LV Suffers Brand Bottlenecks, China's Anti-Corruption Affects Luxury Sales

Some people say that luxury is a barometer of the economy. LV is the weathervane of the luxury industry. Now it seems that the "wind direction" has changed.

At the end of 7, the first half of 2014 announced that the group's total revenue was 14 billion 9 million euros, an increase of 5% over the 13 billion 632 million euros in the same period in 2013, according to the report released in the first half of 2013. Compared with nearly three years of earnings, in 2013, LVMH turnover was 29 billion 100 million euros, an increase of 4% over the same period last year, and the turnover in 2012 was 28 billion 100 million euros, an increase of 19% over the same period. The result of the sustained slowdown in performance growth was not satisfied with investors. On the day of issuance, LVMH shares fell 6.8%.

LVMH is truly a luxury carrier, with more than 60 fashion and luxury brands including LV (hereinafter referred to as "LV"), Hennessy, Fendi, Si Lin, Dior, Yu Po, DFS, and so on. Some analysts point out that China's anti-corruption efforts are the main reasons leading to the slowdown of many luxury brands in China, including LVMH. In fact, this is only one of the external factors. Collective internal forces such as group internal adjustment and consumer psychological changes are the main reasons for killing LVMH's performance.

　 Encounter brand bottlenecks

LV is one of the most famous brands in LVMH, its department. clothing The total retail sales of leather goods in the first half of 2014 were 5 billion 30 million euros, up 4% from 4 billion 711 million euros in the same period in 2013, with a total profit of 1 billion 487 million euros, which is basically the same as that of 1 billion 493 million euros in the same period in 2013. The adjustment of LV is perhaps a microcosm of the adjustment of LVMH clothing and leather equipment department.

"Many entry-level luxury players look down on LV. Actually, when I used dozens of packages, the most frequent use was LV, because it was practical, lightweight and wearable." A luxury commentator wrote in his WeChat public account: "LV is a brand that is seriously underestimated."

Indeed, in the eyes of many wealthy people, LV is the brand that makes them love and hate. LV was once a symbol of wealth and identity when it first entered China. However, in recent years, LV seems to be the pronoun of "upstart". In high-end gatherings, the probability of "bumping into bags" is very high.

With the increase of disposable income of residents, owning a LV package is no longer an unreachable goal for many consumers in the first tier cities. In addition, the domestic counterfeit goods flooded, super a LV fake package can be false.

All these have reduced the brand influence of LV.

LV has long been aware of the problem of brand problems. In order to maintain its consistent high-end image, every year, the price of luxury goods is always LV. According to the rough statistics of the China business daily, the highest price increase of single products has reached 34% in the past four years of LV's rise. The official saying of LV is that the rise of raw materials and operating costs is the main reason for the rise in prices. But Zhou Ting, President of the Institute of quality and quality research, believes that maintaining the luxury of brand is the core reason by raising prices. The reasons for operating costs and raw materials are negligible for the high profit industries such as luxury goods.

In recent years, many rich people have abandoned LV because the material of their bags is mostly PU (artificial leather), while consumers prefer favors such as cowhide, sheepskin and crocodile skin. Leatherwear LV is quietly adapting to such a change. Recently, reporters found in many LV stores in Beijing, Shanghai, Hongkong and Taipei. The most prominent location in the store is leather products. The traditional PU styles such as "cross pattern", "checkerboard" and so on are mostly displayed in the corner, while in some smaller stores, PU material bags are not even placed on shelves. Only when consumers ask questions, will they remove them from the library.

LV public relations also told reporters that the latest Capucines series are all made of cowhide material, while the Parnassea series is also high-grade leather.

A person who worked as a foundry for a well-known luxury brand told reporters that before he was "encouraged", he had made more than A fake items of luxury bags. "We are basically buying fake bags on the market, and then a little bit" demolition "to open and imitate sewing. Although LV is not a purse, LV is almost one of the top brands in terms of packaging technology. According to the personage, to cater to the mentality of the rich people who like to cherish the material of the cortex, and with the high technology of LV and the strategy of raising prices, the core consumers will soon choose LV again.

From the marketing method, LV also began to follow Hermes, which made hunger marketing the ultimate. Nowadays, LV's high-end package Capucines series stores are all out of stock, and consumers must have them through booking.

However, the recovery of a single brand may not completely solve the problem of LVMH. Yang Qingshan, a luxury goods expert, points out that the brand positioning of leather products under the LVMH group is not clear enough, the target group is not enough subdivision, and the brand differentiation is not obvious, which forms the problem of many brands competing for the same user group.

