Luxury Group Quit Beijing

In mid September, Chlo AI, who had been in Changan International Plaza in Xi'an for a year and a half, chose to withdraw.

This is the second store that it withdrew in just 2 months.

After a discount sale in July, the flagship brand of the world's second largest luxury group, Swiss summit group, withdrew from Beijing's shinguang world.

Little known is that these two stores are operated by I.T, a Hongkong agent.

Chlo e public relations department of Hongkong confirmed the first financial weekly. Now Chlo shop in China has only one Suzhou shop operated by agents.

In contrast, LVMH group is continuing to enter the second tier cities of China.

The LV, which is totally rejected in the world, will be stationed in Urumqi in October, only 3 months from the opening of LV Changsha store.

"Only the storefront itself can guarantee good lineage."

In this way, LV explains the significance of direct camp to health expansion.

This is a critical moment.

Most luxury brands are penetrating into the Chinese market more deeply, and behind the trend of shop opening is the game between luxury brands and agents for this attractive market development power.

There are a long list of brands that will gradually reclaim agency rights this year: Zegna, Coach, Loewe, MontBlanc...

They left the agents and expanded them.

Now, Armani group's high-end brand Giorgio Armani except Beijing and Shanghai, the rest of the region uses agents.

Since 2001, China has rapidly grown into Asia's largest market except Armani.

However, in 2007, Armani set up a Chinese company in China and plans to open 50 direct outlets in China in 2008.

The brand of Li Feng Group has gradually recovered its agent in China, not just Chlo's.

The British men's wear brand Dunhill is recovering the agency in Wenzhou, Ningbo and Hangzhou.

The sale of luxury goods has been developing rapidly from the sporadic trend this year.

For these luxury brands, early entry into the Chinese market relies on agents as expedient measures.

Before 2004, China's market laws and regulations were limited, and the market prospect was unknown, so most brands chose to shift risks.

The first batch of large scale private foreign trade companies has become a leading force in the luxury market to enter the Chinese market.

For luxury brands, the cost is very small, almost zero, and these agents are more familiar with the Chinese market, and some already have ready sales channels.

At that time, the mode of cooperation between agents and luxury brands is generally: brands sell to agents at a certain discount, agents are responsible for opening shop costs, personnel recruitment, etc. brand names are given support in store image, agents are responsible for handling inventory and enjoy the right to operate in a certain area.

The initial commercial cooperation is even very rough.

An insider of the industry said OMEGA, a watch brand (OMEGA), did not even sign a formal contract with its original agent when it first entered the Chinese market.

There is no restriction on parallel importation in China, and a brand has several agents at the same time.

But OMEGA could not be reached for comment.

With the help of these agents, he has made huge profits, and Zegna, who came to China in 1990s, is one of them.

At that time, the Italy fashion brand wanted to open its shop in a five star hotel and sell its products to foreigners travelling to China. It found a local partner, Wenzhou Xia Meng company.

Since Xia Meng helped China enter China, Zegna's sales in China have increased by 20% annually since 1991. Now China is Zegna's fourth largest market in the world.

But when big brands know enough about the market, they start to think about getting rid of agents and concentrating on their own business.

This year, due to the subprime mortgage crisis in the United States, the sales of luxury brands in the US have lost vitality and accelerated the formation of this trend.

In August, Deutsche Bank lowered its profit forecast for the entire luxury sector.

Bain consulting predicts that the industry will grow by 2%, compared with 6.7% in 2007, making China even more hopeful.

Coach, a woman's bag manufacturer who always wants to compare with LV, is planning this way.

In May, Coach signed a takeover agreement with its agent, Imaginex Group, to take over the retail business in Hongkong, Macao and Mainland China.

"We are ready to build the Chinese market into third pillars to continue Coach's success in the US and Japan."

Coach CEO Road, Frankfurt (Lew Frankfort) said when it announced the takeover agreement.

However, the most important reason why luxury brands choose to operate directly is that poor management of agents will hurt the most valued brand image.

The biggest difference between agents and the starting point of big interests is that the former seeks the maximization of short-term profits, and the latter pursues the maximization of brand image and profits on this basis.

So despite the symbiotic symbiosis, the interest game between luxury brands and agents has never stopped.

Agents are eager to clean up inventory and reduce costs. They are only willing to put their products on their shelves. Luxury brands often have a theme for every season. Every single item presenting this theme will obviously cost more.

In order to save costs, dealers' control of brand image and related services will sometimes be greatly reduced.

An agent who has worked in both agents and luxury brands has revealed that in Wenzhou, for example, agents often act as agents of multiple luxury brands, and only one or two people manage more than 30 different brands of window displays. In an independent brand such as Zegna, there are twenty or thirty window display teams, and each single store has a designated staff to assist the display specialist in taking care of the store image.

The British men's wear brand Dunhill stores in Shanghai and Beijing are mostly direct battalions, and the rest are agents.

However, the image of store in Hangzhou and Ningbo is totally different. The latter is far from the low-key luxury British gentleman style that Dunhill wants to convey, so Dunhill has begun to withdraw its agent in the region this year.

