CEO Talk | Andrew Keith, President, Lane Crawford

In his latest CEO Talk, Imran Amed sits down with Andrew Keith, president of Lane Crawford, to discuss the business and its strategy for expansion in the maturing Greater China market.

Andrew Keith | Source: Lane Crawford

SHANGHAI, China — As China’s market for luxury goods slows, impacted by decelerating economic growth, a government anti-corruption drive and increasingly discerning shoppers, Lane Crawford, founded in 1850, continues to dominate the landscape. With $700 million in revenues in 2012 (up 23 percent from the previous year) and revenue for the current financial year projected to exceed $1 billion, Lane Crawford is by far the largest luxury department store chain in the Greater China region and one of the largest in the world. The store also continues to set global standards with its rich, multi-brand consumer experience.

Indeed, walking into a Lane Crawford store is like walking right into the pages of a high-end lifestyle magazine, complete with a cover story at major entrances that helps consumers to quickly read the store’s point of view at a given moment.

In contrast to the prevailing trend, there are no branded shop-in-shops at Lane Crawford, which differentiates it not only from many other luxury department stores around the world, but also from the scores of identikit concessions you see elsewhere in China. Everything in a Lane Crawford store has gone through the Lane Crawford edit, which brings together an energetic mix of 800 international brands from across fashion, design, homeware and art, all with a distinct point of view.

Headquartered in Hong Kong, the company opened its first Greater China store in Beijing in 2007, followed last year by another smaller store in Yintai Centre, in the city’s Central Business District, which caters to ultra-high net worth VIP customers. In October, Lane Crawford opened its largest store in Shanghai, with more than 150,000 square feet of retail space, and is currently gearing up for its next major opening, in Chengdu, a second-tier city that is fast emerging as the major hub in Western China.

The Beijing, Shanghai and Chengdu stores (which also serve as distribution centres for e-commerce) are intended to anchor Lane Crawford’s “connected commerce” strategy, which marks the company as the country’s only omni-channel luxury retailer, enabling it to reach customers in important cities across China with same day (or next day) delivery.

As the company stakes its claim to what will soon be the world’s largest luxury market, BoF sat down with Andrew Keith, president of Lane Crawford, in the company’s new Shanghai store to learn more about the business, its expansion strategy and the story-driven visual merchandising “magic” that makes Lane Crawford one of the most exciting luxury retail environments on the planet.

BoF: There was actually a much smaller Lane Crawford store in this same space at one point. Tell me about the decision to come back in a big way here in Shanghai.

AK: Lane Crawford is really a Greater China retailer and the story of our brand has had Shanghai at its heart for many, many years. We made this strategic decision to come back to Shanghai about four years ago now. And the decision was based as much on instinct as it was on commercial opportunity. It was based on what we were seeing evolving through Beijing and also in Hong Kong. Our [Shanghai] customers were increasingly looking for a multi-brand environment edited with a Lane Crawford perspective.

And what they were getting excited about from a product perspective were brands that were fairly sophisticated, brands that weren’t necessarily wide in terms of their current distribution, and so we saw this sort of evolution of sophistication coming from the customers here in China.

BoF: Even back four years ago?

AK: Yes. Four years ago, brands like McQueen, Givenchy, and Alaïa were really starting to resonate with the Chinese customers and so that really gave us the indication that the time was right. Timing and instinct is something that you only ever feel when you’re in the market yourself. That, together with the growth from customers who were coming from Shanghai, gave us the indication that there was definitely great opportunity.

The other issue of course was finding space. Retail space in China is not easy to find. Finding 150,000 square foot spaces is a very challenging task. And so we looked at this location and what we realised was that it gave us great frontage, it gave us the opportunity for scalability — the biggest store in the Lane Crawford portfolio. And it gave us a very prime positioning in the heart of Shanghai and what has probably become the most important retail street within China.

So there were a number of different factors that came into play when it came to the decisions to come here. But fundamentally it was about being able to build Lane Crawford in Shanghai as really the heart of Shanghai: a store that reflected everything that’s happening in the city, from a creative point of view and from a commercial point of view.

BoF: Was that strategy or approach based on any learnings from previous market entries? I know the previous operation was run by a franchisee. What were the things that Lane Crawford took away from that?

AK: The first thing we realised was that we needed to be able to control our own destiny. It’s very difficult to do that when you’ve got a franchise partner. The Lane Crawford experience is so intrinsic to our brand: the product and the visual merchandising and the staffing and the service and the space. We needed to be able to control that. So that was really the fundamental learning from it; you can’t give that to a partner.

