“Grand openings in the fourth quarter, such as those for Dubail (Champs-Elysées), Baccarat (rue du Faubourg Saint-Honoré), Glashütte (rue de la Paix), and Chanel Beauté (rue des Francs-Bourgeois), brought the annual total of luxury shop openings to 63 in France in 2015, a sharp increase over the 34 openings in 2014,” stated Vincent Ascher, head of Luxury Retail for Cushman & Wakefield.
In 2015, the creation of 31 new shops accounted for 49% of all openings in France. Although less than the 65% in 2014, this proportion is significant and shows the momentum of a luxury market rejuvenated by international newcomers (Tory Burch on rue Saint-Honoré, Fabiana Filippi on rue du Faubourg Saint-Honoré), by the resurgence of long-established retailers (Vionnet on rue François 1er, Paco Rabanne on rue Cambon), and by lesser-known single-brand shops (Perrin on rue d’Alger). However, the largest groups did not sit idle. Development projects carried out by LVMH, Richemont, and Kering accounted for nearly 30% of all openings in France in 2015. Several projects were for the creation of sales points for designer brands (Kering with Alexander McQueen on rue Saint-Honoré), while other projects targeted customers and products with high potential (LVMH with Dior Homme on rue François 1er).
“While in 2015 half of all luxury openings in France were for creations, more than one-third of total openings were for relocations, refurbishments, and extensions. In France, as in other mature markets, luxury retailers are focused on consolidating their positions and optimizing their sales networks,” said Vincent Ascher. Several flagships (Saint-Laurent on rue du Faubourg Saint-Honoré) on established luxury high streets underwent refurbishment, while the same areas saw a rising number of relocations. The nine relocations recorded in 2015 are expected to be equaled or surpassed in number in 2016.
Several relocations were carried out in the neighborhood of rue de la Paix and Place Vendôme, where retailers of the Richemont Group continued to play musical chairs. For example, Montblanc has moved into the former Eden Park store, at 12 Boulevard des Capucines, after leaving its former location at 7 rue de la Paix for Piaget; and IWC has moved to 3 rue de la Paix, former home to Van Cleef & Arpels.
Rue Saint-Honoré, now a vital destination for the Paris luxury market
Last year, rue Saint-Honoré was Paris’s most desirable street for luxury retailers. Eight shops opened on rue Saint-Honoré in 2015, including Tory Burch at no. 412 and Alexander McQueen at no. 372. These operations brought to 29 the total number of openings on rue Saint-Honoré since 2011 (year of the Mandarin Oriental’s grand opening), a figure that represents roughly 20% of all openings in Paris during the same period. This figure is equal to that for rue du Faubourg Saint-Honoré (19%) and is much higher than figures for other key luxury high streets, such as avenue Montaigne (12%) and rue de la Paix (6%). While until recently rue Saint-Honoré was outperforming the most prestigious high streets because of its less exclusive profile and its large number of new creations, the coming months will bring more refurbishments and relocations, a change attributable to the street’s very limited supply. This trend can already be seen in the recent openings of Missoni at no. 219 and Mulberry at no. 275. “With rental values up and available space increasingly scarce in the best parts of rue Saint-Honoré, adjacent streets such as rue d’Alger, rue Cambon, and rue Castiglione should continue to offer an alternative to retailers seeking to reposition themselves, to newcomers that wish to test the French market, and to a few smaller French retailers in search of growth opportunities,” explained Vincent Ascher.
Affirmation that the Paris luxury market is expanding
Scarcity of supply and high prices in the most desirable locations explain the expansion of other key areas of the Paris luxury market. One example is rue du Faubourg Saint-Honoré, whose traditionally less attractive areas and nearby side streets have recently been the site of several significant openings. In 2015, Richard Mille opened a shop at 17 avenue Matignon, on the ground floor of a new office building. The entire neighborhood benefits from the Bristol’s presence and is particularly well protected because of its proximity to the Élysée Palace, the Ministry of the Interior, and the Israeli Embassy. The luxury sector is expanding into space that was long the reserve of antiques dealers and art galleries (Valentino and then Miu Miu at 92 rue du Faubourg Saint-Honoré, Baccarat at 79 rue du Faubourg Saint-Honoré, and Gratianne Bascans at 38 avenue Matignon). Activity on boulevard des Capucines also illustrate this spillover effect of the Paris luxury market. After moving from 7 rue de la Paix (taken over by Piaget), Montblanc reopened on boulevard des Capucines in 2015. The list of retailers that have moved there since 2013 also includes Bucherer, Cartier, TAG Heuer, and Omega.
