Major Asian cities are “saturated” with luxury stores
Research companies Boston Consulting Group (BCG) and Bernstein have said luxury brands “need to examine” their retail networks across Asia. They have said in a new joint report that many luxury brands have too many stores in cities such as Tokyo, Seoul, Hong Kong, Shanghai, Beijing, Singapore, and Taipei and that these locations are now “saturated” with luxury stores.
The research draws on BCG’s proprietary Metroluxe Index, which assesses opportunities for luxury sales by city, and the Bernstein proprietary Luxury Store Database, which indexes approximately 7,000 stores run by 36 luxury brands.
“The global luxury market is changing rapidly, and brands need to adapt accordingly,” said Olivier Abtan, a partner and managing director in BCG’s Paris office and the global leader of the firm’s luxury topic area. “China, though it still offers growth, is no longer the El Dorado it once was. Also, the overall slowdown in the market means that savvy brands now prefer variable cost structures to expensive fixed-cost real estate.”
Mr Abtan also mentioned that e-commerce is becoming “a force to be reckoned with” in luxury markets.
The BCG and Bernstein research notes that physical stores continue to play very important roles in brand-building for luxury firms. After the abundant openings over the past decade, however, brands today have fewer opportunities for store expansion. The focus now is on initiatives such as moving to better locations, renegotiating rents, and revising store footprints in order to maximise revenue.
The research identifies the world’s six big luxury centres as New York, Tokyo, London, Paris, Seoul, and Hong Kong and says those cities can to continue to support multiple stores per brand, with a mix of flagship stores and select stores catering to large populations of local shoppers and to steady flows of tourists.
If brands are looking for new places to open stores, BCG and Bernstein say the US remains “a solid market” for luxury brands. They add that many second-tier cities in the US promise “strong, steady sales” from their local populations and are still “under-penetrated”.