LVMH urgently needs to achieve its Pyramid layout. This is also the main reason why Bernard Arnott, President of LVMH, has always coveted Hermes, but this plan was blocked. In October 2010, LVMH announced that it had held 17.1% of the family controlled Hermes and became the largest single shareholder outside the Hermes family heirs. The Hermes family launched a counterattack immediately, and LVMH holdings Hermes was running out.

After the acquisition failed, Arnott preferred LV as the forerunner of brand upgrading. In addition, several other leather brands are also upgrading their brands with characteristics. The slowdown in performance is the "throes" of brand upgrading.

Mergers and acquisitions

Beyond the internal adjustment, the external expansion of LVMH has also been difficult to settle.

In the luxury sector, LVMH has the name of "M & a magnate". In 1987, MOET & CHANDON Hennessy merged with Louis Weedon. At that time, the group had only two brands. In less than 30 years, Bernard Arnott controlled nearly 60 prominent luxury brands, made more than 60 acquisitions, held more than 70 companies, and sold nearly 50 companies. LVMH's M & A is accelerating in 2014.

In February 2014, LVMH group confirmed that the investment was young. Designer Brand Marco de Vincenzo (Marco de Vincenzo), however, holds only small shares of the brand; in April, LVMH announced its recognition of Italy's well-known holdings. shoes Giuseppe Sarno (Giuseppe Zanotti) 30% shares.

These two investment mergers and acquisitions may not surprise investors. After all, as a leader in the luxury industry, they have full experience in the field of clothing and footwear. But entering the catering industry has made investors somewhat unthinkable.

At the end of April, LVMH confirmed that the Crystal Jade, a Chinese restaurant, was purchased at a price of 100 million US dollars. The most common food on the streets of Hongkong was jadeite noodle and Xiaolong Bao. It is reported that after the acquisition of LVMH plans to expand its chain restaurants to the Middle East and European markets, and to be listed.

In addition, according to the Australian financial review, LVMH is planning to acquire the Treasury Wine Estates, the largest wine group in Australia.

Zhou Ting analysis said: "in the first half of 2014, the overall profit of LVMH group was reduced, and the profit growth rate was far lower than the turnover growth. The core reason was the increase in investment and acquisition, in order to consolidate the market budget and increase the existing scale of the existing stores. The profit margin of the product itself has not decreased. " {page_break}

　 Carrier turn?

In addition to the group's internal adjustment and brand upgrading, today's consumption environment is no longer comparable to that of LV.

The change of consumers can not be underestimated. "De Logo" and "customization" are the key words of luxury industry in 2013 and 2014. Chinese consumers no longer like the super letter Logo. Low key, personality and quality are the major considerations for choosing luxury goods.

LV's new series of packages has no obvious Logo, and this action is more than LV's. Hongkong Harbour City almost covered all luxury leather goods brands, and the reporters interviewed found that after Logo, the brands of each brand were not very differentiated, and the packages were basically the same. Lack of personalization is the common problem faced by big brands after Logo.

Zhou Ting believes that the distinction between luxury and fashion has become increasingly blurred in recent years. The trend of fashion is obvious, but the popularity of luxury goods is not obvious. Data show that China's luxury core consumers are 10~15 years younger than European core consumers. They prefer fashion and younger design. Many consumers turn their attention to light luxury brands.

In terms of style, mature markets such as Europe, America and Japan tend to have more styles than the mainland of China or buy new products that are popular in the new century, and consumers have more opportunities to go abroad, making Chinese market demand weaker.

In addition, anti-corruption has a certain impact on the sales of Chinese stores. Wang Na (a pseudonym) is a business manager of a Real Estate Company in Zhengzhou. Every year, she buys some entry-level small products like LV's wallet and key bag as gifts for visiting customers, and the high value products such as leather bags will be given the recognition of the bribe's style in advance, and then buy them to the other party. "This year, the Inland Revenue Department has checked the accounts strictly. The amount of the invoice for shopping in the stores is relatively large, and it can not be offset. It is very troublesome to use the transportation fees and other invoices. On the other hand, the receiving party is also very cautious. It has never been rejected before. This year, several of them directly refused the gift or returned the gift afterwards.

In terms of performance, LVMH Asia (excluding Japan) showed slightly worse performance. Management also pointed out: China's market demand weakened in the second quarter.

However, the industry believes that the weakening demand in the Chinese market is only attributable to the bias in China's anti-corruption issue. Luxury consumers have diversified development trends, consumption upgrades, LVMH group and LV brand internal adjustment and other issues are the factors that slow down their performance growth. Zhou Ting judged that the next LVMH will face greater pressure, and one way out is to further invest in the forefront of the industrial chain, and strengthen control over production and production capacity.

However, the premise of this is to make a thorough judgement of the future and to make bold subversion of the business. Can the luxury giant carrier change its course again?