Galeries Lafayette Beijing store skirts China anti-corruption crackdown

BEIJING Fri Oct 18, 2013 8:24am EDT

BEIJING Oct 18 (Reuters) - France's Galeries Lafayette has unveiled a swish department store in Beijing housing brands it says will lure fashionistas, foregoing names like Cartier that have found themselves associated with China's crackdown on graft.

At the store's official inauguration in the downtown Xidan district, the upscale retailer said on Friday it's chasing a new breed of fashion-obsessed customers in China, rather than luxury goods fans.

Three years in the making, at a cost of 42 million euros ($57 million), the store is Galeries Lafayette's second-biggest after its Paris flagship. The retailer is returning to China 15 years after shuttering a store that was open for only a year.

Lesser-known but trendy Paris labels like The Kooples and Maje are for sale in the six-floor building, while luxury names like Richemont's Cartier, LVMH's Louis Vuitton and Chanel are absent.

Others like Coach Inc's eponymous brand, Kering's Gucci and Prada's own-brand goods are available at the 47,000-square-meter store, which has been open for business since Sept. 28.

The brand selection has allowed family-owned Galeries Lafayette, and its 50-50 joint-venture partner, Hong Kong-based I.T Limited, to skirt the issue of selling brands that have attracted negative attention during an on-going anti-corruption campaign launched by the Chinese government last year.

"Of course, you know dealing with this problem in China, we respect the legal aspects of the country, but you know we are aiming at fashion addict customers," Galeries Lafayette's chairman Philippe Houze said at a news conference in the store on Friday. "They don't care about corruption."

"We are not a luxury store. We are a fashion store," Houze said. He was speaking before an evening reception to mark the event due to be attended by personalities from French movie actress Audrey Tautou to Jean-Pierre Raffarin, former prime minister of France.

'WATCH BROTHER'

In particular, luxury watches like those made by Cartier have been associated with extravagance and graft among Communist Party officials, now the subject of increased government scrutiny.

One official, nicknamed "Watch Brother" in the local press, was spotted sporting a variety of luxury timepieces, convicted of corruption in September and given a 14-year jail sentence.

The campaign's effect on luxury spending has been hard to measure, analysts say. But a survey of Chinese consumers by CLSA found that roughly 30 percent said they would curb their spending on jewelry and watches in the event of any anti-corruption campaign.

Facing weak consumer spending in its home market, Galeries Lafayette has begun rolling out glitzy stores in international capitals in an effort to target customers with money to spend in emerging markets. It now has stores in Jakarta and Dubai, and operates 65 Galeries Lafayette outlets in total, with total revenue of 2.3 billion euros last year.

The company has also sought out new strategies to breathe new life into the department store business model, squeezed in recent decades by the fashion and luxury brands it sells rolling out their own stores.

Earlier this year it hired avant-garde Spanish movie director Pedro Almodovar to be the 'face' of a campaign to promote its menswear departments. Its flagship store in Paris is currently hosting an external gallery of large digital images chosen by Italian label Diesel's designer Nicola Formichetti, best known for his work with pop diva Lady Gaga. ($1 = 0.7319 euros) (Reporting By Adam Rose; Editing by Kenneth Maxwell)