Other streets outside the traditional Paris luxury district also stood out in 2015. With four openings, rue des Archives came in fourth place, after rue Saint-Honoré (eight openings), rue du Faubourg Saint-Honoré (five openings), and rue de la Paix (five openings). Seven luxury stores opened in Le Marais in 2015, confirming the demand there for men's fashion (Fendi, Gucci, Givenchy, and Valentino opened on rue des Archives in 2015, after Moncler in 2014). Accessories and cosmetics (Chanel Beauté on rue des Francs-Bourgeois) have also moved into Le Marais. “Enhanced by the repositioning of BHV and the proliferation of designer showrooms, the upmarket trend in Le Marais is the result of development projects of the most luxurious brands in search of fresh growth fields. These projects allow brands to target new consumers outside the usual customer base of Paris luxury, and to benefit from the neighborhood’s numerous advantages. Le Marais offers extraordinary architecture and attracts large numbers of wealthy Parisians and foreign tourists. In addition, before the adoption of the Macron Law, Le Marais was one of the few neighborhoods in Paris to be open on Sunday,” said Vincent Ascher.
Cannes attracts most activity outside Paris and Île-de-France
The French luxury market is less lively in other parts of France. In 2015 there were 11 openings in French cities other than Paris, including five in Cannes and three in Saint-Tropez. These two towns alone account for more than 70% of the 56 openings carried out in 2011−2015 in the provinces. Such an extreme concentration of activity illustrates the strategies of the largest groups, as seen in stores opened during the past five years by LVMH in Saint-Tropez (Fendi, Fred, Bulgari, Emilio Pucci) and the relocations/extensions, and creations in 2015 on the Croisette in Cannes by Hermès and Richemont (Van Cleef & Arpels).
Outlook for the French luxury market in 2016
Twenty-three openings are planned in France for 2016, a satisfactory figure that suggests that the year will be a good one for the French luxury market. As the birthplace of haute couture and the world’s most prestigious brands, France will thereby consolidate its dominant position, despite economic conditions that have resulted in lackluster results for the sector’s largest groups. The French luxury market should continue to benefit from the weak euro and large number of foreign tourists, given that the slowdown in luxury sales has affected mainly China, Hong Kong, and Russia.
However, several factors could jeopardize the positive momentum of the French market. “More than the strategies adopted by several groups to standardize their prices around the world – global price differences still give France a competitive advantage – the greatest threat to the French luxury market is the rise in terrorism. Although 2015 was on the way to being a very good year for tourism, the attacks on November 13 put paid to that, especially in Paris. Reservations dropped off dramatically for the year-end holiday period, with occupancy rates declining in the ultraluxury hotels (palaces). As a result, the Paris luxury market could be hurt by increasing competition from London, which is not far from Paris, is generally considered safer than Paris, and is very attractive for its established brands and for new British and international retailers,” explained Vincent Ascher. In the short term, this challenging environment could limit the number of store openings in France. With an eye on sagging margins, retailers would be tempted to wait and see, in a context of scarce supply of retail properties and rising rental values. Retailers may also decide to pay more attention to optimizing their sales networks by means of refurbishments, store relocations, and new creations in areas just off the most prestigious high streets. With regard to less established districts, any expansion by retailers will be cautious and opportunistic, and most likely in less exclusive market segments such as accessories and beauty products.
In the long term, the geography of the global luxury market could evolve further, influenced by factors that are favorable to the French market. Volatile exchange rates and raw-materials prices, geopolitical tensions, and regulatory changes (e.g., anticorruption measures in China) have slowed consumer spending in emerging countries. Nevertheless, emerging markets still provide substantial growth, as seen in the rising number of wealthy individuals, the rapidly expanding middle class, and the robustness of international tourism. This potential partially explains the enthusiasm for the French market shown by new international retailers, which cannot forego opening flagships in major cities such as Paris. Their presence here is imperative. The stream of newcomers will also be fed by the rapid development of designer brands and new concepts, most of which are backed by private equity or large groups. “In addition to the growing diversity in retailer demand, other factors may reshape the geography of the French luxury market. The first factor depends on how Sunday store hours are accepted, and on the establishment of international tourist zones that would enhance the most luxurious high streets of Paris and of provincial cities such as Cannes, Nice, and Deauville. In Paris, the completion of major projects such as the Samaritaine – for which the Council of State definitively approved the building permit in 2015 – and the Poste du Louvre, as well as the redevelopment announced for the Louvre des Antiquaires, indicate that a new growth phase lies ahead for the luxury market,” concluded Vincent Ascher.