What we also learnt is that China takes a lot of time, a lot of patience, and quite a lot of money. You’ve really got to have a long-term vision. With Shanghai, we took our time, and we moved when we felt the space was right. We weren’t necessarily looking at it from a market perspective, we were just looking at it as, when did it feel right for us? And the time felt right now.

BoF: Apart from this instinctual and opportunity-based decision making, how critical for the business is having a massive presence in Shanghai?

AK: Strategically, China is part of our expansion strategy. And we see great opportunity for Lane Crawford to be in the market in Shanghai, but we’re also opening 82,000 square feet in Chengdu six months from now in the first part of next year.

And we’re seeing that there’s great commercial application of that as we expand physically in China, but also as we build our e-commerce strategy because China is such a diverse and huge market. We’re not going to be doing cookie-cutter stores in every major Chinese city, but we’re bringing the Lane Crawford experience into the digital format and using our stores to act as the physical expression of the brand and marrying that with all the convenience of online.

So we’re really sort of taking the brand in two different ways, but very connected at the same time so that it’s consistent.

BoF: That “connected commerce” strategy was my next question. People tell me that some of the online-only players are really struggling to connect with the luxury consumer digitally in China. Do you think that is because they don’t have that physical presence?

AK: The physical presence enables us to be able to offer the customers a fuller experience as a brand. Particularly around issues that are affecting Chinese consumers: the credibility, the integrity of the product.

Lane Crawford is a brand that’s been here for 160-odd years. The element of trust is very, very important for the Chinese customer. It’s important that they have an inherent trust of us as a retailer, and that’s something that we’ve built up over generations of customers.

BoF: I noticed the spaces are very flexible. Everything can be adapted and personalised and adjusted to fit a certain purpose.

AK: Our stores are fluid spaces. Spaces that are not contained and spaces that enable us to completely change when we want to. So that means the whole store can change overnight if we want the whole store to change overnight. The fact that we have full flexibility of our space means that we can change it all the time, and that means that we can tell personal stories rather than brand-specific stories.

When we built this store particularly, it was about trying to break down as much as possible the barriers of traditional department stores. Because a lot of the time you feel physically constrained by the environment.

BoF: Particularly in terms of visual merchandising I really think there is something to be learned from Lane Crawford. How do you think about the role of VM here?

AK: We’re not just about selling product. We’re about being able to tell amazing stories. And we’re about being able to showcase the best that’s around the world and bring that to China. And I think that we’re fortunate that we have a team of incredibly visual and creative people who get very inspired and very excited about having a platform to be able to do that.

Significant amounts of space are given to visual merchandising. In all of our stores, at the heart of them, they’re VM, they’re not retailing space, which is almost putting retailing on its head, right? To say that your prime real estate is not going to be given to a cosmetics brand or a shop-in-shop, or to something that’s going to generate the highest financial gain.

We get excited about telling stories and we get excited about what we see and we want to be able to share that in a Lane Crawford way. We call it “the magic” and certainly it’s the Lane Crawford magic and we try to sprinkle that wherever we can.

BoF: I believe this store cost about $65 million. In terms of ROI, when do you expect this store as an investment will begin to generate a return, and also as you look ahead, what’s next?

AK: Every Lane Crawford store is a significant investment. So there’s no compulsion for us to move quickly. For us, it’s about a very sustainable approach and it’s about building on the market as we see there is opportunities happening. Obviously, the connected commerce is part of building our brand strategy in the market as well. So it’s not just about physically building stores, it’s about being able to reach as many Lane Crawford customers as possible within Greater China.

And there are opportunities that are coming up, and each one of those opportunities we’ll be looking at. The reality is that a particular city within China needs to be fairly advanced in terms of it sophistication to support a Lane Crawford. And those cities — there are millions of people in those cities, that is true. But even if you just take the top 0.5 percent of that, you’re still doing an education piece around that is still a significant investment in terms of customer acquisition and investing in terms of the staff training and the space. There’s a lot that goes into it.

So our strategy with China has always been, we move when we feel the opportunity is right. It’s not that we’re going to be, as I said, opening up 100 different stores in the next five years. There are now some brands rethinking how they see China. And the scale of the opportunity.

BoF: I don’t know much about Chengdu. We have all heard about Beijing, Shanghai, Hong Kong, but not Chengdu, where you are opening another big store next year. Paint me the picture. Why was Chengdu the next choice?

AK: Chengdu feels right for a number of reasons. The first one is the fact that the west side of China is growing rapidly and it’s growing faster than the rest of China, in terms of GDP growth. Chengdu is currently growing at 12 percent compared to the rest of China which is 7.2 percent. That’s as a result of a lot of investment from central government into the west side of China.

