The Luxury Market Faces Cold Currents Under The Anti - Corruption Storm

Luxury brands in the Chinese market in the past few years are now facing a strong cold spell.

In 2013, Armani (Giorgio Armani) flagship store and Dolce & Gabbana flagship store were shut down in Shanghai the Bund three and the Bund six. You know, Armani has been in the Bund three for nearly 10 years. Not far from the Bund No. eighteen, Patek Philippe (Patek Philippe) and Boucheron (Boucheron) also withdrew. Along with the economic recession and the weakness of sales in China, luxury brands are advancing all the way in China. Expansion trend It seems to have stopped abruptly.

According to Bain's recent research on China's luxury market in 2013, the growth rate of the luxury market in mainland China slowed further in 2013. Annual growth rate Around 2%. In 2012, the figure was 7%, which was 30% in 2011. Bain expects this slow growth trend to continue until 2014.

The gap in the Chinese market is so great that the Americas market surpassed Asia in 2013 and became the main engine of growth in the luxury industry.

For most luxury brands, the most profitable year for Chinese market is over. The sale of luxury goods is much more difficult than ordinary goods. It is even harder to persuade people to buy "icing on the cake" at a big price in a depressed external environment.

"For Chinese consumers, the decline in the economic environment has also encouraged them to become more sophisticated and rational in luxury consumption. This is a forced rationality. " Lu Xiaoming, President of Loya international and former president of MontBlanc China, pointed out to the twenty-first Century economic reporter, "this is not a good thing. It can reduce the consumer's boasting mentality and promote people's sober thinking on luxury consumption."

Under such circumstances, the major international luxury brands have to slow down. Facing increasingly complex business environment With increasingly fierce competition, luxury brands are trying to adjust their strategies and start again.

From glory to decline

Just a few years ago, luxury brands enjoyed the best time in the Chinese market.

According to Bain's research, after 2009, the growth rate of luxury goods in the Chinese market reached 35%. From 2008 to 2012, the annual compound growth rate of domestic luxury consumption reached an astonishing 27%. At that time, the first tier cities such as North and Guangzhou were far from meeting the huge consumption demand. "Going to town" became an important strategy for many luxury brands. Under such circumstances, many brands have made vigorous expansion plans.

As of 2013, Louis Vuitton (LV) there are 64 stores in 32 cities in the mainland of China. Among them, there are 13 stores in 4 cities in the north and Guangzhou, and the rest are in two or three cities. Burberry (Burberry) is also unwilling to lag behind. It has opened 70 stores in 36 cities in China, of which only 14 are in the north, and the other is in the two or three line cities. GUCCI (Gucci) has opened 59 stores in 32 cities, while Prada (Prada) has opened 27 stores in 19 cities in the city of 2:8.

However, what these luxury brands did not expect is that the powerful engine in the Chinese market is slowing down. In 2013, the growth of LV sales in China was only about 1%. In addition, according to the three quarter earnings report released by LVMH group (LV's parent company) in 2013, sales growth of the company's core fashion and leather goods department slowed down. In 2013 1-9, sales in the sector increased by 4%, and its growth rate dropped by 1% compared with the first half of this year. The overall turnover of the LVMH group in the third quarter of 2013 was 7 billion 20 million euros ($9 billion 480 million), an increase of 1.7% over the previous year's 6 billion 900 million euros ($9 billion 300 million), lower than the expected Euro 7 billion 300 million.

Not only is LVMH, but also the three quarter earnings report of Kering in 2013 showed that the Gucci brand of the group declined by 5.4% in the three quarter, and its performance was not satisfactory.

There are also high-end watches. Not long ago, there were media reports about luxury brands in France. Cartier (Cartier) news of closing 10 stores in China and saying that sales of Cartier in China have been hard to maintain the two digit growth in previous years.

Another group of data is that in the first quarter of 2013, Swiss exports to China decreased by 26% compared with the same period in 2012, reversing a ten year growth trend.

In Swiss statistical Industry Federation's statistics, 2001-2011 years, Swiss watches and clocks Value of industrial exports From 10 billion 297 million Swiss francs to 19 billion 30 million Swiss francs, an increase of 84.81%. Among them, the sales of Swiss watch brands in the Chinese market increased by an average of 123.73% over the past 10 years. However, from the second half of 2012, the momentum of the rally will not continue. In the second half of 2012, the growth rate of the Chinese market decreased by 23.11% compared with the previous ten years, compared with the same period in 2011, the growth rate dropped by 47.17%.

More than a month ago, a top clocks and watches agent in Hongkong also told the twenty-first Century economic news reporter that the consumption of luxury watches in 2013 declined significantly, and that the mainland customers bought most of the customers' prices below 100 thousand yuan. Previously, sales of watches around 2 million yuan have been good.

In this "cold current", even China's own luxury goods, the national liquor Moutai, is no exception. In September of this year, Guizhou Moutai announced its worst half year performance since 2001. Since early 2013, the stock price of Moutai in Guizhou has fallen by nearly 40%.

