International fashion and luxury groups are opening coffee shops in major Chinese cities, entering an intensely competitive space in a bid to draw in customers amid a slowdown in luxury spending.
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In Shanghai, French luxury conglomerate LVMH added a cafe and dining space to The Louis, a massive three-storey, boat-shaped concept store that opened in the bustling HKRI Taikoo Hui shopping centre in late June. That followed French fashion house Celine’s debut of a garden-themed coffee shop nearby in April.
In Nanjing, capital of China’s eastern Jiangsu province, Spanish retailer Zara unveiled Zacaffè, its first coffee shop in Asia, inside its 2,500 square metre (26,910 sq ft) flagship store. In Beijing, Italian luxury fashion house Giorgio Armani launched its first cafe in the city at China World Mall, taking up more than 350 square metres, or about a third of the store’s footprint.
“The foray by foreign fashion brands into the coffee sector is not really about developing a new product line, but rather about creating a novel shopping environment and socially-driven experience to boost customer loyalty,” said Celia Chen, research director for JLL North China.
Brands would continue to explore this model, given high margins on fancy coffee drinks and low operating costs for cafes relative to other strategies for attracting consumers, such as celebrity endorsements, she added.
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The tactic also represented a cost-efficient way for international companies to market themselves at a time when consumer spending was showing little sign of picking up, said Chester Zhang, research director at Savills in Shanghai.
