September 12, 2024. Shanghai – The difference between a simple salesman and a great merchant is that the merchant can identify the trends of tomorrow, understand customers’ desires, and inspire dreams, said Nicolas Morineaux, Chief Executive Officer of Galeries Lafayette China, during a CEIBS Executive Forum on our Shanghai campus today.

Focusing on the theme of “The Transformative China Journey of France’s Most Iconic Department Store”, the event took the audience on a journey through the company’s history, challenges and strategic success amid China’s transformative retail landscape over the past three decades.

Galeries Lafayette first launched in China in 2013 with the opening of a flagship store in Beijing offering a selection of luxury brands and niche fashion labels, followed by Shanghai in 2019 and Shenzhen in 2023.

After 30 years of investment in China, the leading French department store chain has navigated a complex environment, where retail growth changes in tandem with fluctuating consumer demand.

“I feel like we are now in a five-year transformative cycle. What’s happening in China today reminds me what occurred in Japan in the 2000s and in the US in the 2010s,” Mr. Morineaux said.

“Japan 20 years ago experienced a real estate and credit bubble, leading to a significant impact on real estate and the consolidation of department stores. Similarly, US brick-and-mortar retailers like Nordstrom, Macy's, and Barneys suffered from ‘Retail Armageddon’ in the mid-2010s,” he added.

Drawing parallels to shifts seen in other markets, the luxury expert then identified the key challenges in the current retail market in China, including a deteriorating macroeconomic outlook and low consumer confidence index, a drop in sales in premium products driven by discounts on online platforms, market oversaturation, price wars, and cash flow constraints.

“Confidence levels are low for the first time in the modern history of China, while luxury and premium brands have reportsed double digit drops during the first half of this year […] Tmall has announced an overall drop in profit by 37% on a moderate sales growth of 4%. What does it mean? Discount, discount, discount…”

Despite these challenges, Mr. Morineaux also emphasised several opportunities, such as consumers’ shifting preferences toward "guochao" (domestic Chinese) brands, food and beverage, convenience, VIP retention, and multichannel strategies.

“Convenience means mixing everything centralising, with a little bit of gifting over here, perfume over there, fashion there, and happiness in the middle. Galeries Lafayette has one motto: Happy Shopping,” Mr. Morineaux explained, highlighting the importance of offering diverse, convenient experiences under one roof to meet the expectations of Chinese clients.

Committed to building a unique retail model that prioritises joy, client experience, and Parisian art de vivre, Galeries Lafayette achieved rapid success in the first six months of this year in the Chinese market through a strategic focus on cash control, leadership team development, balance sheet management, and client engagement.

“First of all, set the priorities. Real estate, department stores, retail today is about control your cash. Second, set up a winning team with the right names and right competence. Do not hesitate to be bold moving people from one position to another one. Third, clean the company balance sheet and be accountable. Fourth, reconnect with our partners to make sure that we know who they are, they know what we are, what is the plan, seek the trust of the brands whether they are headquarters or at local levels. Finally, engage our existing and potential clients through regular activities every week,” Mr. Morineaux said.

He added that the group has also embraced an omnichannel approach, utilising platforms like WeChat, WeCom, TikTok, and Red (Xiaohongshu) to enhance customer engagement.

In outlining Galeries Lafayette’s future acceleration plans in the Chinese market, Mr. Morineaux suggested that the company is planning to introduce new concepts focusing on gourmet food, beauty-focused products, lifestyle services, and gifting and lifestyle offers, while expanding their network through direct or franchise stores.

Future stores will not only include an extensive offer of fashion, beauty and lifestyle, but also independent brands selections and gourmet food and beverage.

“For the very first time, Galeries Lafayette will join the China International Import Expo (CIIE) in November along with LVMH, L’Oreal, and Danone,” he noted, underscoring the group’s ongoing commitment in the thriving Chinese market.