“We are dealing with the most mobile and affluent young customer globally. Looking at the stats around what luxury spend could look like in 2020, 44% [of spend] will come from Chinese customers, half of that will come from China itself and the majority will be from millennial customers. If you think about the market opportunity, it’s pretty significant,” Adrew Keith, president of Hong Kong department store chain Lane Crawford, said in an interview.
Andrew Keith is on a mission to cement the position of the 167-year-old retailer, and its luxury sister chain, Joyce, as the go-to shopping destination for affluent 25-to-35-year-old Chinese shoppers.
As China’s economy continues to show signs of cooling, Lane Crawford is among those pinning their hopes on engaging millennial consumers to drive a boom in e-commerce sales.
“We are in a fortunate position in that we have got heritage, so we are trusted. Generations of people have grown up with Lane Crawford,” he said.
“To continue to be a leader and be able to guide this exciting next generation of customers as they evolve is something we feel energized by, ” he continued.
With about 100 UK brands across clothing, shoes, accessories and beauty – including Alexander McQueen, Grenson and Stella McCartney – among the retailer’s 1,000 labels, Lane Crawford is widely regarded as a stepping stone into the vast Chinese market.
Since Keith took the helm in 2015, it has almost doubled its store count to eight, following launches in Beijing, Shanghai and Chengdu. And his multichannel strategy could enable brands to scale up rapidly in the country.
Lane Crawford does not disclose its financial results but Keith seems unfazed by the cooling of the Chinese economy, which grew by 6.7% last year – the slowest rate since 1990. He admits “some negative impact” from currency fluctuations, but says there is now “some stabilisation”. Nonetheless, he says profit margins have remained static, and the business is “containing margin erosion relatively well” after bolstering its product offering for millennial shoppers.
Meanwhile, revenue, estimated at more than US$1bn (£740m), has “seen positive growth in line with expectations”. Greater China is Lane Crawford’s fastest-growing market: stores report double-digit sales increases. Keith attributes this to its “lighthouse location” strategy – planting flags in Beijing, Chengdu, Shanghai and Hong Kong to cover all of the country’s key cities for same- or next-day delivery.
The retailer has also sharpened its focus on customer profiling, after investing in shopper research across China through ethnographic interviews to gain insight into people’s values and living expectations.
“It is a great way for us to connect with our customers in a meaningful way and get some rich insight from them,” explained Keith. “It is feeding into how we are starting to shape our customer journey and our strategy around that,” he added.
In line with its findings, Lane Crawford is plotting to ramp up its focus on “immersive” retail by dividing store layouts according to consumer profiles and lifestyles, rather than by product category.
The retailer has dipped its toe in the immersive experience through a collaboration with London menswear independent Trunk Clothiers, which launched a curated space at Lane Crawford’s three Hong Kong stores in August for Autumn 2017.
The edit comprises 35 brands including British footwear label George Cleverley and Italian clothing brand Altea.
Trunk founder Mats Klingberg describes Keith as “down to earth”, adding that the team is “very professional”: “Lane Crawford is an impressive business – I’ve always looked up to its team. They are known for being innovative – there’s no [other store] I know of that partners with boutiques on this scale.” He added that it has given Trunk a meaningful opportunity to “test out” its offering in a department store setting among its existing customer base in Hong Kong, Japan and Singapore.
However, as the focus on rising local designers has grown in response to customer demand, western labels may be at risk of becoming sidelined.
Keith believes it is essential for them to embrace its feedback to gain market traction: “The most successful partnerships are the ones where we have an open dialogue on how we can most successfully provide product, service and experience to the customer that is relevant for them. We give specific feedback on products and their development, merchandising and fabrication to our brands. [For example,] the cut may need to be adapted, or the fabric needs to change slightly for climate reasons. It’s the brands that are able to adapt positively that we find are most successful.”
Nine months into his leadership role Keith also launched Lane Crawford’s online store, which he now seeks to position as its flagship. The outlook for Keith’s strategy is looking bright – in PwC’s 2017 Total Retail report, 79% of Chinese respondents said they buy products online via mobile devices at least monthly.
The limitations of display space in stores is driving the digital strategy: its largest store, in Shanghai, houses around 35,000 fashion SKUs on a 12-week turnover rate. Keith adds that Lane Crawford’s omnichannel customers spend seven times more than single-channel customers, and half of all online transactions are click-and-collect. To leverage this, it offers shoppers the option of placing orders in store for home delivery, and is considering how to use mobile app WeChat to engage new customers.
“It was a big risk,” he recalls. “I had a lot of exposure to merchandising but I was primarily focused on product development and design. So I approached it from a product perspective – looking at merchandising brands in the same way you would merchandise a collection.”
It paid off. In 2006, Keith became vice-president of merchandising. Two years later he became president at listed sister chain Joyce, where he secured franchise agreements with brands such as Rick Owens and Balenciaga, before returning to Lane Crawford as president.
One of the most important lessons Keith has learned as a leader is that ambitions for scale must be supported by team capacity. Launching Lane Crawford stores in Shanghai and Chengdu within months of each other in 2013 proved challenging.
“We had great ambition. Everyone was very positive and excited about it, but [we were] on-boarding a significant amount of people dealing with building retail space in a new market, as well as product assortment and logistics – all of this in China, which is still not as easy a place to do business as Europe, in terms of infrastructure”, he explained.
As retailers navigate the changing luxury landscape, Keith is among those leading the charge on exploring how to keep the next generation of shoppers hooked: “One of the issues of luxury is that the word has become synonymous with certain kinds of brands and experiences. I think, actually, there is an opportunity to say that luxury for 2020 will be a different experience. We are looking at how that can be redefined.”
Redefining luxury is no mean feat, but if anyone is up to the task, it would be Keith.
(Source: Drapers )