Chengdu is cash-rich. It’s a young city. It’s a city full of entrepreneurs and technology. So it’s a kind of Silicon Valley of China. And the total catchment of Chengdu is 250 million people. So if you look at the western provinces that feed into Chengdu, from that point of view, there is big commercial opportunity there.

But it’s also going to be very key connection point because the government are building a high-speed railway line that will connect Chengdu to Thailand which will ensure that China will be able to have fuel supplies that come up through the Gulf of Thailand.

But from our perspective, with Beijing, Shanghai, and Chengdu, we basically have triangular coverage of the majority of China. And, as hubs, they then feed the majority of our customer base and the opportunities within the market. They also act as distribution centres for online. So all of our fulfilment for online comes from those stores which means we can serve as regional centres with same-day delivery.

BoF: Let’s talk about that Chinese luxury consumer. I would love to know how you think about the consumer landscape here, and how different parts of this store are appealing to or targeted to different types of consumers.

AK: The diversity of the market is extraordinary. What’s exciting is that it’s all growing.

For example, the space that we’re sitting in is for our top-spending customers. And within this space, I don’t think there’s any other retailer that would give 20,000 square feet of retail space just to create an environment that is about personally discovering product, that’s about being able to come and see great unique pieces that have been bought specifically for you. It’s about a wardrobing experience, it’s about trunk shows, it’s about designer personal appearances.

But then there’s also other consumers coming in and they’re maybe buying their first pair of shoes and they’re connecting in different ways, and they’re seeing the fact that there’s 200 brands of bags and shoes out there, all presented in a way that’s completely visually stimulating and completely different to anything they’ve seen in a mono-brand environment. They’re seeing a world of possibilities.

We’ve then got customers coming in and maybe accessing brands for the very first time through cosmetics. And so they’re coming in and what they’re experiencing is a completely different way to cosmetics. They’re not experiencing spraying fragrances, but they can come in and have fun and play with makeup. They’re going to get suggestions on how to do that with a fashion eye as opposed to just from a beauty perspective.

There’s lots of different customer segmentations. It’s too easy to generalise.

BoF: Yes, there is not one monolithic Chinese consumer.

AK: The thread that probably sews it all together is the fact that all of those customers are looking to differentiate themselves. This is quite different to what Hong Kong was at this stage in its development, where everyone was quite happy to wear head to foot designer brands all the time. And in Japan.

If you come from a totalitarian state, where everyone has been so unified in terms of their approach to education and how they can express their individuality, to then have this incredible awareness of the fact that you want to feel like an individual and express yourself.

And you see it with the younger generation. Everyone goes wild. They’re taking so much risk when it comes to how they express themselves and just craziness when it comes to styling. But they’re having so much fun, and that’s what’s great.

BoF: But one thing I couldn’t help but notice as I walked these floors is the relative absence of local brands. There was Helen Lee and Chictopia, and Nicole Zhang, but not much else.

AK: All of them have been selling very well. I personally feel incredibly committed to supporting China and the creativity that’s starting to come through here. What we have here is just the start and it’s something that I see growing as we start developing our own generation of talent.

What we want to do is be able to select Chinese talent that will sit within our portfolio of 600 brands. That’s different to saying, “Oh yeah we want to showcase some talented Chinese designers.” It’s about saying, “Ok, we believe that these brands and these creative talent are very relevant within a global platform of brands.”

BoF: And by the way, in a world where everyone’s looking for the greatest, newest, freshest, most interesting thing, maybe there’s a new pool of talent here that is ready for the global market?

AK: What’s interesting at the moment is that the talent in China is going through a sort of discovery process, looking for a collective kind of voice; a new generation and what that means. And not in a pastiched way, not in a ‘Let’s go back to Shanghai in the 1930s kind of way, but what are the references going to be? Where is the cultural background? It happened in art before it happened in fashion. And what we’re still waiting for is this movement that will sort of be a Chinese kind of movement. I think it will happen.

This interview has been edited and condensed.

Imran Amed travelled to Shanghai as a guest of Lane Crawford.

Editor’s Note: This article was revised on 3 December, 2013. An earlier version of this article misstated that Lane Crawford’s new Shanghai store cost the company $500 million. It did not. Lane Crawford’s investment in the store was RMB 400 million (about $65 million).

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1 comment

  1. Proud to work with Lane Crawford for MY BOB.

    It’s just a great customer that offers you an amazing purchase experience.

    Geoffroy Moreels from United Kingdom