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Breaking China: advice from Hong Kong's luxury ambassador

Lane crawford ifc mall lsa entrance

The president of Lane Crawford and Joyce, Andrew Keith, is digitalising the 167-year-old Hong Kong luxury department store chain for China’s millennial shoppers.

“We’re dealing with the most mobile and affluent young customer globally. Looking at the stats around what luxury spend could look like in 2020, 44% [of spend] will come from Chinese customers, half of that will come from China itself and the majority will be from millennial customers. If you think about the market opportunity, it’s pretty significant.”

Andrew Keith, president of Hong Kong department store chain Lane Crawford, is on a mission to cement the position of the 167-year-old retailer, and its luxury sister chain, Joyce, as the go-to shopping destination for affluent 25-to-35-year-old Chinese shoppers. As China’s economy continues to show signs of cooling, Lane Crawford is among those pinning their hopes on engaging millennial consumers to drive a boom in ecommerce sales.

Sitting in its edgily stylish Hong Kong headquarters, the Edinburgh-born Kingston University graduate takes a sip of water from a crystal-infused glass bottle, said to contain re-energising properties.

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Andrew Keith

“We’re in a fortunate position in that we’ve got heritage, so we’re trusted. Generations of people have grown up with Lane Crawford,” he says. “To continue to be a leader and be able to guide this exciting next generation of customers as they evolve is something we feel energised by.” He gestures at his water. “It’s not just the crystals,” he jokes.

With about 100 UK brands across clothing, shoes, accessories and beauty – including Alexander McQueen, Grenson and Stella McCartney – among the retailer’s 1,000 labels, Lane Crawford is widely regarded as a stepping stone into the vast Chinese market. Since Keith took the helm in 2015, it has almost doubled its store count to eight, following launches in Beijing, Shanghai and Chengdu. And his multichannel strategy could enable brands to scale up rapidly in the country.

Lane Crawford does not disclose its financial results but Keith seems unfazed by the cooling of the Chinese economy, which grew by 6.7% last year – the slowest rate since 1990. He admits “some negative impact” from currency fluctuations, but says there is now “some stabilisation”. Nonetheless, he says profit margins have remained static, and the business is “containing margin erosion relatively well” after bolstering its product offering for millennial shoppers.

Meanwhile, revenue, estimated at more than US$1bn (£740m), has “seen positive growth in line with expectations”. Greater China is Lane Crawford’s fastest-growing market: stores report double-digit sales increases. Keith attributes this to its “lighthouse location” strategy – planting flags in Beijing, Chengdu, Shanghai and Hong Kong to cover all of the country’s key cities for same- or next-day delivery.

The retailer has also sharpened its focus on customer profiling, after investing in shopper research across China through ethnographic interviews to gain insight into people’s values and living expectations.

“It’s a great way for us to connect with our customers in a meaningful way and get some rich insight from them,” explains Keith. “It’s feeding into how we’re starting to shape our customer journey and our strategy around that.”

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The womenswear ”penthouse” at Lane Crawford in Hong Kong’s IFC Mall

In line with its findings, Lane Crawford is plotting to ramp up its focus on “immersive” retail by dividing store layouts according to consumer profiles and lifestyles, rather than by product category.

The retailer has dipped its toe in the immersive experience through a collaboration with London menswear independent Trunk Clothiers, which launched a curated space at Lane Crawford’s three Hong Kong stores in August for autumn 17. The edit comprises 35 brands including British footwear label George Cleverley and Italian clothing brand Altea.

Trunk founder Mats Klingberg describes Keith as “down to earth”, adding that the team is “very professional”: “Lane Crawford is an impressive business – I’ve always looked up to its team. They are known for being innovative – there’s no [other store] I know of that partners with boutiques on this scale.” He adds that it has given Trunk a meaningful opportunity to “test out” its offering in a department store setting among its existing customer base in Hong Kong, Japan and Singapore.

It’s the brands that are able to adapt positively that we find are most successful.

However, as the focus on rising local designers has grown in response to customer demand, western labels may be at risk of becoming sidelined.

