J.Crew to Expand to Beijing, Hong Kong

Local and Western fashion companies continue to thrive in China, and J. Crew is trying to ride China’s fashion wave by opening its first store in Hong Kong, from Bloomberg Business Week:

J.Crew Group Inc., the apparel retailer whose customers include U.S. First Lady Michelle Obama, is planning its first Asian store in Hong Kong targeting tourists from mainland China that totaled 28 million last year.

The retailer may open the Hong Kong store as early as next year and is also looking for sites in Beijing and Shanghai, Chief Executive Officer Mickey Drexler said in an interview in Hong Kong.

Closely held J.Crew is pushing to reach Chinese shoppers as competition heats up and economic growth slows in the world’s most populous nation. The apparel company will join brands including Abercrombie & Fitch Co. (ANF) (ANF), Gap Inc. and Burberry Group PLC (BRBY) in courting tourists from China’s mainland in the former British colony.

Founded in 1983, J.Crew has more than 200 stores in the U.S. and Canada and is preparing to expand in Europe and Asia. Drexler said today that the company will open a store in London next year, ahead of Hong Kong. In 2008 the company pulled out of Japan, where it had some licensed stores through a partnership. It presently doesn’t have any stores outside the U.S. and Canada.

According to The Wall Street Journal, Hong Kong is among the top e-commerce markets for the brand, but it is still unclear whether J. Crew will be well received:

It isn’t clear whether the U.S. line will be well-received in China, where consumers favor luxury European brands and logos. The late entrance of U.S. retailers into China means they have to try harder to build brand recognition and loyalty.

“It is easy for a Chinese consumer to understand Gucci, ‘It is expensive, so it must be good, and you must be someone if you have it.’ How does a Chinese consumer understand the history and lifestyle that [a particular U.S. brand] represents?” said Franklin Yao, chief executive of consulting firm SmithStreetSolutions.

J.Crew this year started shipping online orders to more than a hundred countries as a way to test the markets. Hong Kong, Japan and Australia are now among J.Crew’s top five international e-commerce markets.

Building brand recognition in Asia, particularly in China, will be a challenge. J.Crew will have to compete with the dozens of midtier international clothing names already in the market. Pricing is an issue for new brands entering China, Mr. Yao said, especially with the advent of international shipping from e-commerce sites and the growth of Chinese travelers shopping abroad.