Lane Crawford says its Beijing store is the first stage in a long-term plan for China and other stores will be rolled out in the future.

Retail analysts say that having a flagship store rather than being among dozens of brands carried in a high-class department store is the best way to achieve brand recognition and exclusivity in China.

However, it is difficult and expensive to find good sites for boutiques in China due to exorbitant rentals in high-end areas.

Reaching out beyond Beijing and Shanghai is the next step. The southern boom city of Shenzhen replaced Chengdu in 2007 as the city with the highest average spending on luxury goods, according to Credit Suisse, while the size of the luxury markets in Shenzhen and Wuhan doubled.

Braun says fast-growing northeastern cities such as Dalian offer better opportunities for expansion than southern cities.

Zhang Ning from Guangzhou heads to Hong Kong to shop at Hermes because there is no sales tax and luxury items are 30 percent cheaper than on the mainland.

A long-established market for luxury goods, Hong Kong also offers a much wider choice of designers.

Neighbouring Macau is also becoming a shopping hub for affluent mainland Chinese following the arrival of U.S. casino operators in the past few years.

Prada's edgier offshoot Miu Miu earlier this year staged its first fashion show in Asia in Macau, flying in the Crazy Horse cabaret revue from Paris to perform in front of local glitterati at the ritzy Wynn Macau casino resort, which houses Prada and Chanel boutiques in its ground-floor lobby.

"I believe Macau will be comparable to Hong Kong in terms of sales in the next few years," said Prada's Suhl.

Miu Miu, which sells at Lane Crawford in Beijing, plans to open its first independent mainland China store in Shenzhen this year. Meanwhile, Hermes is preparing for the opening of a 500-square-metre store in Beijing before the Olympic Games in August.

China sales will help offset a long-term decline in business in Japan, aggravated by its rapidly aging population, it says.