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Demand for Aftercare Services Grow In Mainland Luxury Sector

With 41% of luxury purchasers across China unhappy with the quality of aftercare services available, clear and lucrative opportunities are emerging for specialist companies in both the leathercare and high-end watch maintenance sectors.

Photo: Burgeoning across tier one cities: Luxury aftercare centres.
Burgeoning across tier one cities: Luxury aftercare centres.
Photo: Burgeoning across tier one cities: Luxury aftercare centres.
Burgeoning across tier one cities: Luxury aftercare centres.

The huge growth in the mainland's luxury industry has fuelled increased demand for a higher quality of after-sales services. This was underlined by a 2014 survey in the Chinese edition of Fortune magazine, which showed that 41% of respondents are currently unhappy with their after-sale service and see improvements as a priority over the next five years. Aside from luxury watch repairs, according to the survey, leather care offers the greatest market potential to those considering business opportunities in this sector.

It is widely accepted that designer handbags and shoes inevitably suffer from wear and tear, notably scuffing, scratches, stains, loose threads and worn metal parts. It is only natural that owners should want these problems fixed in a timely and professional manner. As many top-of-the-range labels do not offer comprehensive after-care services or charge exorbitant prices, there is considerable scope for business expansion in the luxury leather care sector.

In many of the tier one cities, such as Beijing, Shanghai and Guangzhou, the number of luxury goods care and restoration businesses has increased sharply over recent years. A number of relatively mature luxury chain businesses have emerged, including Newlux, Luxuries Club and Green Bag Hotel. Several such operators registered sales of more than Rmb100,000 within two weeks of opening.

Several of the more well-established shops have also witnessed significant business growth. In the first five months of this year, for instance, sales at Beijing Landscape Luxury Leather Repair and Maintenance Co Ltd grew 30% compared with the same period last year.

Customised solutions

In terms of the professional luxury care shops in Beijing, three different operational models appear to be emerging. The first such model is a basic operation that focuses on keeping down the fixed costs. Typically, this comprises a small shop, a few frontline staff and a centralised workshop. Such businesses can be found in rented shop spaces on busy streets and in office areas. Normally, some two to three shop assistants are employed in a 20-30 square metre space. All repair work is done at a separate factory and a tracking service is offered. According to industry insiders, such an outlet requires a net investment of Rmb150,000-250,000 and can turn a profit with as little as 100 loyal customers.

The second operational model focuses on large physical shops and emphasises a premium customer experience. These businesses can be found in a number of upmarket retail districts, such as Beijing's China World Trade Center and Financial Street. The outlets typically have a five-star look and charge at a higher rate. Basic membership/subscription packages start at Rmb5,000 and premium contracts of more than Rmb10,000 are not uncommon.

The third type of operation takes the form of off-line services accessed via luxury e-business platforms. The luxury e-tailer Secoo.com, for example, has set up a care centre in addition to its main business. Items requiring maintenance can be dropped at the front desks of its club centres in many major cities. A photo of the item is then taken and uploaded to the care service system so that a quotation can be provided. Fees are collected at the club and then passed on to the repair operation.

Photo: Happy leather after: A restored Hermès bag.
Happy leather after: A restored Hermès bag.
Photo: Happy leather after: A restored Hermès bag.
Happy leather after: A restored Hermès bag.
Photo: The pre- and post-restoration difference.
The pre- and post-restoration difference.
Photo: The pre- and post-restoration difference.
The pre- and post-restoration difference.

All professional luxury care shops offer maintenance services for high-end footwear, leather bags and clothing. Such services include cleaning, treatments, colour restoration, colour changing and repairs. They can also service leather trim on luxury cars, yachts and even private aircraft. Some medium-to-large specialty stores may have dedicated business divisions dealing specifically with leather goods, watches and jewellery.

The larger luxury care shops have made considerable investment in advanced hardware, notably colourimeters, colour mixers, steam stain removers and imported manual sewing tools. They will also hire senior technicians and implement stringent quality control standards.

It is widely understood that luxury items need tailored maintenance methods and procedures in line with individual brand requirements. This means that customised solutions have to be devised, dependent on the type of material used and the techniques required. Achieving the required standards of cleaning, ironing and colouring relies on the workmanship and experience of the workers involved. Typically, a senior technician in charge of such core tasks will have more than 10 years of related work experience.

Peak season

The bread and butter business of mainland luxury leather care shops is cleaning and maintaining high-end handbags and wallets. This accounts for 50-60% of their trade, followed (in decreasing order of volume) by leather garments, furs, belts and footwear.

According to the manager of one leather care shop in western Beijing, the bulk of its work comprises cleaning and restoring the vegetable-tanned leather hems of Louis Vuitton handbags and dyeing and deep-cleaning Gucci canvas bags. Charges for these services range from Rmb400-600. He emphasised that the frequency of certain brands requiring attention does not imply quality issues, but rather indicates the popularity of the brand.

Explaining their typical trade, the manager said: "Many customers want regular care of their Hermès and Chanel bags, but there are also many jobs arising from small accidents. For example, the oil stains on one handbag were caused by spillage during a hotpot meal. That kind of problem can be dealt with easily."

In Beijing, a service package that includes basic cleaning and upkeep of a luxury handbag costs around Rmb300-400, while restoration of the edges, corners and partial colouring incurs an additional Rmb200 fee. Work on a pair of luxury shoes is in the Rmb100-200 range.

Photo: On-street aftercare marketing.
On-street aftercare marketing.
Photo: On-street aftercare marketing.
On-street aftercare marketing.
Photo: In need of TLC: Designer accessories.
In need of TLC: Designer accessories.
Photo: In need of TLC: Designer accessories.
In need of TLC: Designer accessories.

Many luxury care shops charge according to the brand, shape and size of the item. The Green Bag Hotel at Seasons Place, for instance, charges an additional Rmb200 for the upkeep of Hermès, Chanel and Bottega Veneta items. This is largely because their value is greater and more sophisticated skills are required. Typically, changing the colour of Hermès handbags and restoring the lining of Louis Vuitton wallets are regular jobs.

The peak seasons for the cleaning and upkeep of leather garments and furs are autumn and winter. The manager of one established leather care shop near the Hong Kong Macau Center in Beijing said such work accounts for almost 20% of his business. For some high-end leather garments and furs – such as those made of suede, patent leather or nubuck – the standards of required workmanship are higher on account of the necessary colour compensation and colouring treatments. As an additional consideration, fur items sometimes come with unique decorative elements made from delicate materials, notable silk. If not handled carefully these may be damaged, ensuring such garments need to be entrusted to high-end professionals.

Franchise stores proliferate

Given the proliferation of luxury care shops in major cities and their various operational models, new entrants to the market should determine carefully just how they intend to proceed. In light of this, several franchisors are ramping up their marketing activities and looking to recruit business partners. A number of well-known luxury care brands are also planning to establish around 30 to 50 outlets across the country.

Other established businesses are seeking overseas partners in order to expand and are already offering services to the global market. There are even some veteran leather care merchants committed to providing bespoke niche services. Such companies intend to stick to the principle of "smaller but specialised" and prioritise their reputation over their business scale.

As industry analysts point out, in this trade, workmanship is the ultimate yardstick. Whatever the operational model, then, there is the need to identify unique advantages. Some businesses, for example, specialise in sewing and oiling the edges of brand leather belts, while others have made a name for themselves thanks to their detailed restoration of wallets. A loyal customer leads to repeat business and to recommendations – the key means of growth in this sector.

Yuan Zhen, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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