Their love of luxury brands and willingness to spend on them will stay strong
Europe is struggling to contain a spiraling debt crisis, the U.S. economy is beset with high unemployment, and while emerging Asian economies are growing less rapidly than the past couple of years – none of this is killing off Asian shoppers’ taste for luxury goods.
Today’s times still say when a luxury brand is facing a difficult economy…look to expand into the Asian markets.
The Italian luxury retailer Prada, for example, which had an initial public offering in Hong Kong last June, reported that sales in Asia excluding Japan had climbed 45 percent by the end of 2011.
Italian luxury clothier Ermenegildo Zegna SpA says they are optimistic for 2012 even as Europe’s sovereign-debt crisis weighs on demand in the region and growth slows in Asia. While GDP growth is slowing in China, demand for luxury goods is increasing in so-called second-, third- and fourth-tier cities, Zegna said, and is confident this will continue.
The machinery maker Shandong Heavy Industry Group sealed a deal recently to take a 75 percent stake in the debt-laden Italian luxury yacht maker Ferretti, the latest in a series of Chinese acquisitions of European brands.
The deal for the Italian company reflects the growing demand for luxury in mainland China, and is one of the most rapidly developing countries for the yachting sector with great potential. Under this acquisition, Ferretti’s management team, headquarters and production bases will remain in Italy.
There has been a growing number of Chinese companies taking advantage of Europe’s financial woes by picking up assets and acquiring top brands relatively inexpensively.
Italian luxury fashion giant Prada filed an application with the Hong Kong stock exchange to go public last summer. Their profits soared in the third quarter boosted by increased sales in the Asia-Pacific region.
Still despite all the proven figures, not all luxury brands are convinced jumping into the Asian market is the right thing for them. The need to raise capital explains why some of the most famous Italian companies such as Prada, Bulgari and Ferragamo have been forced to decide between going public and being acquired by a big group. In fact, behind Asia, France is somewhat thriving and has helped some major Italian luxury brands. Gucci and Bottega Veneta were acquired years ago by the French company PPR. Brioni also joined PPR this year, and Bulgari was acquired by LVMH.
With the continued struggling economy in the US, Italy and other European countries, we will surely see more IPO’s and acquisitions of Italian luxury brands in Asia. While the economy there too is facing challenges now, their love of luxury brands and willingness to spend on them will stay strong and be a magnet for those companies needing to stay afloat.
