The big European and American fashion brands are focusing on East Asia, given the slowdown in the demand for luxury goods in mature markets. According to analysts, China will be an engine of growth for the world luxury business in years to come. The potential market is huge (175 million Chinese are expected to be interested in luxury purchases and are projected to be as many as 250 million by 2010), young (affluent Chinese are aged 47 on average, as compared to 60 for the European, according to Merril Lynch), and metropolitan (it's concentrated in major urban areas such as Beijing, Shanghai, Shenzhen, Guangzhou, as well as in 27 second-tier cities, such as Changchun, Chendu, Hangzhou, Kuming, Nanjing). According to 2007 data from the China Statistical Yearbook 2007, China's 41 biggest cities account for 51.8% of Chinese GDP, 23.5% of the population, and 50% of retail sales.

A recent research study conducted by MAFED of SDA Bocconi School of Management on behalf of the Altagamma association, has looked into the strategies of Western brands to capture this potential growth. The first evidence has to with increasing sophistication in distribution: growth in China takes place through a retail model, in other words via the opening of monobrand shops. Recent trends show a growth in the number of retail points and a growth in their average size, in order to display additional categories of goods and improve shopping experience. Ermenegildo Zegna, a pioneer of the Chinese market with 65 shops in 31 cities, is increasing its commercial space, for instance by adding a second floor to the Zegna boutique in the Plaza 66 mall in Shanghai. Dunhill and Emporio Armani have followed suit. The Montblanc luxury brand, present in 41 Chinese cities, has just opened its largest shop in the world on Shanghai's Nanjing Road, which has a surface of 6,100 square meters. Another strategy is opening shops specializing in certain luxury goods: Gucci has opened its first boutique devoted to watches in Shanghai, while Calvin Klein, Diesel and Miss Sixty have opened shops to sell their branded accessories. Another trend concerns the widening of the brand reach toward second-tier cities, where luxury retailing is growing fast within malls and with the first street-level points of sale.

A further strategy is to intercept Chinese growth is increasing control over business retail, overcoming the partnership model in association with local agents or distributors. The American brand Coach is now running directly its business retail hitherto managed by Imaginex in China, Hong Kong e Macao. Same strategy has been implemented by Montblanc and Dunhill.

If global appeal is what the Chinese consumer seeks in luxury brands, the most recent strategies go toward coming globality with local cultura. For instance, Fendi organized a memorable fashion show on the Great Wall, while Zegna launched an advertising campaign filmed on the Great Wall and in the Forbbiden City, and Armani employs the Japanese actor Takeshi Kaneshiro for the Emporio pret-à-porter line and the Chinese top model Du Juan for the main brand. And Gucci and Louis Vuitton have added luxury Mahjong ceramics to their goods on offer.

by  Stefania Saviolo, Lecturer of Strategic Management, Bocconi University, and Co-director of the Master in Fashion, Experience & Design Management (MAFED) of SDA Bocconi