Keith believes it is essential for them to embrace its feedback to gain market traction: “The most successful partnerships are the ones where we have an open dialogue on how we can most successfully provide product, service and experience to the customer that is relevant for them. We give specific feedback on products and their development, merchandising and fabrication to our brands. [For example,] the cut may need to be adapted, or the fabric needs to change slightly for climate reasons. It’s the brands that are able to adapt positively that we find are most successful.”

Nonetheless, he is keen to continue to harness British creative talent. The group sponsors Central Saint Martins and the Royal College of Art, among other education and creative organisations, to ensure it is “getting as much UK creativity into the business” as possible. This feeds into the retailer’s drive to boost its creative functions. Lane Crawford plans to expand its 450-strong head office with 50 new recruits, including photographers, stylists, and specialists in digital communications and data management, as it steps up in-house projects, collaborations and consultation work. Keith has more than doubled the Lane Crawford headcount from under 1,000 to more than 2,000.

Nine months into his leadership role Keith also launched Lane Crawford’s online store, which he now seeks to position as its flagship. The outlook for Keith’s strategy is looking bright – in PwC’s 2017 Total Retail report, 79% of Chinese respondents said they buy products online via mobile devices at least monthly.

Luca Solca, luxury goods managing director at broker Exane BNP Paribas, notes: “After a long period of doom and gloom in Hong Kong, things are looking on the bright side. Luxury sales are growing again. Foreign exchange rates are helping, as well as stronger Chinese consumer confidence. Lane Crawford should benefit from this environment, provided it is capable [of adding] effective digital execution.”

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Menswear at the IFC Mall

The limitations of display space in stores is driving the digital strategy: its largest store, in Shanghai, houses around 35,000 fashion SKUs on a 12-week turnover rate. Keith adds that Lane Crawford’s omnichannel customers spend seven times more than single-channel customers, and half of all online transactions are click-and-collect. To leverage this, it offers shoppers the option of placing orders in store for home delivery, and is considering how to use mobile app WeChat to engage new customers.

Having studied fashion design, Keith began his career as a menswear designer at Esprit, Marks & Spencer and Hong Kong workwear chain G2000 before the opportunity to join Lane Crawford as menswear merchandising manager arose in 2001.

“It was a big risk,” he recalls. “I had a lot of exposure to merchandising but I was primarily focused on product development and design. So I approached it from a product perspective – looking at merchandising brands in the same way you would merchandise a collection.”

It paid off. In 2006, Keith became vice-president of merchandising. Two years later he became president at listed sister chain Joyce, where he secured franchise agreements with brands such as Rick Owens and Balenciaga, before returning to Lane Crawford as president.

A former buyer for Lane Crawford, who worked at the department store for several years and has remained in luxury retail buying, said Keith was a “great person and an inspiring leader”, adding that working with the team under chief brand officer Joanna Gunn provided “invaluable experience”.

“The business struggled a bit last year, although I think that was down to general market conditions more than anything else,” adds the source.

One of the most important lessons Keith has learned as a leader is that ambitions for scale must be supported by team capacity. Launching Lane Crawford stores in Shanghai and Chengdu within months of each other in 2013 proved challenging.

“We had great ambition. Everyone was very positive and excited about it, but [we were] on-boarding a significant amount of people dealing with building retail space in a new market, as well as product assortment and logistics – all of this in China, which is still not as easy a place to do business as Europe, in terms of infrastructure.

“One of the bigger learnings was being able to get the talent on board to support that in a market like China.” This informs his advice for brands hoping to set up shop in Asia: “It is still a very a new market, so take it slowly. If you don’t have the resources to operate yourselves, find a partner that really understands both the China market and your business. Preferably go in with a wholesale partner first – if there’s one that’s relevant – then spend time in the market, get an appreciation of who the players are and how things are changing. Try to get under the skin of Chinese contemporary culture and what’s happening digitally. You need to appreciate what’s happening.”

As retailers navigate the changing luxury landscape, Keith is among those leading the charge on exploring how to keep the next generation of shoppers hooked: “One of the issues of luxury is that the word has become synonymous with certain kinds of brands and experiences. I think, actually, there is an opportunity to say that luxury for 2020 will be a different experience. We’re looking at how that can be redefined.” Redefining luxury is no mean feat, but if anyone is up to the task, it would be Keith.

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