August 15, 2008 11:57 pm

Furla to double number of Chinese stores

Furla, the Italian leather goods company, plans a significant expansion in China over the next three years.

The company, whose made-in-Italy handbags are sold in the so-called affordable luxury price range, aims to more than double the number of stores it has in mainland China by 2011, said Paolo Fontanelli. the chief executive.

By then, said Mr Fontanelli, China would become the third biggest market for Furla after Japan and Italy.

“We don’t see any [prospect of a] short-term downturn in China,” said Mr Fontanelli, who dismissed suggestions Furla was diversifying into China because prospects in Europe, its biggest market, were bleak.

“The possibility of a recession in the European and US markets is not an argument to stop investing [there]. We can still make very good deals . . . you have to look at the long term,” he said.

This month, the 80-year-old family business launched its first ever men’s collection, which will be sold worldwide, for the autumn-winter season specifically in anticipation of its China expansion.

Gian Luca Traverso, who heads Furla’s Asia-Pacific operations, said: “We see a lot of potential for this [new line], especially in the Chinese market where most consumers are still men.”

In a reflection of the evolving relationship between international brands and their Chinese distributors, Furla will pursue the expansion through a joint venture with Sidefame, the Hong Kong company that has long managed its distribution network in the city.

Foreign brands, which had been barred by Beijing from owning retail outlets in China until 2006, are trying to gain greater control over their distribution networks from the franchisees upon which they previously had to rely. Earlier, Coach, the US bag and accessories brand, announced that it would buy 24 of its stores in greater China from ImagineX, its Hong Kong-based distributor.

But distributors, which had a head start in establishing a retail network, are also now acquiring brands in their efforts to move up the value chain. The owner of Hembly, a Hong Kong distributor, bought Sergio Tacchini, the Italian sportswear brand, in June.

The joint venture arrangement, in which Furla will own 60 per cent to Sidefame’s 40 per cent, will allow the Italian company to capture a share of the profits that typically goes to its retailers.

In the past, Furla sold its goods on a wholesale basis to Sidefame, which ran the stores. The retail value of Furla’s bags is two to three times greater than their wholesale price, according to Mr Traverso. “This allows us to consolidate the retail margin,” he said.

Furla said that it would spend “several million euros” to fund the joint venture, which will focus on lesser known cities such as Shenyang in northeast China, said Mr Fontanelli.

In addition, the Italian company said that it would invest about the same amount to add to its two directly owned stores in Shanghai and Beijing.

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