Harrods in talks to open store in Shanghai

SHANGHAI: London-based high-end department store Harrods is said to be in talks with Shanghai municipal government on the opening of its first store in China, reported China Daily.

The paper quoted a real estate agent familiar with Harrods’s plan, who said that the British brand is keen in opening the department store in one of the buildings where British banks and merchant houses once traded.

However, locations may be limited for the British retailer as only a few locations are large enough to house Harrods’s department stores, which is one of London’s largest.

The proposed venture by Harrods into China is said to be initiated by its managing director, Michael Ward, who was reported as saying that “China is the most probable” market for Harrods, but the company’s corporate affairs department has maintained that no plans have been confirmed for a new store in Shanghai.

Harrods is a well-known outlet for luxury good among the Chinese consumers who travel to Britain. A British daily, The Guardian reported that the number of Chinese travellers who shopped at Harrods in the first six months of 2010 rose 125% year-on-year.

China Daily quoted head of retail at Jones Lang LaSalle, China Eugene Tang as saying that it would take a long time before any lease agreement can be concluded with Harrods and that he does not expect to see the opening of Harrods in Shanghai in the next couple of years, adding that “it will take much longer for them to get things right before the opening”.

He said that negotiations between Harrods and potential Chinese partners alone would take one year, and another year-and-a-half will be spent on design, decoration and stocking.

Harrods’s move into China is seen as a break of tradition for the high-end retailer, said Knight Frank analyst, Regina Yang, adding that Harrods is renowned for their conservative business philosophy and that “most premiere British retail brands don't go overseas for expansion”.

However, other British retailers have been making in-roads into China. Marks & Spencer has opened its second store in Shanghai’s Yuyuan Garden last month and is already said to be scouting for its third branch.

Yang said that although luxury goods are relatively cheaper in Hong Kong, Europe and the United States, many mainland consumers prefer the convenience of making occasional purchases at local stores.

According to Bain & Co, a management-consulting firm, China has overtaken the US to become the world's second-largest luxury goods market, with Japan holding the top spot. Sales of luxury goods in China grew 12% in 2009 to US$9.6 billion (RM30.7 billion), accounting for 27.5% of the global market.

In the next five years, China's luxury spending will increase to $14.6 billion, making it the world's largest luxury market.

High-end brands such as Louis Vuitton, Zegna, Gucci, Dior, Tiffany, Hermes and Prada have all already opened stores in Shanghai between April and June to meet luxury buyers' ballooning demand.