Luxury Market Brakes Sharply 2013 May Encounter Cold Winter

　　 Price quotation tool of Jinhao desktop market

Now, the brake of this leading country is too urgent to be taken by surprise. From the compound annual growth of about 30% every year in the past to about 7% in 2012, in the future, Lu Xiaoming, the former general manager of Montblanc China, said, "China's luxury market will enter a severe winter in 2013, and this severe winter will continue for a period of time." The instant changes in China's luxury market have even confused smart luxury brands.

Is it really the end of luxury brands' good days in the Chinese market? Will the Chinese people who consume the most luxury goods in the world lose their home market? Where should luxury brands go in the Chinese market? Perhaps a clear understanding of the development curve of China's luxury market will help us find the answers to these questions.

　　 Slam brake

After five years of explosive development, the Chinese luxury market did not continue to move forward at a high speed as the luxury brands expected. The sudden brake of this consumer car really made them stumble.

In the first half of 2012, the sales of all business categories under the luxury giant LVMH Group showed a steady growth, but the sales performance in the Chinese market showed a slight decline.

"From Asia to Europe, the company's performance has changed," Jean Jacques Guiony, chief financial officer of LVMH, said in a conference call, "The growth in mainland China has slowed down." The news that Burberry, a British luxury brand, announced that its sales growth in the Asia Pacific region dominated by China in the first quarter of 2012 fell to 16% from 67% in the same period last year, cast a shadow on the Chinese luxury market.

According to the latest 2012 financial report released by PPR, the sales growth of all major brands of the Group has declined from the first half of 2012 to the second half of 2012, including Gucci, BottegaVeneta and YvesSaintLaurent.

"The main reason is that overseas purchases are increasing." Francis Gouten, former CEO of Richemont Group in Asia Pacific and founder of Guten Consulting Company, analyzed in an interview with China Business News. Whether it is the "good news" of Chinese consumption craze coming from Europe during the Spring Festival Golden Week, or the phenomenon investigated by consulting companies: Chinese people have become the largest group of luxury consumption in the world, but China's local luxury market is slowing down, or the growth of the major luxury brands' financial reports in the Central European and American markets is now surpassing China's data, All these facts have raised a concern that the luxury industry is facing challenges in China, which has the strongest growth.

Statistics show that 60% of China's luxury consumption occurs overseas, and overseas consumption expenditure is accelerating, especially in Europe. In 2011, China's overseas consumption of luxury goods increased by 42% year on year and about 31% year on year in 2012. On the contrary, China's local luxury consumption increased by 30% year on year in 2011, but dropped sharply to about 7% in 2012.

"Of course, the slowdown of China's economy has some impact on the market, but in addition, gift giving consumption fell sharply in 2012, and officials' wearing luxury goods affected their image. The new policy issued by the government in October 2012 limits the government's spending on luxury goods, which has a great impact on China's luxury market, because most of these consumption occurs at home." Bruno Lana Bruno, global partner of Bain and chairman of consumer goods, retail and luxury goods business in Greater China. The high-end wristwatch with the increasing overseas price difference and gift giving consumption accounting for 50%~60% is undoubtedly the most hit luxury.

　　 Is the good day over?

Although many luxury brand presidents in the past emphasized that luxury brands pay attention to the balanced development of the global market when they were interviewed by our reporter, the prosperity of the Chinese market in the past inevitably inclines the resources of the global layout of these brands to emerging markets.

But now Chinese people's money can't stay in the local market, which makes luxury brands who didn't seem to care where consumption took place in the past worried: what about the growth of so many stores in the Chinese market? What should we do about the high inventory caused by the high budget that is carried away by the prosperity? Is the Chinese market only a showroom for luxury brands in the future?

In 2012, the sales of stores under Burberry's name for more than one year in the third quarter increased by zero in the 10 weeks ending on September 8, far less than the 6% increase in the same store sales in the second quarter ending on June 30.

Bruno said: "The upsurge of overseas consumption of Chinese people will continue, because overseas travel continues to heat up, and the RMB exchange rate against the euro and the dollar is expected to continue to rise, which means that the price difference between domestic and overseas luxury goods will remain in a considerable range."

In Lu Xiaoming's view, if the Chinese luxury market is in a cold winter in 2012, then the Chinese luxury market will enter the severe winter stage in 2013, and the severe winter will continue for a period, and then return to the normal and mature consumer market.

The reasons for Lu Xiaoming's judgment are as follows: "China's luxury goods market is struggling to develop under the condition of immaturity. Once the economy is bad, consumers here will become mature all of a sudden. Therefore, in 2013 and 2014, those who are too empty of good face and important consumption will be reduced, and the government's fight against corruption will make public funds and gift giving consumption less and less."