Mon, Jan 25, 2016 - Page 14 News List

Bulgari to launch Chinese boutiques

Reuters, DAVOS, Switzerland

Bulgari is investing more than ever in China, aiming to tap in to the growing reluctance of Chinese shoppers to buy abroad due to security fears, stricter customs checks and a devaluation of its currency.

The world’s third-largest watch and jewelry brand, part of luxury goods powerhouse LVMH Moet Hennessy Louis Vuitton SA, plans to open two boutiques in China this year, Bulgari chief executive Jean-Christophe Babin said.

“If you see there is a potential swing with more mainland and less travel proportion, it’s one more reason to speed up your mainland investments,” Babin said at the World Economic Forum in Davos.

China’s economy grew 6.9 percent last year, its slowest rate in 25 years, putting a damper on Chinese sales of everything from food to trips abroad, but Babin said some Chinese consumers have become nervous about traveling to Europe and other places, due to the attacks in November last year in Paris, where 130 people were killed.

The shift to domestic purchases is also being fueled by the devaluation of the Chinese currency, which makes it more expensive to buy abroad, as well as stepped-up checks by Chinese customs on purchases made abroad.

Chinese consumers, whether shopping at home or abroad, make up more than 30 percent of sales of Swiss watches and are notorious lovers of luxury goods in general.

Chinese tourists returning from overseas trips are becoming subject to stricter-than-ever customs controls on what they bring back, Babin said, adding that watches are subject to a 30 percent levy plus a penalty that is a multiple of that for anyone caught not declaring the purchase.

“People are quite scared to buy a US$10,000 watch in Hong Kong, Zurich or Tokyo and eventually have to pay twice as much as they originally paid,” Babin said.

Bulgari, with annual sales estimated between 1.5 billion and 2 billion euros, (US$1.6 billion and US$2.2 billion) is No. 3 behind Richemont AG's Cartier and Tiffany & Co.

“More than ever it makes a lot of sense for Bulgari to invest in China,” Babin said.

Fears about China’s downshift have dominated high-level discussions at the World Economic Forum, both during public debates and in smaller, private meetings.

However, behind the gloom and doom a more complex picture is emerging.

Melissa Ma (馬顯麗), the founder of the US$6.8 billion private equity firm Asia Alternatives said: “In Davos, there is a gap between perception and reality. If you are on the ground in China, you are not worried.”

Asia Alternatives, which is based in Beijing, invests across Asia, with about half of its portfolio in China.

China’s most influential executives could be seen this week in Davos, including SOHO China Ltd chief executive Zhang Xin (張欣); Baidu Inc (百度) president Zhang Yaqin (張亞勤) and Alibaba Group Holding Ltd (阿里巴巴) founder Jack Ma (馬雲). These leaders have stepped in to argue for a more nuanced view on China as many expressed concerns that an unintended consequence of Chinese President Xi Jinping’s (習近平) anti-corruption campaign would be continued disruption of the financial markets.

Additional reporting by New York Times

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