In this case, luxury brands can no longer describe the plan of opening shop with lofty sentiments as they did in 2009. In early 2013, LVMH group said that the LV brand will completely inhibit expansion and will not continue to open stores in China's two or three tier cities. Kering group and Summit group It also said it would slow down the expansion in the Chinese market. Obviously, if the sales of luxury brands can no longer balance the high cost of expansion, the cost and risk will increase simultaneously.

For LV, who has opened its flagship store to Inner Mongolia, China, and Gucci, which occupies the two or three tier city's core shops, the contraction front is undoubtedly a major turning point in its strategy in China.

Of course, in this sudden recession, not all luxury brands have become shabby, and some lower priced entry-level brands have smelled opportunities. Coach, a luxury fashion brand in the US, said its sales in the Chinese fiscal year 2013 (July 2012 to June 2013) increased by 40% compared with the same period last year, or even double digit sales.

　 Coach To the newspaper, the growth of the company's performance in China mainly depends on two reasons. "First of all, Coach is not an extravagant brand. We notice that most customers of Coach buy customers from relatives or friends. Second, the price of Coach products is 40%-60% of European traditional luxury prices, so it can attract a wider customer base."

At present, Coach has opened a physical store in 49 cities in China. In 2012, the company announced that it would open 30 new stores in China every year, 90% of which would be in two or three tier cities. In 2014, Coach said it would keep the shop open.

Be in a dilemma

To a large extent, the collective frustration of luxury brands in the Chinese market is related to the slowdown in the economy. In other words, China's domestic purchasing power is no longer able to sustain the huge expansion of luxury brands in the Chinese market in the past few years.

In addition, in June 2012, China issued the first rule that "public funds should not purchase luxury goods". This "strike gift giving" act also caused a great impact on the luxury industry. Bain said in the report that the government's anti-corruption campaign has the most obvious influence on the category of "official gifts" as the main driving force for advanced watches and senior men's clothing.

This impact has even been transmitted to the headquarters of the luxury group. French wine brands Remy Martin Jun recently warned investors that their operating profits will fall by at least 20% this year, mainly due to the "significant decline in China's performance" in 2012. You know, Remy Martin's Royal production is $3000 a bottle of Louis thirteen Cognac brandy.

Moreover, overseas consumption is still an important factor limiting the sale of luxury goods in China. According to the statistics of Bain, the price difference of luxury goods is very obvious at home and abroad. Over the past 2013 years, 60% of the total sales of luxury goods in China have occurred abroad, and overseas purchasing and e-commerce channels of luxury goods have also broken the market of traditional stores. According to the estimates of Italy luxury industry association and Bain company, although sales in Greater China account for only about 13% of global luxury goods sales, 29% of consumers who buy global luxury goods are Chinese. In 2005, the proportion of Chinese consumers was less than 5%.

The change of consumption concept is also a bad news for all luxury brands. Nowadays, the rich people in China are quietly changing the consumption psychology of luxury goods, and some rich people begin to pay attention to " Personal Tailor The concept and service. As a result, the attractiveness of the mass produced luxury brands gradually declined.

Moreover, some people in the industry say that many luxury brands have been in China for nearly 20 years, and have been caught up in the dilemma of "brand value decline" because of their excessive pursuit of profit maximization. Today, the affluent class prefers brands that highlight individuality, and no longer favors the "ubiquitous" homogenization products. The changes in consumer tastes have made the once popular brand of big brands suddenly cold.

As far as familiar LV is concerned, the "BrandZ global brand top 100 list" released by market research firm in 2013 shows that LV is still the most valuable luxury brand in the world, but it is worth noting that its brand value has dropped by 12% to 22 billion 700 million US dollars compared with 2012.

Another big reason for LV's "disfavor" is that its fake products have covered almost all channels in the Chinese market, including distribution agents, secondhand goods and e-commerce channels. The flood of counterfeit goods makes many high-end consumers slowly abandon LV and turn to other more expensive and smaller brands. After all, it is hard for the wealthy to consume the most counterfeit brand. For ordinary consumers, they often do not spend tens of thousands of yuan to buy a real LV package. More people are willing to go to Taobao or other channels to buy high imitation goods.

Not only LV, but also French embarrassment, and France's table jewellery brand. Cartier (Cartier) it was once considered the next LV. According to anecdotal data, Cartire's advertising in China ranks first among all luxury brands, with more than 200 stores in China. However, a large number of advertisements and many stores have violated the scarce attributes of luxury goods to a certain extent, and the value of brands will inevitably be diluted. In fact, most domestic consumers' understanding of Cartire focuses on only ten thousand yuan LOVE series jewelry and thirty thousand yuan blue balloon series watches. Consumers know little about Cartire's top jewellery.

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At present, the development of luxury goods in China seems to be caught in a paradox: to improve. Popularity And sales volume, we must open more stores and put a lot of advertisements on it; however, the more open stores, the stronger the brands, the higher the consumers may be, and they will be far away from the brand. In the eyes of many people, the image of LV in the Chinese market has dropped.

