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Hermes tests European appetite for its young Chinese brand

Furniture are displayed for sale in the shop of the young brand Shang Xia on its opening day in Paris September 11, 2013. REUTERS/Jacky Naeg
Furniture are displayed for sale in the shop of the young brand Shang Xia on its opening day in Paris September 11, 2013. REUTERS/Jacky Naeg

By Astrid Wendlandt and Pascale Denis

PARIS (Reuters) - Shang Xia, a Chinese brand backed by French luxury goods group Hermes , opened its first shop outside its home market in Paris on Wednesday to test demand among non-Chinese customers for its handcrafted products.

Shang Xia, which aims to revive Chinese crafts that were nearly destroyed by China's Cultural Revolution, including ancient styles of porcelain, cashmere felt and furniture, is part of a new generation of Chinese brands elbowing their way into the crowed European luxury goods market.

The young brand is hoping its Paris showcase, just meters away from a Hermes boutique, will help lift its profile among European buyers, as well as the legions of Chinese tourists who visit the French capital each year.

"This morning I sold three pairs of shoes to Chinese tourists who discovered the brand," said Shang Xia's artistic director and chief executive Jiang Qiong Er, who owns 10 percent of the venture. Hermes controls the other 90 percent.

Last year, Chinese luxury shoe brand Stella Luna also opened its first European store in Paris's trendy Boulevard Saint-Germain.

Shang Xia is the brainchild of Patrick Thomas, the French brand's outgoing chief executive, who aimed to challenge the view that Chinese-made goods were synonymous with poor quality.

About 90 percent of Shang Xia products, which include a 4,000 euro ($5,300) porcelain tea service decorated with hand-weaved bamboo threads and 4,700 euro cashmere felt coat, are made in China.

Thomas, who has led Hermes since 2006, will remain as chairman of Shang Xia once he passes on the group reins to Hermes family member Axel Dumas, 43, in February next year.

In spite of the recent slowdown in China's economic expansion, Hermes is not alone in backing the growth potential of Chinese labels.

Last year, French luxury and sports group Kering, formerly known as PPR , bought Chinese jewelry brand Qeelin, known for its animal-shaped motifs and co-founded by Frenchman Guillaume Brochard, Jiang's husband.

Swiss luxury group Richemont owns Chinese fashion brand Shanghai Tang, and L'Oreal, which already owns cosmetics brand Yue Sai, last month paid $840 million to add face mask specialist Magic Holdings to its Chinese portfolio.

Hermes has spent on average more than 10 million euros ($13.3 million) a year on Shang Xia since its inception in 2008. Today, the brand makes less than 10 million euros in annual sales and aims to break even in the next two to three years, Jiang said.

Shang Xia, which means up and down, plans to move its first shop, which opened in Shanghai in 2010, to bigger premises next year. It has also had a boutique in Beijing since 2012, but for now it has no plans for further expansion.

"We want to grow slowly," Jiang told journalists.

"It took me years to find the artisans with the right know-how," Jiang said, adding that she roamed China, her designers in tow, from workshop to workshop, and had a whole team dedicated to finding craftsmen.

"The challenge for me will be widening my workforce and finding people who accept to be trained," she said, adding that younger generations today preferred to work in bars and cafes where they could learn the job in a day, while it took a year to learn how to weave bamboo threads.

The brand also sells Ming Dynasty-inspired wooden furniture assembled only with mortise and tenon joints.

In China, Jiang said customers included Communist Party officials who were "happy to rediscover the country's traditional craftsmanship".

Jiang, who studied art in Paris, ran her own jewelry and interior design business before Shang Xia.

($1 = 0.7518 euros)

(Reporting by Astrid Wendlandt; Editing by Will Waterman)

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