World Famous Luxury Giant Collusion In China

In July 26th, another world famous. Luxury brand HugoBoss has been exposed and will set up a joint venture in China in the second half of the year. Not long ago, a number of big international brands such as Burberry have "dumped" Chinese agents and reclaimed the agent to do direct business. Behind this "repossession tide", it reflects the urgency of the strategy of luxury reorganization in China and the ambition to control the Chinese market.

Dynamic: all luxury goods go hand in hand.

According to overseas sources, HugoBoss plans to set up a joint venture in China in the second half of this year, and has signed an agreement. HugoBoss will have a 60% stake in the joint venture. The analysis shows that the Chinese market is likely to become the third largest market in the world. However, the news was not confirmed by HugoBoss China.

In July 17th, the first British luxury brand Burberry, the first group to enter the Chinese market, announced that it would buy its franchise partner KwokHangHoldings, the Burberry franchise in mainland China, at 70 million pounds. It is reported that the transaction will be completed around the fall of this year. Burberry's team in the Asia Pacific region will be responsible for the operation of China's Direct stores. At the same time, brand operators will also fully supervise the development and operation of the sales chain, supply and network market.

The brand director of Burberry said in an interview that the right to withdraw the proxy will keep the brand image, which will help Burberry rapidly expand the market. Burberry has also begun to fight against counterfeit goods. According to Burberry's new fiscal year plan, the brand will accelerate the expansion of the Chinese market, and it is expected to open another 10 direct stores in the current fiscal year. Burberry, which has been in China for twenty years, has about 50 franchise stores in the mainland market.

"When they harvest fruit, they naturally rush to pick it up." about Burberry The right to regaining the Chinese market, a senior manager of a high-end shopping mall said so. And this move is also considered by the industry to be "breaking the bridge".

Public information shows that before the Burberry, many international first-line brands have reclaimed their dealership in the Chinese market and shifted to the direct mode. In January 2008, MontBlanc announced the right to reclaim Shanghai's Credit Suisse watch Co., Ltd.; two months later, the French Montagut, which had earlier entered the Chinese market, reclaimed the right of agency. The brand also established a China headquarters in Guangzhou in 2007 and directly managed the mainland market. Armani also set up a sole proprietorship company in 2007 in China, and announced that it opened 50 Direct stores in China in 2008. In May 2008, Coach announced the acquisition of Coach retail business in Hongkong, Macao and the mainland in Hongkong Junsi. In the same year, Dunhill, the internationally famous men's wear brand, began to gradually reclaim the agency in Wenzhou, Ningbo and Hangzhou. In addition, Gucci and other brand stores that have higher awareness in the domestic luxury market are all direct battalions.

Motivation: to swallow China's market big cake

Maintaining brand image and improving high-end service

For luxury brands to recover their agency rights, the industry believes that while regulating China's luxury market, it can also more effectively maintain brand image and expand "safety". A senior manager of a high-end shopping mall believes that the development of China's luxury market is only 20 years, and in the strict sense, it is not yet an industry and has yet to reach maturity. In the meantime, there had been a negative impact on the brand image of the agent because of the lack of integrity.

Liu Hui, a commercial consultant, said that when luxury brands choose agency mode, because agents need to buy goods for sale by brands, and are restricted by factors such as capital chain, most agents will purchase commodities according to the location of their stores, which leads to the incomplete commodity category of many luxury brand shops. Moreover, when luxury brands give proxy to small agents, there is a "adulteration" of stores. With luxury brands gradually reclaiming agency rights, some agents without integrity will be eliminated by the market.

In Liu Hui's view, a number of luxury brand shops run by agencies in some shopping malls do not show a higher standard of service than the general brands.

Reporters in a shopping mall in the Bvlgari and Armani It is seen in the store that when the customers enter the store, the staff are still sorting out the goods, and in no way do they serve the consumers.

In this regard, business experts believe that brand operators begin to control and supervise the daily operation of stores, will further improve the service level of the staff in the store, so that consumers can truly enjoy the high-end services of selling luxury brands.

In the industry, luxury brand is the most important brand image, if only through agents to realize the expansion of stores, because it is only the agent brand, driven by profit driven, in order to obtain higher profits to do harm to the brand image. In the expansion of agents, there may also be a mismatch between operation management, personnel level and brand development, which will discredit brand image. And the transformation of brands into direct camp will not only ensure the speed of expansion, but also balance the relationship between high speed expansion and store management.

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Targeting the Chinese market and controlling the right to speak

However, in the eyes of more people, the Chinese market with huge potential is the reason why the giants really regain the right of agency.

According to relevant data, the growth rate of European luxury consumption in 2008 was only half that of 2007, which was affected by the international financial crisis. In the first quarter of last year, the total sales volume of GucciGroup in France decreased by 3.4% compared with the same period last year, while in the Greater China region, consumption growth was as high as 13%.

Bain's latest report also pointed out that last year, the sales of China's luxury goods market increased by nearly 12% to 9 billion 600 million dollars, accounting for 27.5% of the global market share. In the next five years, China's luxury goods market will reach US $14 billion 600 million, ranking first in the global luxury market.

Correspondingly, according to this year's Hurun fortune report, there are now 140 rich and 1900 yuan rich one billion yuan rich people in mainland China, and more than 55 thousand people are worth more than 100 million yuan. The rich have an average of 3 cars and 4.4 watches, with an average annual consumption of 1 million 700 thousand yuan.

The strong growth of China's luxury goods market and the contrast between the high-end consumption sectors in Europe and the United States have made it impossible for luxury brands to sit down and have to adjust their strategy in China to cater to the trend of the global luxury market and accelerate the layout of the rapidly developing Chinese luxury market. The withdrawal of agency power can not only control profits, but also have more voice.

