On May 6th, Swire Properties announced its operating data for the first quarter of 2024.
Among them, the wholesale business, which represents the central benchmark of luxury shopping in mainland China, has declined across the entire line.
Take a look separately, the wholesale volume of Beijing Sanli Taikoo Village, Beijing Yidi Port, Guangzhou Taikoo Hui, Shanghai Xingye Taikoo Hui, and Chengdu Taikoo Village increased by 5.4%, 2.4%, 9.2%, 19.4%, and 14.7%, respectively. Only the wholesale volume of Taikoo Li in Qiantan, Shanghai, increased by 0.7% year-on-year. However, considering that this brand has a short history of cooperation and has the lowest base, such a performance is difficult to achieve.
Beijing Sanlitun Taikoo Village and Shanghai Xingye Taikoo Hui are experiencing integration.
At present, the integration of Taikouli South District in Sanlitun, Beijing has been basically achieved. Previously, Kenzo, Stone Island, and Diesel, which were jointly located in the northern district, have opened new stores in the southern district, while Acne Studios and Maison Kitsune’s southern district stores are under renovation. The original H&M flagship store has been split by two brands, Fila and Lululemon, the former has already closed, while the latter is still in the stage of enclosure decoration.
But in the northern district, multiple booths are still under renovation. Louis Vuitton, Dior, and Herm è s have occupied three standalone buildings, including exhibition booths on the ground and underground levels. The stores of Balenciaga, Fendi, and Burberry are also being renovated, and the original Maison Kitsune and Kenzo booths are currently not fenced off.
The entry of the brand into the decoration means that the lease agreement will expire, but due to the larger area of non operating stores in the northern area compared to the same period in 2023, this has to some extent affected the overall sales promotion of Sanlitun Taikoo Village.
The achievement of Shanghai Xingye Taikoo Hui is that it has also experienced integration, but has a large number of empty exhibitions that are not blocked. These booths not only have no choice but to pay for their rooms, but the resulting consumption of sports tends to be zero. This made Xingye Taikoo Hui the most severe increase in wholesale sales among the six mainland names of Taikoo Real Estate in the first quarter.
The integration from Sanlitun Taikoo Village to Xingye Taikoo Hui is a transformation towards high-end. But looking at the manifestations of Chengdu Taikoo Li and Guangzhou Taikoo Hui, this may not necessarily bring a satisfactory increase to Taikoo Real Estate.
Compared to Sanlitun Taikoo Village, Chengdu Taikoo Village and Guangzhou Taikoo Hui have a higher proportion of luxury brands. However, in the first quarter of 2024, multiple luxury brands did not show any slowdown or increase in expenses, with LVMH group and Heyun group expenses increasing by 2% and 11% respectively. The increase in expenses for Herm è s group expenses narrowed from 22.3% to the current 12.6%.
During the epidemic, luxury brands in China experienced rapid growth due to the return of overseas consumption due to the lack of convenient transportation. Chengdu Taikoo Li and Guangzhou Taikoo Hui were the two most prominent names. Both Sanlitun Taikoo Village and Xingye Taikoo Hui have luxury brands entering, but the number of them is not large enough and the brand level is not high enough, resulting in a lower wholesale growth rate compared to Chengdu and Guangzhou.
This explains why Taikoo Real Estate needs to stop integrating Sanlitun Taikoo Village and Xingye Taikoo Hui.
But with the end of the epidemic, the gradual resumption of travel without borders, and the favorable exchange rates and pricing in countries such as Japan, luxury goods without borders are once again being welcomed. In the first quarter of this year, multiple luxury brands exaggerated the colorless increase in the Japanese luxury goods market in their performance reports.
In such a context, Sanlitun Taikoo Village, which has a large number of mid-range and light luxury businesses, and Beijing Yidi Port, which does not have luxury businesses at all, have recorded lower wholesale sales declines.
In the first quarter financial report of 2024, Swire Properties showed a more cautious stance on expanding luxury brands in Beijing and Shanghai. Due to the limited number of high-end markets in Guangzhou and the fact that Chengdu is still the center of luxury consumption in the western region, luxury brands still hold a more positive stance in these two cities to join the joint stores under the name of Taikoo Real Estate.
Throughout the past few years, the brand format of Swire Properties in mainland China has undergone rapid changes.
For a considerable period of time, major sports brands such as Nike, Adidas, and Puma, as well as fast fashion brands such as H&M and Uniqlo, were the main force in store partnerships, followed by light luxury brands such as Coach and Michael Kors. During the period from 2015 to 2020, when the streets were flooded, high-end trendy brands such as Off White and trendy foot shops such as Popcorn and Juicy gathered under the name of Taikoo Real Estate.
After 2020, high-end has become a new trend. On one hand, Taikoo Real Estate has introduced a large number of luxury brands, while on the other hand, it has attracted many high-end sports brands who are interested in following the fashionable path to settle in. Archaeopteryx has jointly established large stores in Sanlitun Taikoo Village and Chengdu Taikoo Village, and smaller brands such as Goldwin and Wilson have also stopped expanding through mutual assistance with Taikoo Real Estate.
But in the two energy sectors that are currently launching the high-end integration of their products by Swire Properties, luxury brands have not shown signs of decline. They tend to collaborate with real estate developers like Swire Properties due to their luxury business history, but they do not need Swire Properties’ reputation to influence them.
However, high-end sports brands and many small designer and beauty brands that have just ceased their structure in the Chinese market still need to apply the honor of Taikoo Real Estate to shape abstraction.
However, compared to luxury brands, oligopoly sports brands, fast fashion brands, and light luxury brands, the influence of high-end sports brands in China is still limited, and the influence of oligopoly designer brands and beauty brands is even more so. Mutual assistance between such brands and Swire Properties may enrich wholesale formats, but it may not necessarily eliminate the rapid increase in sales.
In fact, this is also one of the reasons why Taikoo Real Estate stopped integrating the northern area of Taikoo Village in Sanlitun. The North District was originally a foot shopping store and designer brand supply store for Dover Street Market, Maison Margiela, and Paul Smith, but they were eventually replaced with larger luxury brands. Even for high-end sports brands, only a few such as Archaeopteryx and Lululemon can merge into large stores.
In such a situation, Taikoo Real Estate’s mainland name has not been reflected in wholesale for a period of time, and will undoubtedly face continuous provocation.