HANGZHOU, China — Dolce & Gabbana just keeps
rolling.
Releasing estimated financial data for the first quarter
of 2005 as it opened a store here, the company said its earnings before
interest, tax, depreciation and allowances climbed 12 percent to 135
million euros, or $174.1 million at current exchange, on a 15 percent
increase in wholesale revenues to 1 billion euros, or $1.29 billion. EBIT
rose 9 percent to 109 million euros, or $140.6 million, while consolidated
revenues grew 20 percent to 700 million euros, or $903
million.
Meanwhile, the company has taken another major stride by
opening its first store in mainland China at Hangzhou’s EuroStreet, a new
luxury mall on the shores of the city’s famous West Lake.
The
company chose Hangzhou, among China’s most affluent cities and a prime
tourist destination, because of its thriving retail climate. It also was
the first area in China to enact World Trade Organization rules allowing
foreign enterprises to wholly own their retail operations. Dolce &
Gabbana plans to use Hangzhou as a base to gradually expand in China, with
openings in Shanghai and Beijing slated for 2006.
The
7,500-square-foot store, which opened earlier this month, occupies a
three-story building and features the designers’ women’s, men’s and
accessories collections. Women’s wear is on the ground floor and men’s on
the second, with both areas being about 2,150 square feet. The
1,300-square-foot third floor is a VIP area featuring premium products and
leads into an outdoor patio that will be used for events and
exhibitions.
The design by Ferruccio Laviani is dominated by black
glass, interspersed with windows, and with flourishes such as whimsical
purple glass Murano chandeliers and silver chain curtains. The walls of
the VIP area are lined with fur, reputedly pelts from southern China’s
SARS-notorious civet cat.
The group now has 87 group-owned stores
worldwide.
According to a spokesman, the company established the
wholly owned Dolce & Gabbana Hangzhou Ltd. in January this year,
making it “the first Italian fashion company to obtain the retail license
to operate in China without local partners.” The flagship in Shanghai and
the shop in the Beijing Palace Hotel planned for 2006 also will be wholly
owned. Since 2000, the group has followed a policy of total
verticalization and control of both production and
distribution.
Via e-mail, Stefano Gabbana told WWD: “We have always
proceeded step-by-step in all the new markets we have scouted and this
policy has definitely turned out to be a winning one, if we see the
results we are obtaining.”
He said that, while the group has plans
to expand further in China beyond the Shanghai and Beijing openings, it is
premature to fix dates.
The EuroStreet mall is Hangzhou’s newest
luxury property, and part of a larger development of the Hubin Road area,
which also includes the new Hyatt Regency Hangzhou, Ethan Allen and
Bentley dealerships, and several other hotels and malls still under
construction. Dolce & Gabbana’s existing neighbors at EuroStreet
include a French restaurant and Swarovski and Hailives stores. In the next
several months, the 376,670-square-foot compound will add shops for
Armani, Armani Casa, Ermenegildo Zegna, Omega, Alviero Martini, Hempel and
Giadanio A. Paladini.
Located about 75 miles south of Shanghai,
Hangzhou enjoys a symbiotic cultural and economic relationship with that
city, but has a larger role as the capital of Zhejiang Province. Zhejiang,
the most prosperous area of the emerging Yangtze River Delta, is home to
46.8 million people and, along with Hangzhou, contains the important port
cities of Ningbo and Wenzhou. With a written history dating back 2,200
years, and famous for the scenic West Lake, or Xihu, hilly tea plantations
and countless temples and museums, Hangzhou is one of China’s most popular
tourist destinations, attracting some 30 million visitors a year.
Along with tourism, the city also boasts strong manufacturing and
information technology industries, with GDP growing 15 percent to $23.26
billion. According to the Hangzhou Bureau of Statistics, the city’s
population of 6.4 million has an average annual disposable income of
$1,558, very high by Chinese standards. The combination of local wealth,
the Zhejiang tourist influx and tourist spending has created a ripe retail
environment in Hangzhou.
Hangzhou Tower, the city’s largest and
most successful luxury mall, sees foot traffic of 30,000 to 50,000
shoppers a day, and last year reaped profits of 1.8 billion yuan, or about
$225 million, according to its director, Tong Minqiang. Wang Lan, editor
of Zhejiang lifestyle magazine Exquisite Life, said all of Hangzhou’s
retail properties operate in the black and are quite successful.
Dolce & Gabbana’s Hangzhou flagship is part of the small chain
of stores it operates throughout Asia. The company opened in Japan only
three years ago, and launched a Hong Kong boutique in June 2004. Domenico
Dolce observed, via e-mail, that “China is certainly a key market, where
we plan to establish very important operations. But, apart from figures
and business, this is a country where presence is important, a country you
need to get to know. The Chinese are a bit like Italians: They are very
hard workers, are very fast and have good taste. Tellingly, they boast a
great culture of fashion, textiles and colors.”
The company
spokesman added that Dolce & Gabbana will stress brand positioning in
the immediate future, with a focus on men’s wear. In regard to China’s
rampant piracy of branded goods, “we are well aware of the seriousness of
this issue and…are proceeding with caution, taking all necessary
precautions both from a production and legal safeguarding point of view in
order to restrict the impact of this phenomenon.”
The Hangzhou
opening was attended by several group executives, including the newly
appointed Giacomo Santucci, previously head of the Gucci brand who now is
Dolce & Gabbana’s commercial, licenses and retail director.
  The Dolce & Gabbana store in Hangzhou.
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