Hermes defies the trend of slipping sales

The white, life-sized paper pony standing proudly in the display window of the newly expanded Hermes store at Plaza 66, Shanghai's most exclusive shopping mall, characterizes the French luxury house's confidence in China.

While many luxury retailers are undergoing an unprecedentedly difficult year in China, a one-time beacon of sales growth, Hermes is continuing to increase its presence in one of its most important markets, if not the most.

"The expansion is mainly due to popular demand here. Last year, Chinese customers contributed 25 percent of our total sales. Five or six years ago, the proportion was less than one percent," said Leo Lui, president of Hermes China, on Sept 11, one day before the grand re-opening of the newly enlarged shop.

The outlet, first opened in 2001, has been increased in size from 180 square meters to a 540 square meter space with a brown sugar-colored facade that echoes the "low-key profile" of the brand.

"We don't want to be the kind of store that can be remotely distinguished from streets away," said Lui. "We find our Chinese customers are becoming more and more sophisticated and in dire need of products of high quality and nice materials, instead of big logos."

Sitting next to brands such as Louis Vuitton and Tiffany in this 66-floor mall and office building, the new Hermes store, covering two floors connected by a white spiral staircase, will be the largest one on the Chinese mainland with merchandise ranging from the brand's signature silk scarves and leather bags to babywear and household products, the latter branded items being sold in the mainland for the first time.

"It's true the year of 2012 has probably been the toughest one for many luxury companies in China after the past decade of prosperity, as the real estate market dried up and stocks turned rather gloomy," said Lui.

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