Besides, when some luxury brands are produced locally, agents will directly pick up goods from factories. When the sales channels of these agents are too powerful and too close to manufacturers, luxury brands will lose control, which leads to many grey areas.

Luxury brands can do very little for intellectual property protection in China.

But on the game itself, the balance is absolutely tilted to luxury brands. What they need to do is cut off the source of goods.

This often arouses the intense reaction of agents.

Desperate agents sometimes sell madly.

Shanghai run fan trading company is the agent of CalvinKlein in Shanghai.

When CK Asia headquarters unilaterally announced the suspension of cooperation, the company began to sell CK to 1 to 60 percent off.

In January 2008, after 5 years of cooperation, MontBlanc announced that the agency of Shanghai ruisin watch Co., Ltd. (hereinafter referred to as "Credit Suisse") should be reclaimed, and the two sides even went to court.

Both sides are arguing about the cost of decoration and operation area of the counters, but anyway, State Credit Suisse has not been able to get the goods at last, and MontBlanc's exclusive store in the gold position of CITIC Pacific square has nothing to do with it.

"The most feared and the most passive problem of agents is the supply of goods. We must purchase goods from the brand. The brand can use many reasonable excuses to restrict the purchase of agents.

This is very fatal.

Agents basically have no way to do that. "

Zhu Xingyi said.

The strategy of Coach agent Junsi group is that in addition to signing as long as possible, it will also use the terms of automatic renewal to protect its interests.

The automatic renewal is that Junsi and the brand holding personnel first formulate a series of indicators in the agent stage. At that time, as long as Junsi can complete the task according to the index, the renewal of the next stage can be automatically obtained after the contract expires, and the brand holder can not change the agent at will.

Perhaps it is not the right and the wrong, but the agents must be aware of the fact that they want to keep on and get more profits. Agents must be good enough and smart to compete with luxury brands.

In order to protect themselves, agents must be able to provide more benefits to the brand in exchange for deeper cooperation.

In 2006, China replaced Japan as OMEGA's largest sales market in the world, and its agent Shanghai Xinyu Hendry watches Co.

So even if OMEGA opened a direct store in China in 2005, Xinyu Hendry could still participate in OMEGA's sales by establishing a joint venture with the other side.

Another relatively successful agent case is Zegna's partner Xia Meng.

Ruggiero, China's managing director, told the first financial weekly that Zegna has expanded rapidly in China because they have found a good partner.

This partner helps it solve many problems, such as local production of some garments, finding suitable channels, opening stores and so on.

Xia Meng said that now Xia Meng's clothing in China reaches 50% of Zegna's total production.

Zegna even opened a joint venture with Xia Meng in 2003 - Xia Meng Yi Jie Garments Co., Ltd.

Zegna and Xia Meng each share 50% of the shares to jointly develop a high-end high-end men's clothing brand.

Unfortunately, this cooperation is fruitless. Even so, Zegna still needs to withdraw its battalion.

This is because the high-end brand image is the Qian Shu of luxury brands, and any measures that are detrimental to them will be abandoned later.

Now Zegna only chooses agents in Hefei, Urumqi and other markets, and the number of outlets has increased to about 3 times that of agents.

In the eyes of luxury big players, the time to fully operate in China is ripe.

China's domestic demand has been fully stimulated, and the main consumer market of luxury goods is no longer the same as that of the former Beijing, Shanghai, Guangdong and three developed provinces. The second tier provincial capitals, such as Chengdu and Wuhan, are also beginning to enter the big view.

LV began to place its shop in provincial capitals such as Changsha and Urumqi.

In 2004, China followed the promise of WTO to open restrictions on foreign investment in commercial areas. Luxury brands set off a wave of shops in China.

However, it is not easy to win the luxury brand.

The constraints include not always finding the right store when negotiating with the channel side. The agents may have deeper accumulation because of long-term and channel cooperation.

Luxury brands do not necessarily gain the advantage of negotiating with distributors.

China's local men's wear brand, Vike, has shops in Beijing new world and Xinguang world. One of the company's people said that the top tier channels like Xinguang world and Dongxin Xintiandi tend to favor big brands in the one or two tier, because there are not many such top shopping malls, and the competition between big brands is fierce.

In addition to brand strength, product and overall store image, a very important consideration is whether or not to accept bundles, that is, whether the brand can be stationed in the shopping mall of every new city in the new world.

For luxury brands, a big problem is that the new world department store is a high-end channel in Wuhan, but not in Beijing.

Cost control is another test.

On the surface, the battalion will earn more money, but it will also bring more cost.

A dress of 10 thousand yuan, if 50 percent off sold to dealers, once the direct camp, it seems that luxury brands can earn more than 5 of the profits.

But in fact, luxury brands need to be allocated part of the profits to high-end shopping malls.

No matter whether it is based on rentals, such as Yansha shopping mall or the New Oriental world and Xinguang world, according to the return point, the shopping center will be divided into 10% to 30% sales volume.

In addition, the camp will bring libraries.