LVMH Moet Hennessey Louis Vuitton are to renovate their old department store in Paris in a bid to attract tourists from emerging markets.
LVMH will renovate the old La Samaritaine store eight years after concerns about fire safety forced them to close it in 2005, with the renovation set to cost around €460 million ($598.4 million), and the completion date set for 2016.
Pierre Raynal, head of the retail division at real-estate firm Cushman & Wakefield in France, suggests that this motive is the correct way forward for this type business, because the number of Chinese tourists visiting France is expected to hit eight million a year by 2020, up from the current one million.
La Samaritaine will house LVMH’s first five-star Cheval Blanc hotel in the capital. The ultra-luxury hotel will be alongside LVMH’s first DFS duty-free emporium in Europe, which will rely largely on budget Chinese travellers, according to sources close to the project.
The setting up of a DFS department in LVMH’s home city comes as part of a trend of large retailers in Europe starting to target tourists from emerging markets; mostly Chinese visitors, but also Brazilians and Russians.
DFS, which sells clothing, accessories and beauty products from brands such as Chanel, Burberry and LVMH’s own Louis Vuitton, has made a business of following Asian tourists. The Chinese already are DFS’s top clientele.
Until now, DFS stores have been located mainly in the Pacific, in such destinations as Macau, Hong Kong and Singapore. The stores that have come a bit closer to Europe have been established in Abu Dhabi and in U.S. airports such as New York’s John F. Kennedy International Airport.
Tourism spending in the vicinity of La Samaritaine is increasing. Tourists now account for 30% of purchases along the Rue de Rivoli, which borders one side of the La Samaritaine complex, compared with 10% five years ago, according to Mr. Raynal.
LVMH’s goal is to hope to get some of the crowds away from Paris’s jam-packed department stores like Galeries Lafayette and Printemps. Some of the Luxury brands that have storefronts in the department stores have registered concern that the big retailers can’t provide the right kind of service and attention to busloads of tourists.
DFS is planning to build special entrances that can fit the tour buses that the majority of Chinese visitors travel in when visiting Europe, as well as multilingual staff and tax-free cash registers. DFSD believes all of these elements will allow it to compete against Paris’s existing department stores.
“It’s essential to welcome tourism shopping in Paris, not just for the luxury industry but for the entire French economy,” Mr. Raynal says.
Some 300,000 sq ft of space in the renovation project is earmarked for retail shops, according to public documents with details of LVMH’s plans, including two midsize stores and one department store. DFS and Louis Vuitton will be the proprietors of the two midsize stores, according to sources in the companies.
Some other plans for the renovation also include retail, office, residential and hotel space.