However, Lu Xiaoming, President of Loya international, does not agree with the idea of "excessive expansion of luxury goods". In his view, luxury brands have strict standards for opening up shop, and the performance decline is attributed to too fast shop and too many stores.

In his view, except for the four first tier cities, "north deep and deep", there are about 40 core cities in China. If the average number of stores in every second tier city is 1-1.5, plus the number of stores in the first tier cities, the number of luxury brands in China will be around 60 to 100. If luxury brands only open in first tier cities and provincial tier cities, they can open about 50 stores in China.

"Of course, it also depends on the positioning and strategy of the luxury brand itself." Lu Xiaoming said, "for example Hermes It will only be in the first tier cities and the most developed second tier cities, so its number of stores in China will be controlled at twenty or thirty. By contrast, fashion and light luxury brands like HUGO BOSS can be found in almost all second tier cities. It is not surprising that such brands will open more than 100 stores in China.

Breakthrough in transformation

Although the slowdown in the Chinese market is so dramatic, it is still the most important market that no one can ignore. But after the honeymoon period, what these luxury brands need to consider is that reducing the storefront, controlling the pace of expansion and upgrading the storefront are the main measures to deal with the market downturn and restore the brand image.

After investigating 20 global luxury brands, Bain said that the number of new outlets in the Chinese market has decreased from around 150 in 2012 to around 100 in 2013, a decrease of 1/3. "The Chinese luxury market has developed rapidly from the enclosure stage to the stage of continuous attention to customer experience and comparable store sales." Bruno LAN, Bain's global partner, said.

At the same time, luxury companies are trying to take various measures to deal with economic depression and market uncertainty.

For example, Gucci Begin to shift more to high-end market, improve product performance by raising unit price. It is reported that the company began to make more use of Python skin and other rare leather materials to produce handbags.

There are also companies that raise sales by cutting prices. For example, Shuijingfang, one of the high-end liquor brands in China, now sells half of its products to less than 500 yuan. Prior to that, every product of the company was higher than this price.

The strategy of Coach is to further expand its product line in the Chinese market. The American luxury brand is trying to transform brand recognition, so that consumers no longer regard it as a handbag brand, but a fashion brand that includes a series of products such as shoes, clothing, watches, sunglasses, etc. In addition, Coach has made great efforts to popularize men's products in recent years. The retail sales of global men's business have been developing rapidly from US $100 million in fiscal year 2010 to US $600 million in fiscal year 2013, which has become a new business growth point for the company.

In addition to adjusting product lines and prices, many luxury brands have begun to expand the channels of e-commerce, in order to further explore the market. At the moment, Gucci and Giorgio Armani's e-commerce platforms have landed in China; Ferregamo has opened official licensed online stores on the show network; Coach, HUGO BOSS has also launched online self operated online stores in China.

Burberry's electricity supplier strategy is even more radical. In addition to increasing cooperation with Baidu, Youku, Alibaba and other companies, it has begun offering online private custom services. It is understood that after seeing a new product, Chinese consumers can redesign their styles, colors, sidelines, and even personalized signature initials on clothes according to their wishes, and directly customize them to the UK through the Chinese website of Burberry.

But even everyone is talking about it. Electronic Commerce Domestic luxury electric business is still in its infancy. On the one hand, the noble attributes of luxury goods enable people to enjoy all kinds of experiential services in luxurious stores, while selecting tea salesmen's recommended products while drinking tea. On the other hand, the channel management strategy of luxury brands will also make them hesitate to face the electricity supplier. In other words, luxury brands need to seek a balance between openness and control. A brand like Coach has a higher degree of openness. Therefore, it is more positive for e-commerce channels. Most of the time, luxury groups are still slow in formulating effective e-commerce strategies.

"It should be said that Luxury brand The electricity supplier is still in a very careful stage, and there will be no big moves in this area. Lu Xiaoming said, "you will find that most of the products that are available for online shopping on the luxury website are accessories, such as glasses, scarves, and so on. There are few mainstream products. Only those fashion brands that focus on light luxury positioning will be able to work hard on the electricity supplier.

At the same time, he said that luxury brands will not study consumer preferences just like the fast food products, because they are inconsistent with brand value. "What luxury goods do is to slowly lead consumers' preferences, so that consumers can accept the brand culture, rhythm and historical precipitation rather than consumers."

In fact, most of these luxury brands have a history of over 100 years, and the slowdown in growth is not new for them. use Lu Xiao Ming In other words, "in the US and Europe, luxury brands are also very popular at the beginning. After a period of time, the annual growth is very little, or even zero growth. After a few years, it will be revitalized again. This process is repeated only once in China. " But at the same time, he admitted that compared with other markets, the Chinese market has been extremely hot and cool. It is faster than the imagination. "This is a sign that Chinese consumers are not patient enough."

No matter what the future strategy is, for one of the major luxury brands, one thing is obvious - the era of easy picking up the fruits of the market is gone forever.