Do small brands have a chance to establish themselves in China?

The luxury brands such as Gucci, Chanel, and Louis Vuitton have easily entered the Chinese fashion market. This is not the case for small brands which have seen their Chinese dream stop dead. We will see why thanks to the Italian manufacturer of jewelry, Damiani.

Case of the Italian brand Damiani

Damiani has tried to fit into the Chinese market for a decade (see what jewelers should do to attract Chinese tourists ?). Unable to find a partner because of its small size, the brand had to wait a few years to try its luck, the time to be “strong enough and brave enough to do it,” said Guido Grassi Damiani, CEO of the group.

The Damiani brand is known for having made the wedding rings of Brad Pitt and Jennifer Aniston. Just like this sad story, the height of the brand seems to be exceeded. The brand sales fell 9% since December. She recorded a net loss of $ 6.1 million.

The brand health of Damiani is a reflection of many others. The current economic environment affects everyone in Europe. The combination of fashion in Italy says that global fashion sales fell 8% last year, and sales of domestic brands fell by about 20%. The crisis is thus global.

China, the promised land of profit

Faced with such poor results, China seems to be the Eldorado profit. According to the consulting firm Bain & Company survey, luxury sales in China rose 19% last year, and have tripled since 2007. Chinese also boost sales abroad. During their many excursions, foreign customers represent half of the luxury buyers in Italy and France. Most are Asian. The problem for small brands such as Damiani is that foreigners buy brands they know. This is good news for the big luxury houses such as Gucci and LVMH but not for small and independent retailers.

Damiani, therefore, change strategy. The brand will inject nearly 5 million euros in China thanks to the closure of unprofitable stores in Europe. This year, the actress Sophia Loren will be the star of their marketing campaign. However, the investments required to have a location in a big city like Shanghai quickly reach 40 million dollars. These kinds of stores are shops reference because they insist on design. It seems very hard for small isolated brands to have a spot. Can Damiani compete with luxury brands and exist in China with a budget eight times lower?

Small brands: new symbol of scarcity and exclusivity?

The solution for Damiani would be to bounce on the against-success of some luxury brands which became too accessible. Their small size could be a means of promoting the rarity and exclusivity that some luxury brands no longer guarantee. To get results, the Damiani brand will have to be patient. Gianluca Brozetti, the CEO of Roberto Cavalli, said that “the expansion in China is an investment for the medium to long term.” Having opened its first store in China in 2009, it will take 5 years to see real results. This is especially true for smaller brands’ reputations, such as Damiani.