Shang Xia, Hermès bet in China, expects profits in 2016

The volume, rate of growth and the huge potential of the Chinese luxury market has made great luxury company positioning industry in China using different strategies. Shang Xia was established as a joint venture between the Hermès Group and renowned Chinese designer Jiang Qionger in 2008. Shang Xia in Chinese means «up-down» and writing involves some of the most easy to identify oriental characters by a foreigner.

Currently the company has a boutique in Shaghai one in Beijing and make relatively recently opened one in Paris, in the most exclusive area of the French capital. With regard to the latter must indicate that the main objective is to introduce Chinese high quality products with the idea of eliminating the prejudice that almost everything Made in China means low quality.

Hermès Shang Xia wants to coordinate past, present and future. The splendor of the past few centuries ago when China was a world economic power, with an ancient craft tradition gave way to an industry of refined luxury and high quality. Present , in large multinational companies like Hermès or Richemont, which has launched a similar project in 2008 to acquire Shanghai Tang, a house of high fashion with a number of shops (in greater numbers than Shang Xia), that has recently dressed Nicole Kidman, among other celebrities.

Lastly is the future, a bright future is seeking both Hermès and Richemont with their project, trying to reach the increasingly affluent Chinese consumers, at this time, as we have been indicating in Luxonomist is in a time of stagnation due to the slight cooling of the Chinese economy and the tight control by the authorities on gifts than before, received officials.

To enter Shang Xia both China and especially in his shop in Paris, the company counted with an original advertising campaign agency Fred & Farid Group. Worth seeing one of the videos of the campaign such as this attached.

The profitability of the project is, so far, quite slow and the own company sources expect break even in 2016, according to Wall Street Journal have published in a recent article.

Shang Xia has three boutiques designed by the Japanese architect Kengo Kuma.The boutique opened in Shanghai Bund in 2010 and has a zen, futuristic framework; Beijing (2012) has inspired the Great Wall design; and Paris Shang Xia (2013) was his first store outside of China. Product lines include Shang Xia furniture, housewares, accessories and apparel, all of which communicate aesthetic values, attitudes and practices that radiate from the idea of Chinese tea ritual. Shang Xia also develops each year a series of limited edition objects of high cultural interest.

In an interesting variation of how traditional brands are promoted, Shang Xia maintains two showcases for three weeks, including live demonstrations, presenting their high quality materials with cultural products and objects of the company, for prices ranging from EUR 60 to 20,000. Our colleagues of Selfbank in The Luxonomist recently analyzed the value of Hermès in thecomprehensive article.In brief we will observe if Shang Xia adds or detracts value to this important European company. The strategy may seem risky but is, in any case, very elegant.