Where Will The Global Luxury Retail Industry Go?

While European companies are anxious about the global pricing and grey purchasing market, the new monetary standard also makes them happy with cheap exports and the expansion of trade potential in the US. American companies familiar with the operation of vulnerable currencies now feel the pressure of declining sales and expensive exports, and American tourists who are weak for many years are preparing to devote themselves to Europe and Britain.

As early as January this year, Morgan Stanley predicted that the euro would be parity with the US dollar in 2016, but earlier this month, Goldman Sachs further said parity could take place as early as September. The last parity between the euro and the US dollar was at the end of 2002 more than 10 years ago. Goldman Sachs recently predicted that 1 euros would be 1.02 dollars in three months, while 1 euros would be 95 cents in 12 months. By the end of 2017, the bank expects the euro to reach a record low of 80 cents. The euro currently trades at $1.10, while 1 pounds equals $1.49.

The brands including Tod's and Ferragamo (Salvatore Ferragamo) have seen their holiday sales soar in Europe. They believe there will be a large number of tourists, especially Chinese tourists, who use euro to depreciate and go to Europe to sweep goods. Airport retail stores, hotel groups and duty-free shopping companies Global Blue and Premier Tax Free are ready to welcome a wave of Chinese and American tourists this year and next year.

According to a report by Exane BNP Paribas earlier this month, the price of luxury brands in mainland China is 60% higher than that in the euro area, compared with 50% in the past. The price gap between the United States and Europe has also risen unprecedentedly.

In Britain, Global Blue is salivating over the future of the US tourism industry. Although the pound is still strong compared with the euro, in the past 12 months, the pound has depreciated by about 10% against the US dollar. Global Blue, British and Irish regional manager Gordon Clark, said that the United States is one of the top ten countries in terms of per capita spending in the UK, with an average transaction volume of 575 pounds, or 876 US dollars. With the continued favorable exchange rate effect, American consumers will swarm into the European market.

At the beginning of this year, Selfridges announced a space demand report on customer service specifically for foreign tax-free shopping. Shops say they have invested millions of dollars in the construction of the new 4 Tier space, which has its own tax rebate lounge, two duty-free processing halls, and VIP area for individuals with high net worth.

In February of this year, Harvey Nichols (Harvey Nichols) organized the largest Chinese New Year celebration in its history, specially developing products that span the fields of fashion, beauty and food. Its restaurant also produced a special "Yin Yang" menu with the top Chinese chef Huang Jingyi. A store spokesman pointed out that in February, Chinese consumers were "the most critical source of store rate and consumption" among all international customers.

According to Global Blue, the Chinese group was the strongest consumer group in the world in 2014, achieving an increase of 18% last year. A recent HSBC report shows that China now accounts for nearly 1/3 of luxury goods sales, with over 2/3 of its consumption outside China. Over the past 12 months, the renminbi has risen by 21% against the euro and the political turmoil has made more Chinese tourists more willing to travel abroad, especially in other parts of Europe and Asia.

The main reason for the increase in the consumption of Chinese tourists in Europe is also related to the recent announcement of the plan to adjust the price by the "Ya," and "Heuer" tables. The global price adjustment will take place next month. China will cut its price by 20% and Europe will raise it year by year. I don't want to see people rush into shops in Europe, nor do they want to see the Chinese make use of the difference in price to make gray transactions.

Analysts are divided over whether other companies will follow the lead. Luca Solca, chairman of Exane BNP Paribas, pointed out in a recent report that most European luxury brands are reluctant to raise prices in the euro area, so as not to continue to reduce customers in the already weak local market. In addition, he said: "they do not want to lower prices in China, so as not to devalue the renminbi and damage the brand image. This may lead to more purchases in Europe, but less shopping in China. "

HSBC analysts are similarly thinking, saying that the price adjustment is ultimately a neutral game. The devaluation of the euro is far more profitable than the price. The bank estimates that European enterprises will see the positive impact of the pre tax earnings of 30% in 2015-2016 years from the depreciation of the euro.

"We believe that the price adjustment will take place in the listed companies that have been reported, but we do not want to be as extreme as the announcement," HSBC wrote. "We do not believe that there will be many brands' short-term price increases, because this will immediately reduce the interest of local European consumers and alienate brands." The report adds that the price of luxury goods in the euro area is likely to rise by about 10%, and will be gradually realized in the next 12-18 months.

