Domestic Luxury Market Is Blocked, Many Brands Have Closed Shop

Bruno Laina is always seen before the end of the year. As a global partner of Bain consulting company, he has been leading the team for eight consecutive years to conduct research on China's luxury market.

It can be said that in the past 2014, for most luxury brands, they were the most "sad" and "bad" year in China. As you will see from the bain survey, the Chinese luxury market has slipped for the first time in eight years, the traditional big names are losing popularity, the sales of big name stores are down, and many luxury brands are closing down.

But the good news is that since winter comes, spring is not far away.

"I think the worst year in China's luxury market is over, and the adjustment is almost over."

Bruno said to me.

Following the pace of the global luxury market, China's luxury market is also entering the new normal, that is, maintaining a slow but more sustainable growth for a long time.

As a luxury brand trying to reverse the situation, what kind of consumer demand and major business need to be changed should be mastered?

Fashion Note, as the only media invited by Bain in the 2014 China Luxury Market Research Report, will take the first time to see what kinds of "shocks" and the future trends have occurred in the worst 2014.

Bain's 2014 China luxury market research shows that in 2014, the luxury market in mainland China dropped to about 115 billion yuan, down 1% from 2013.

This is also the first decline in the market in eight years.

The implementation and promotion of the government's anti-corruption efforts has had a lasting impact on the "luxury gift giving trend", and the slowdown in economic growth and the overseas buying buying boom exacerbated this phenomenon.

Among them, the male market is the most serious decline: Men's clothing has dropped by 10% over the past year, and watches have dropped by 13%.

The biggest winners of women's clothing and footwear remain 11% and 8% growth.

Consumers are becoming more sophisticated, buying more luxury goods and paying more attention to garments. These trends fundamentally set a new benchmark for the luxury market. The influx of fashion and emerging brands enhances consumer preferences for brand diversification. Factors such as specificity, quality, cost-effective, and no need for obvious brand identification are becoming increasingly important.

More than 80% consumers said that compared to the traditional big brands (LV, GUCCI, Prada), they will buy more emerging luxury brands in the next three years. They are regarded as new luxury brands such as Paris, Alexander Mqueen, Roger Vivier and so on. More and more consumers begin to shift their spending to experiential luxury consumption, such as El Luxor Hotel, luxury spa, high-end tourism, luxury cruise and so on. 80% indicates that the experience of luxury consumption will increase in the coming year.

According to the retail sales, the ranking and status of the top five luxury brands in various categories have changed. The new Kiehl's and Lancome in cosmetics are on the rise; the TISSOT rank in the watches is rising; the Coach ranks in the luggage category; Dior is promoted to the top five of men's clothing, and Chanel is the top five brand in shoes promotion.

Among the popular brands, Chanel, Louis Weedon, Hermes, Gucci, Dior, Armani, Prada and Boboli are losing their share gradually, among whom Louis Weedon, Gucci and actress are the most churn, while those of Paris and Givenchy are "followers".

It is gradually upgrading, though the original base is low.

Same store sales are facing pressure (the average sales of many luxury brands in the same store in 2014 dropped by 5%-6%). The traditional luxury brands were relatively conservative in the expansion of new stores, turning to the existing stores and closing the smaller satellite shops in the low level cities. The luxury brands in shops, especially men's wear brands, performed the most obvious. In HUGO BOSS2014, they closed 7 stores in mainland China, Zegna closed 6, and Bo Boli closed 4.

More attention

Decoration, many

The quality of service in key cities such as Beijing and Shanghai has been enhanced.

VIP customer demands are more demanding.

The purchasing market has been growing rapidly in the past year, which is more than half of the mainland luxury market, reaching 550-750 billion yuan, and the future purchasing expenditure will also increase.

The future FTA is expected to facilitate the vigorous development of luxury cross-border e-commerce.

Japan and South Korea have become new popular shopping destinations, and the number of tourists traveling to Japan and Korea has increased by 60%.

The attractiveness of tourism consumption in Hongkong has declined significantly.

Under such circumstances, exclusive and fashion become an important and symbolic element of luxury. Despite the market's upsurge, limited edition, fashion focused products and designer cooperation have promoted the growth of some brands. Bain expects that these brands will continue to grow in the coming years.

The traditional luxury brands are taking measures to integrate into more fashion elements: LV, HUGO BOSS and Coach have recruited new designers to inject vitality into the brand in the past year.

Bain believes that the current readjustment of the luxury market in China is basically over. The outlook for 2015 is similar to that of 2014. Brands are reinvigorate the core network and strive to cater for consumers who are increasingly aware of luxury goods and have more experience in buying. It is expected that all kinds of products will achieve more conservative growth in the coming year.