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Exclusive-In strategy shift, Louis Vuitton considers first duty free store in China’s Hainan       

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November 12, 2021

By Sophie Yu, Mimosa Spencer and Silvia Aloisi

BEIJING/PARIS (Reuters) – Louis Vuitton is considering opening its first duty free store in China on the emerging luxury island hub of Hainan, according to two sources, in a move that would mark a new approach for the world’s largest luxury label.

The brand, which is the main profit engine of French luxury giant LVMH, is known for maintaining an iron grip on distribution  and famously never offering discounts on its leather monogrammed bags.

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Yet executives are looking at the possibility of opening a duty free shop in the Haitang Bay shopping centre in Sanya, through an agreement with the mall’s state-owned operator, China Duty Free Group, the sources said.

The plan, which would help Louis Vuitton capitalise on pent-up demand for luxury goods by Chinese shoppers – the sector’s most avid consumers – was unveiled by brand executives at an early September presentation in Shanghai, according to a person who attended it.

Louis Vuitton declined to comment when asked about plans for a duty free shop in Hainan, which has boomed as a high-end shopping destination during the COVID-19 pandemic with Chinese consumers unable to travel abroad. China Duty Free Group, the largest duty free operator in the country, did not reply to a request for comment.

Some European and U.S. brands including Kering-owned Gucci and Ferragamo – both of which are highly exposed to travel retail compared to peers – sell products in the shopping centre, and there are signs of growing interest from high-end watch and jewellery labels.

But LVMH’s higher profile fashion and leather goods brands, which include Dior, are not present in Hainan beyond selling their range of perfumes and cosmetics. A Louis Vuitton duty free shop on the island would be one of only a handful of such retail outlets worldwide for the label.

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The global duty free industry was worth $86 billion in 2019, before the pandemic knocked the figure down by nearly half, to $45 billion in 2020, according to Generation Research, a provider of travel retail and duty free shopping statistics.

International travel restrictions mean that spending is being rapidly repatriated to China, and the Chinese government is keen to keep it that way, according to analysts at Bernstein.

Last year, the Chinese government tripled the amount that consumers could buy duty free in Hainan to 100,000 yuan ($15,635) a year and lifted certain purchase limits.

The disruption in international transportation caused by the pandemic hurt the grey market driven by “daigou”, professional shoppers who buy high-end products abroad – in Europe, but also in South Korea – on behalf of mainland Chinese.

That helped duty free sales in Hainan, which has surged as much as fivefold compared to pre-pandemic levels, while a government target for sales of 700 million yuan by 2030 implies annual growth of 37%, according to Bernstein analysts.

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“International travel will come back, but a strong company presence in Hainan will become paramount,” they said.

Gaining a foothold in Hainan gives luxury brands access to a broader customer base. Yet Louis Vuitton and its rivals are wary of discounts, which erode the exclusive aura of their products, and of the risk of feeding a grey market if their handbags and clothes can be bought more cheaply in some places.

“As long as we are talking to real clients, end clients and not to daigou… we are OK with doing business in Hainan,” LVMH finance chief Jean-Jacques Guiony told analysts at an earnings presentation in October.

“If Hainan becomes a hub for daigou, that will be a different story,” he said.

Bruno Lannes, a partner at consultancy Bain’s consumer products and retail practice in Shanghai, said brands had to make sure that offering luxury goods at a lower price would not damage their image.

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“If you go back to the original definition of luxury, luxury’s exclusive, and exclusive means that you exclude consumers — it’s not for everybody, so that’s the challenge.” ($1=6.39 yuan)

(Reporting by Sophie Yu, Mimosa Spencer and Silvia Aloisi: Editing by Kirsten Donovan)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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