France's Galeries Lafayette says 'bonjour' to Shanghai

French high-end department store Galeries Lafayette plans to open its second location in China - an outlet in Shanghai - next year. The company has operated in China since 2013, when it opened a store in Beijing.

Shanghai Lujiazui Finance & Trade Zone Development Co Ltd, which is listed on the Shanghai market, announced after the close of trading on Wednesday that it signed a letter of intent with Galeries Lafayette (China) to open a new store in Shanghai's Pudong New Area by the end of 2018.

According to the notice, Shanghai Lujiazui will offer a 23,100-square-meter space for Galeries Lafayette (China), a joint venture founded by Societe Anonyme des Galeries Lafayette and Hong Kong's I.T. Ltd, and will assist in decoration of the store. A formal contract will be signed between the parties within three months, according to the notice.

Galeries Lafayette (China), founded in September 2010 in Hong Kong, was authorized to launch and operate Galeries Lafayette department stores in China.

"The Galeries Lafayette in Paris is truly a landmark shopping destination for global tourists, and its affluent offerings and fine shopping environment attract travelers ... all the year around," said Qi Xiaozhai, head of the Shanghai Society of Commercial Economy. But Qi said the new store will face challenges along with opportunities.

The location of the future Shanghai Galeries Lafayette will be in a brand new shopping mall located in Shanghai's Lujiazui financial and trade zone. The project is within one kilometer of 44 skyscrapers, including the 632-meter Shanghai Tower, China's tallest building and home to the Tomson Riviera apartments, which sell for up to 237,600 yuan ($35,462) per square meter. The area has more than 460,000 white collar workers in Grade-A offices and more than 160,000 residents living in the high-end residential community.

"The ideal location will give Galeries Lafayette some privilege in attracting high-end customers from this area," said Qi, but he added that operating successfully in a highly competitive shopping mall market is not easy at all.

According to Euromonitor International data, the revenue of China's department stores grew from 943.8 billion yuan in 2012 to 994 billion yuan last year, but it forecast that the figure will slip to 904 billion yuan by 2021.

"The key to success will be finding its own positioning, amid the fierce competition of Shanghai's numerous shopping centers, department stores, as well as the rampant e-commerce," Qi said.