Bally pushes ahead with China expansion

Bally expects its double-digit sales growth in China to continue in the coming years, as the international luxury leather-goods brand plans to open flagship stores in Beijing and Shanghai soon.

It is also upgrading its existing network with 51 stores and seven outlets in 30 cities around the nation.

"Changing needs of consumers dictate that we connect with existing and new customers not only through the product, but that Bally's brand values align with those of sophisticated Chinese consumers," said Reinhard Mieck, CEO of both Bally Switzerland and Labelux Group.

"This is an important area for us to explore and understand to ensure we connect with China's upscale urban consumers."

He said the Chinese market ranks as one of the most significant in Bally's global business, and over the past few years, Bally has seen annual growth in high double digits in emerging markets.

The 161-year-old Bally began in Switzerland and has had a presence in China for 25 years. It is under Labelux, a division of the privately held Joh A Benckiser SE, whose other divisions include Coty Inc and Reckitt Benckiser Plc.

Multinational market research houses Bain & Co and McKinsey & Co both identified the main driving force of growth in China as urbanization. They estimated that the urban population of the nation will increase to 72 percent by 2025 from 42 percent in 2010, resulting in rising wages and the development of further mega-cities.

Chinese consumers make up about 12 percent of global luxury spending and about 30 percent of global market growth. The Chinese mainland luxury market has increased at a compound annual growth rate of 34 percent since 2004, and is now more than twice the size of Russia's $5.73 billion and the Middle East's $5.1 billion.

"We are certainly very bullish on China and it will continue to be a key focus for Bally," Mieck said.

"However, the mainland market is not the only story, with Chinese consumers now increasingly spending internationally either through Hong Kong and Macao, or more recently in Europe."

Bain has identified the top market-defining factors for luxury in the next three to five years as Chinese consumers, including their spending as tourists, who now account for more than 20 percent of global luxury sales. Asian consumers, including people from Japan, South Korea and Southeast Asia, make up more than 50 percent. Thirty percent of global luxury sales now occur within emerging markets.

"Our object is to grow at a sustainable level. As Bally is part of a privately owned group, we are to allow the global business to grow organically while maintaining our core values," Mieck said.

International luxury brands are competing to open stores and expand their footholds in China, given the market potentials and economic slowdown in the developed markets, such as Europe and the United States.

During the first seven months of this year, 13 global top premium fashion brands, such as Louis Vuitton, Gucci and Chanel, opened or announced plans to open 56 stores, including 11 flagship stores, in 18 cities in the Chinese mainland, according to the luxury-goods and service research center affiliated to the University of International Business and Economics.

"We have to make sure we engage with Chinese consumers in a way that is meaningful for them," Mieck said.

"Our flagship virtual store dedicated entirely to the Chinese market was an important step in that process, but there is more to be done, and in a market the size of China, which continues to develop and change at such a rate, it's a challenge we are enjoying."