June 18, 2008


Boom in Asia, gloom elsewhere for luxury labels

By Michelle Tay

THE sale was on, and the shoppers came. So many turned up, in fact, that the queue outside the Prada boutique was 30 deep on a Friday this month.

The scene at the Paragon Shopping Centre bore out the optimism of international luxury retailers who say they are not only seeing a healthy turnover, but also expect Asian shoppers to continue beating a path to their door, never mind the price of petrol.

Many report double-digit growth in the region this year and are aggressively expanding their presence.

Italian label Versace registered an 11.8 per cent jump in turnover from January to March, and is now aiming to make Asia its second-biggest market in terms of turnover after Europe.

It is splashing 45 million euros (S$96 million) on 11 stores in the region.

Swiss luxury goods group Richemont attributed its 9.8 per cent growth in revenue for last year to strong demand in the Asia-Pacific region, particularly in China and Hong Kong, where sales grew 21 per cent to 1.29 billion euros for the year.

Italian fashion label Prada told The Straits Times that it has seen double-digit growth in the Asia-Pacific so far this year, though it would not release details.

Mr Ben Benjamin, brand manager for French fashion chain Celine in South-east Asia, said: 'We've seen no negative growth quarter on quarter. January, just before Chinese New Year, and April were the best months so far this year.'

Paragon Shopping Centre, which has a concentration of international top-end labels, said that total sales from the blue-chip stores grew 13 per cent in the first quarter, compared with the same period last year.

Although slightly slower than the year-on-year growth of 20 per cent for the first quarter of last year, the figure still shows a healthy crowd of big-spending shoppers.

This despite inflation hitting a 26-year high of 7.5 per cent and the retail sales index going up 7.5 per cent in April from a year ago - although the latter is partly due to higher prices.

Strong sales in Asia are in marked contrast to the scene in the United States and Europe. Italian chain Bulgari, for example, said American sales suffered in the first three months of the year and were soft in Britain, Spain and Italy.

Retailers banking on the trend remaining strong here are opening large stores, despite average monthly rents in Orchard Road being at more than $45.45 per sq ft, up from $36.88 psf in early 2005.

When the new mall Ion Orchard opens next year, Giorgio Armani, Dolce & Gabbana and Prada will have roughly 10,000 sq ft flagship stores, with monthly rents at around $60 psf.

American haute jeweller Harry Winston will open its first South-east Asian boutique there too, according to developer Orchard Turn Developments' chief executive Soon Su Lin.

'The market for luxury jewellery and timepieces is fast expanding in Asia and connoisseurs from the region and beyond are drawn to Singapore in search of these items,' she said.

Industry players told The Straits Times that shoppers here can still splash out because their wealth remains buoyant, thanks to wise investments over the past two or three boom years.

Mr Christopher Kilaniotis, managing director of Cartier for Singapore, Malaysia, Indonesia and Australia, said: 'While inflation is a big threat, a great number of people have earned solid income from properties, shares and other investments.

'Maybe the return on investments has slowed a little, but this does not mean you can't afford something you've always aspired to own, like a new car or a watch.'

Mr Sebastian Suhl, chief executive of Prada Asia Pacific, said strong growth in Asia reflected the increasing wealth in the region.

A recent survey by Barclays Wealth predicted that Singapore and Hong Kong will have the highest concentration of wealthy households in the world by 2017, with about 40 per cent of households having assets of at least $1 million.

But not all top-end retailers interviewed by The Straits Times were uniformly upbeat about the state of the industry and its prospects.

Speaking on condition of anonymity, a director of a company distributing luxury fashion labels here said that his sales were healthy from late last year until the Chinese New Year.

After that, sales dipped drastically as news of the US financial turmoil sank in.

He added: 'Stock-market investors who invested heavily during the bull run now have to endure the recent volatile markets.

'I reckon many retailers are 10 per cent to 30 per cent behind their sales targets across all businesses.'

Dr Jannie Tay, president of the Singapore Retailers Association and vice-chairman of The Hour Glass watch chain, is also cautious.

'I don't think we can expect to continue galloping the way we were. Maybe it's time for a breather,' she said.

Economists believe the effects of the slowdown in the US and Europe and soaring petrol prices may eventually hurt shoppers' sentiment here.

But Dr Chua Hak Bin, Asian strategist at Deutsche Bank Private Wealth Management, thinks rising affluence in China and India still spells favourable conditions for Asia's luxury-goods market.

'Also, in terms of overall growth, Asia just hasn't been hit as badly as the US and Europe,' he said.

Marketing consultant Mabel Tay, 45, would likely agree with that.

'My spending has never been affected by the economy because I always set a budget for shopping,' she said. 'But if need be, I would cut down to, say, one, instead of two, handbags.'

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