Many giants have invested heavily in distribution systems for luxury goods only to find the market plagued by questionable practices.
Mr. Hoang, a Hanoian construction contractor, still remembers the late-December afternoon last year when he put pen to paper on a million-dollar contract. It was a cold winter’s day but he was pretty sure he would warm his wife’s heart when he arrived home with the great news, a bottle of champagne to celebrate, and a thousand-dollar Lady Dior bag as a thank you for her sacrifices over the course of his career.
At 5pm on the dot he left his office for a luxury boutique he knew on Hang Bong Street, just a few steps away from Hoan Kiem Lake. His good mood quickly evaporated, replaced by a bittersweet feeling, when the found that the shop had been shut down and the owner arrested for selling counterfeits.
He was pleased, though, that he hadn’t outlaid a thousand dollars on a fake bag for his wife, but was unhappy at the thought of having to walk over to Trang Tien Plaza, on the other side of the lake, and spend half as much again on a Lady Dior bag that he could be sure was genuine.
Success eludes giants
Trang Tien Plaza is an iconic landmark set on the southeast corner of Hoan Kiem Lake, right in Hanoi’s city center. The luxury shopping mall underwent a major revamp in 2012 that cost its owners, Imex Pan Pacific (IPP), more than VND400 billion ($20 million), becoming the first high-end mall in Hanoi to boast popular international brands such as Rolex, Cartier, Louis Vuitton, and Dior after reopening.
If Mr. Hoang had wrapped up his million-dollar deal a few months earlier he wouldn’t have had the option of heading to Trang Tien Plaza to buy the Lady Dior bag for his wife.
The luxury shopping center first opened at a time when Vietnam and the world was starting to feel the pinch from the financial crisis and recession, then closed when a few of its leading retailers decided to shut up shop. “If it wasn’t a special occasion I wouldn’t have bought the bag,” he said. “We stopped buying luxurious items a few years ago.”
Given the crisis it was understandable that consumers like Mr. Hoang and his wife had cut down their spending on luxury goods. IPP wasn’t the only one facing a gloomy period, with many other luxury goods distributors doing quite poorly as well.
While purchasing power was falling there were various openings of new shopping malls around the city and new boutiques in the Hoan Kiem area. That some would then close was inevitable.
IPP reported that last year the luxury outlets in Trang Tien Plaza saw quite good sales, with a daily average of 3,000 to 4,000 visitors. It didn’t disclose, though, how many were only window-shoppers or that those who did part with some cash perhaps bought a broomstick rather than a luxury item.
This is another issue for Trang Tien Plaza, as besides the difficulties caused by the wavering macro-economic environment the majestic mall has failed to establish a clear brand position.
While the first three floors are filled with the high-end brands mentioned above, along with Ralph Lauren, Salvatore Ferragamo, Burberry, Versace, and others, many visitors head to the mini-supermarket, the Thai hot pot restaurant, or the many other shops selling cheaper goods.
“Trang Tien Plaza is very well decorated and looks magnificent, but I don’t really feel like buying any of the luxury goods there when so many people are strolling around in shorts and sandals and there are couples taking wedding photos outside,” said Ms. Huong, a 35-year-old high-end fashion addict. “The prices in these types of shopping malls are much higher than at smaller boutiques, and I come here not just to buy authentic products but also to enjoy a grand atmosphere and top services.”
She also complained that even the largest retailers in Vietnam simply can’t be trusted. A luxury brand distributor with shops in Hanoi’s Ly Thai To Street and Ho Chi Minh City’s Dong Khoi Street, two of the most expensive streets in the country, operated dozens of other shops with each only selling a particular brand, meaning that customers know the brand they are buying but not who they are paying.
Authorities published the distributor’s import receipts in 2012, showing many were cheap China counterfeits. Ms. Huong still has doubts as to whether they sold her authentic goods, with the receipts merely a ruse to ease their tax obligations, or whether she was actually sold fakes.
While many consumers have lost trust in giant local distributors and don’t fancy or can’t afford their high prices, import turnover for luxury goods still reached into multi-billion dollars in 2014.
No specific figures for each distributor were released by authorities, but with the difficulties giant distributors have been grappling with their luxury goods are perhaps being distributed efficiently via different channels.
- distribution systems
- luxury goods
- Trang Tien Plaza