It is understood that this year, luxury brand Prada has opened 4 new stores in Shanghai. In the near future, the brand will also open 4 new stores in Chengdu, Guangzhou and Hangzhou, with an increase of 47%. On the two day before the opening of World Expo in Shanghai, LV opened 2 flagship stores in Huaihailu Road and Pudong District of Shanghai, and two of its Huaihai flagship store, with a total area of 1475 square meters, and Pudong national gold center flagship store area of 1736 square meters.

In this regard, some analysts pointed out that such a large volume of shops and expansion speed can be written into the history of LV development.

The future: all-around initiative

Early evasion of risk using agency

20 years ago, when China's luxury market started, the average monthly income of ordinary residents was only a few hundred yuan. However, as one of the most important countries in the world, the potential of China's consumer market has made it impossible for luxury brands to give up. In order to avoid risks and not miss opportunities, many luxury brands entered the Chinese market at the beginning of the agency mode, and entered the domestic market by proxy mode. Because local agents are more familiar with China's national conditions, agents also have rich human resources and channel advantages.

A person familiar with the operation process of luxury goods revealed that when agents represented luxury brands, they mostly adopted the "buying system", that is, agents bought and sold branded goods in stores. At the same time, agents will also be responsible for the rental and daily operation expenses of the stores. Through the agency mode, luxury brands transfer risks to agents, even if losses do not have too much impact on the company's performance, and the operational risk is greatly reduced.

Experts also say that luxury brands usually open the market with the power of domestic agents in order to achieve the goal of entering the Chinese market rapidly.

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Reclaiming agency power to help brand expansion

An insider revealed that at present, the emerging luxury market including India is repeating the old road that China has gone through, and the Chinese market has reached the stage of luxury brand direct operation.

In fact, behind the resurgence of this agency, it reflects that the development mode of luxury brands in China has changed significantly. Luxury brands have changed from passive sale to active attack, and Burberry has regain the right of agency.

According to the new cooperation agreement between Burberry and KwokHangHoldings, Burberry plans to invest 70 million pounds in cash to acquire 50 KwokHangHoldings stores in the mainland and 85% of the company's shares.

A person in charge of Burberry also confirmed this to reporters.

For agents upgrading from "buyers" to partners, a veteran in the luxury industry believes that this will speed up Burberry expansion in the domestic market. According to the personage, the agent has the right to establish a brand to open a store. The cost of only one purchase is often as high as several million yuan. At the same time, the agent also needs to pay the daily operation expenses such as store rents and staff salaries. The high investment makes the agents cautious in dealing with the opening shop, which restricts the further expansion of luxury brands. When the brand agent reclaims the power of agency and changes the mode of cooperation, the brand also becomes passive marketing at the marketing level.

Moreover, after the withdrawal of agency power, the brand does not need to continue to pay the agent's "intermediate fee". This part of the cost will "transition" to the profit return of the brand as the capital support for brand expansion.

"Compared to opening stores, integration of Chinese elements is the sign of luxury brands to force the Chinese market." Yu Guanghua, chairman of Lotte intime department store, said in an interview with reporters that the brand business opened more stores in the market, and only a large number of products sold in Europe, America and Japan were sold in shops.

At present, many luxury brands have already treated the Chinese market as well as the European and American markets and Japanese markets. They have introduced commodities that incorporate local cultural connotations and signed local designers. A few days ago, Hermes, a luxury brand with 18 stores in the Chinese market, announced that it would launch a new brand "up and down" in China in September. It is reported that "up and down" is a "Chinese brand", which will be developed and produced by Chinese design team in China based on Chinese traditional craft and culture.

In the interview, the managing director of the North Asia sub district of Hermes said that the first store of "upper and lower" brand will be located in Shanghai, which mainly sells household products such as tableware and furniture with traditional Chinese cultural themes.

With the rapid development of China's luxury market, the relationship between luxury brands and the Chinese market is becoming more and more closely related. It is understood that Burberry's BlackLabel and BlueLabel are only available in Hongkong, China and Japan. In addition, LeviStrauss&Co is also planning to launch a Chinese brand this year.

Mainland textile mill to increase profit return

In fact, luxury brands are not satisfied with marketing at the marketing level. Many luxury brands have extended their contacts to the production process. Although the brand image is highly valued and many consumers do not fully accept "made in China", driven by the maximization of interests, many luxury brands have moved factories to China with relatively low labor costs.

Since 2000, Coach has transferred more than 90% of its factories to Asian countries with relatively low labor costs. Second years after the transfer, the effect began to appear. It is understood that the gross margin of Coach commodity is up to 64%, even more than 62% of LV. With the reduction of labor costs, this figure has jumped all the way to 77% in recent years.

In response, a business expert said that Coach's reputation in the domestic market was not as good as that of LV, and its product line pricing was also low, so that it could get such a high gross profit margin, benefiting from the compression of production cost.

Moving the factory to a relatively low labour market also gives Coach confidence in the company's future prospects. According to a market report from Coach, by 2013, the market for handbags and accessories in mainland China, Hongkong and Macao will probably exceed $2 billion 500 million, far higher than the current sales of US $1 billion 200 million.

According to statistics, about 80% of the world's top luxury brands have entered the Chinese market. In some provinces and cities in China, in order to introduce luxury brands, some shopping malls are willing to take the "down payment" method, such as decoration, to attract luxury brands to enter.

　　 Editor's comments, luxury brands in China to recover the agency power, cloth factory shop, in addition to improving profit margins, it is possible to further control the voice of China's luxury market. The expansion of global luxury brands in China has entered an era of active growth.