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How Do You Say Saks in Chinese?

This is not your grandmother’s Saks Fifth Avenue. For starters, it’s 300,000 square feet, about triple the average size of an existing store. Then there’s the line of revelers standing in line to press somebody else’s flesh in the nightclub. Oh, and there’s one more thing: The quintessentially American Saks is in Shanghai. China.

Birmingham, Ala.-based Saks Inc. said this week that Roosevelt China Investments Corp. licensed the Saks Fifth Avenue name. When the first China Saks opens in 2008, it will, in fact, be the first American department store there. Roosevelt China says that it plans to develop five additional Saks Fifth Avenue stores in China or Macau within the next three years.

Department stores haven’t rushed into the Chinese market as fast as luxury brands like Prada, which have opened their own shops to prevent local retailers from diluting their brand identity. Currently Saks’s only direct competitor is Hong Kong-based Lane Crawford.

Saks, Lane Crawford and most luxury retailers are located in Bund, Shanghai’s ritzy waterfront district. According to Julie Frohlich, director of the law firm Goulston & Storrs, which negotiated the deal on behalf of Roosevelt China, the licensee is not worried about preexisting competition near the store. “It’s really two different animals,” she says.

The American identity differentiates it from Lane Crawford, she speculates, and “this Saks store is going to be so much larger than any of the freestanding brand-name stores, that alone makes it very unique.”

Saks will collect revenue from the naming rights, and it will control product selection. Merchandise will look much like what’s available in America, although the store will also promote lines that are less familiar to Chinese luxury consumers. The four-story store, which will occupy a frothy Beaux-Arts building, will include upscale non-fashion destinations, such as restaurants, spa and that nightclub. This is Saks’s third overseas licensing agreement. In 2001, a Saks-branded department store opened in Riyadh, Saudi Arabia, and a Dubai location came on line in 2004.

Chinese expansion isn’t limited to luxury offerings. Just two weeks before the Saks announcement, Best Buy said that it, too, would open its first retail outlet in China. The 86,000-square-foot flagship will be located on four floors of the Jiang Shan Building in Shanghai. Best Buy vice chairman Al Lenzmeier has said the project “enables us to learn about China’s diverse consumers.” A company statement also suggests that future expansion will comprise greenfield construction, rather than redevelopment of existing properties. A company spokesperson would not provide further details about the plan: “We haven’t gotten that far.”

—David Sokol

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