Editor’s Note
This report on Tiffany & Co.’s strategic downsizing in Shanghai highlights the shifting dynamics within China’s luxury market. It serves as a case study of how global brands are adapting to changing consumer sentiment and economic pressures in a key region.
Tiffany & Co., a key jewelry manufacturer under LVMH, is reportedly planning to downsize its flagship store of over 12,000 square feet in Shanghai, as luxury brand sales plummet in China, the world’s second-largest economy.
Tiffany, which opened a two-story store in Shanghai’s Hong Kong Plaza in late 2019, has decided to relinquish about half of the space, according to sources familiar with the matter. The company is expected to vacate the space by the end of this month, and the landlord is already in negotiations with potential new tenants, the sources said.
Lai Sun Group, which owns both Tiffany and the luxury mall landlord Lai Fung Holdings Ltd., did not immediately respond to requests for comment.
Tiffany’s retreat in Shanghai, China’s financial hub, highlights the increasingly difficult business environment for global luxury giants amid an economic downturn and a property market slump.
Recently, Chinese consumers have become more price-sensitive, seeking cheaper products overseas, such as in the gray market or in Japan, which is experiencing an influx of tourists due to the ‘yen depreciation effect.’ This has led to a significant decline in sales for high-end brands, curbing growth and increasing pressure on profit margins.
LVMH Group’s watches and jewelry division saw its sales decrease by 3% in the first half of this year compared to the same period last year, making it one of the poorest-performing segments. The division’s recurring operating profit fell by 19%.
Additionally, a source said Tiffany has asked its landlord, Lai Fung Holdings, to lower the rent for its Shanghai flagship store.
Located in Shanghai’s core business and shopping district, the store houses Tiffany’s first Blue Box Cafe in China and is the brand’s third-largest store globally. It is currently one of the largest brand stores in Asia. The cafe will remain in place even after the downsizing, according to sources.
The 187-year-old jewelry company, Tiffany, has been struggling to meet LVMH’s ambitious sales targets since its acquisition by billionaire Bernard Arnault’s luxury empire in 2021. Bloomberg News reported earlier this year that Tiffany has recently seen staff departures due to lower commissions than before, with some moving to competitors and taking some loyal customers with them.
The brand is facing increasing pressure from competitors and is losing market share to companies including Cartier, owned by Swiss luxury group Cie Financiere Richemont SA.