Posted On 2016/02/05 By In Business, Consumer, Research, Media, Luxury, Shopping With 1054 Views

Why Italian Luxury Companies are still betting on China

In the face of a plummeting stock exchange and predictions of a prolonged bear market, a group of Italian luxury executives remains cautiously, perhaps improbably bullish about China’s economy.

“I think sometimes, there is a misunderstanding,” said Michele Norsa, chief operating officer of Salvatore Ferragamo, the Florence-based manufacturer of $860 oxford shoes and $190 silk ties. “The stock exchange is not really impacting the consumption market.”

In an interview conducted during Milan’s biannual fashion week, Norsa projected confidence. “The mood, if you look at different categories, is still of growth,” he said.

The sentiment was echoed by Gian Giacomo Ferraris, chief executive officer of Gianni Versace.

“We believe that even with this instability, we’ll have double digit growth” in 2016, he said, citing increased brand awareness, underrepresentation in Asian markets, and “an incredible power in the creative area.” The volatile stock market, Ferraris said, could even be a positive development. “Some competitors will exit,” he said. “So there will be incredible opportunities for us.”

This theory—that a wobbly economy could actually benefit luxury companies that don’t already have a major presence on the mainland—was echoed by other executives.

“In China we have a very good distribution” of stores, said Remo Ruffini, chairman of Moncler, the company best known for its $1,500 down jackets. “We don’t have too many stores, around 25; I think it’s important to build up the brand.”

Such upbeat statements are to be expected from a chief executive officer. In this case, the predictions aren’t just blind optimism or positive spin: Other luxury brands postedbetter-than-expected revenue for the fourth quarter of 2015. Burberry Group reported that it had returned to growth in the months through December, while Richemont, owner of the jeweler Cartier, reported just a 9 percent decline in the Asia Pacific Region, against analysts’ estimates of a 16 percent decline.

The same Italian executives, however, also sounded notes of caution. “The beginning of 2016 was quite shaky,” said Ferragamo’s Norsa. “It was already difficult to forecast the size of the growth and mostly, the location of growth.”

Ferraris offered a similar caveat:

“I’m worried, but I have to be courageous,” he said. “But we are still under-penetrated.” The key, he said, is slow but steady expansion. “We don’t want explosive growth,” he said. “A company the size of Versace needs a constant growth rate.”

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Article: Bloomberg Business / Image: Romana Correale

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Stefan (from Austria, Europe) has been living, studying and working in China since 2010. Stefan has worked on several research, publication and consulting projects focusing on the China Travel Market. He holds three Masters degrees and is an expert on China Outbound Tourism, Marketing and Social Media in China. Stefan works with BMG on the Global Ready China Seminars as well as the Global Ready China News and related projects. He also has teaching engagements in the areas of eMarketing and Tourism Strategy.

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