L’Occitane to expand to China’s lower-tier cities

French skincare brand L’Occitane has revealed its plans to expand into China’s lower-tier cities through e-commerce, in particular Tmall, an online platform for branded goods operated by Alibaba Group Holding.

The company revealed that it has a marketing partnership with the online platform to meet China’s emerging middle class, who are creating growing demand for imported premium products.

According to Andre Hoffmann, L’Occitane’s vice chairman and managing director of Asia-Pacific, opening new physical stores in China’s second and third-tier cities would help create brand awareness.

The group reported that mainland China was its largest source of growth last year, with sales in the country growing 16.8 percent, contributing nearly 30 percent to the company’s overall growth. The company saw an 8.9 percent rise in sales to USD1.45 billon over the 12 months ending in March.

Meanwhile, L’Occitane held off on plans to expand in Hong Kong and Macau due to the declining numbers of Chinese tourists visiting the two regions. The company revealed that it will be shutting down a store in Hong Kong in September, following a recent closure of one of its shops in Macau.

“Now [that] mainland tourist numbers are shrinking, maybe we don’t need so many stores to do the same level of business,” said Hoffman in a Nikkei report.

L’Occitane is planning to continue adding to its 187 stores in 65 cities across mainland China. Some 50 stores, which are set to open globally later this year, will be in mainland China, Japan and South Korea.

While Hoffman noted that all stores in Hong Kong have been “profitable,” he admitted that the retail market has been “very challenging in the past 18 months.”

The vice-chairman revealed that its current strategy is to focus more on local costumers, adding, “The mainland tourists are just like the cherry on top of the ice-cream sundae.”