Hermes has said they will not neglect local European customers. "The current increase in Europe will sacrifice local tourists to some extent. From a global strategic point of view, we do not want to do so now. Group CEO Axel Duma said that this year or early next year, the company will further discuss the price.

Taking into account the amount and location of Chinese consumers spending on luxury goods, European companies are also seeking another market that has a huge impact on the industry - Russia. According to data from London Barclays Bank (Barclays) and Global Blue international January, consumption of Russian tourists is further deteriorating. Monthly consumption fell by 51.2% over the same period last year, down 43.8% from last December. The collapse is related to the ruble exchange rate and the continued geopolitical issues. Overall, according to the Global Blue report, the expenditure of Russian tourists dropped by nearly 17% in 2014.

Jimmy Choo's CEO Pierre Denis said earlier that the Russians, especially overseas tourists, had not "gone shopping". This will definitely affect 2015 of our sales. " At the same time, he added that the consumption of Chinese tourists may offset losses in Russian tourists.

In February of this year, Exane BNP Paribas's Solca warned that Russia's border trade was going through a serious storm. His report said, "Russia will be another crisis," the rise of luxury prices and the decline of the rouble in the eastern countries, let alone international sanctions, oil price shrinkage and the overall economic downturn, will be overloaded with weak market demand. He said that the development of luxury companies in the region in 2015 was a "difficult start".

American tourists who experience re baptism should be able to provide some assistance in the next few years. Global Blue said that despite the sharp loss of consumption, the Russian market is still worth three times that of the United States, and there is still room for development. Kim Gray, head of retail strategy at Heathrow, said the airport is doing internal refurbishment to better serve the international high consumption customers, especially the United States. "We are the largest destinations for flights from Heathrow airport, and we have been watching the US market closely," Gray said. "We are now trying to cultivate consumers' awareness of consumption at Heathrow, and let everyone feel the charm of airport tourism. We hope to let American friends enjoy the shopping experience at the airport.

Just in December, Heathrow Airport Terminal 5 ushered in the first European airport open shop of Louis Vuitton, which covers an area of over 300 square meters. In addition, there was the first Cartier airport independent boutique and the Diane von Louis Weedon pop-up store in Harroz (Harrods) department store. Meanwhile, the hotel group is also striving to survive in the new environment, ready to welcome the influx of Americans and Asians.

With Raffles, Fairmont (Fairmont) and Swiss Tel FRHI luxury hotels and resort management group responsible for Western Europe Regional Sales and marketing director Christiane Anstoetz said there is no doubt that for the United States and Asian customers, Europe is an attractive destination. "We see that cruise business has also received a large number of American customers last year, and we expect that the number of receptionist will increase significantly this year, because Americans are keen on ferry. We also look forward to a large number of tourists from Europe, because they do not want to spend overseas. She said.

The strength of the US dollar is creating numerous opportunities: it not only stimulated the needs of Americans to travel abroad, but also increased the desire of British enterprises to open stores in the United States. According to a recent study by Royal Mail, the United States has surpassed Europe as the primary goal of Britain's international expansion. The survey shows that 39% of online retailers have indicated that they will place the United States as the next expansion destination, while only 30% of them are still looking at European countries.

SuperGroup, the British company, has just concluded its SDUSA LLC30 license agreement in 2008 and obtained the exclusive right to sell products in North America. "Strategically speaking, gaining control of our products in North America is a very important and natural step. This is also the key to our global business and our ambition." SuperGroup's CEO Euan Sutherland said. The strong dependence of the US dollar International Trade It's not a good thing for US businesses to travel. This will have a wide impact on us listed multinationals. Analysts said last week that about half of the companies in the S & P 500 index came from abroad. The report points out that the increase in the US dollar against the euro and other currencies will lower the first quarter profit of 1-2%.

At the same time, it is also destroying the purchasing strategy of many European enterprises. Now for Europe American goods are more expensive than Chinese tourists. The quarterly results of US companies show that they have reduced sales and profits from foreign exchange to US dollars. Until recently, Burberry, Kering, Ferragamo (Ferragamo) and Richemont were all complaining about the pain caused by the value of the euro and the pound.