a big impact on social media which helps drive traffic.
The surge in luxury spending in China has put additional pressure on store location strategies. Shanghai is a prime example of a thriving business destination. According to CBRE Group, commercial rental activity in Shanghai for the first quarter of 2021 showed no signs of fatigue related to COVID-19, with net absorption reaching a record 28,562 m². Momentum also remains strong, with new retail projects underway at sites bordering Shanghai.
The blueprint for luxury brands deciding where to open a store is to find an important and prestigious location: identify a high-profile retail location to strengthen brand positioning and, of course, connect with consumers from local luxury. For example, a Diesel Hub concept store recently opened in the six-story Shanghai-based Grand Gateway 66 shopping mall, which is also home to luxury brands like Tesla and Bottega Veneta.
It is an efficient and predictable principle for finding outlets. However, the future challenge for luxury brands is to leverage their locations as competitive selling propositions while adding brand value in the process. In other words, looking at a point of sale through a qualitative lens and beyond traditional quantitative measures of luxury footfall data.
Here, Daily Jing describes four ways luxury executives can leverage location to stand out in an increasingly crowded luxury retail space.
Luxury brands usually decide their location based on where and how consumers choose to spend their free time, as luxury retailing is a consequence of these places. The K11 Art Malls in Hong Kong, Shanghai, Guangzhou, Wuhan, Shenyang and Tianjin (with other openings planned) are destinations to appreciate art, as with the Georges Mathieu retrospective exhibition, currently at K11 MUSEA.
This type of environment dedicated to cultural retail is the raison d’être of luxury retail. Opportunities also exist in the growing domestic tourism and leisure sector, especially in popular vacation destinations such as Sanya and Hainan. Likewise, China’s cruise tourism industry is expected to become the largest in the world by 2030 – a compelling reason why some luxury brands like Bvlgari are aboard the Costa Venezia, a specially designed Italian-themed cruise ship. for Chinese customers.
Burberry’s decision to open its first social retail store in Shenzhen Bay MixC was no coincidence. The luxury brand could have opted for China’s fashion capital, Shanghai, but the store’s distinctive concept is based on technology. Shenzhen is the tech capital of China, but it’s also home to Tencent, which provides the technology exclusively for Burberry’s social retail experience. Location synergies are not just at city level.
Brands can also benefit from associations with neighborhoods that have a distinctive character. One example is Beijing’s 798 Art District, a creative hub that is starting to attract luxury brands, including Shanghai Tang, which has opened a concept store near the UCCA Contemporary Art Center.
Pop-up stores can be effective for luxury brands that want to do something unusual to increase engagement. They also have a big impact on social media, helping to generate traffic. Most pop-up stores are located in malls, but they can also provide temporary access through unconventional locations while giving the brand a creative edge.
Yves Saint Laurent had launched a hotel-themed pop-up store at the Shanghai Museum of Modern Art – king-size bed and bathtub included. This approach also gives brands the advantage of identifying new locations that are not showing up on the retail radar. Porsche China has 136 outlets concentrated in the coastal cities of the southeast and the regions of the west. Pop-up stores offer Porsche the opportunity to venture into underserved but potentially viable locations with minimal risk and cost.
While location is critical, the actual physical building is just as important in sending brand signals. Heritage buildings are favorable and their scarcity in Chinese cities adds an additional sense of exclusivity. It would have taken Tom Dixon Studio two years to find the perfect location in Shanghai. Its newly opened hub in Xintiandi is located in a traditional Chinese building that celebrates Shikumen, a Shanghainese architectural style. Alternatively, brands can recreate uniqueness. This route is vividly illustrated by the Apple Sanlitun in Beijing, designed by the architectural firm Foster + Partners. The stand-alone flagship store, while in a prime location, opens on all four sides.
The location should not only be about to touch, but should also captivate the luxury consumer. Shopping centers in prestigious neighborhoods will remain a priority. Still, luxury brands need to think about how chosen locations can provide a competitive advantage. As luxury brands continue to expand their business footprint, it may be prudent for executives to take a step back before signing new leases. Their locations could make the difference between simply meeting expectations or greatly exceeding a brand’s business potential.
Glyn Atwal is associate professor at the Ecole Supérieure de Commerce de Bourgogne (France). He is co-author of Luxury Brands in China and India (Palgrave Macmillan).