Why Are Luxury Brands "Lost" In China?

With the sales volume of US $102 billion, we are leading the global luxury market in China, and now we are moving towards the freezing point. The latest performance of many luxury companies shows a downward trend, and the Asia Pacific region with China as the core is the most serious.

Industry analysts said that the trend of China's luxury market growth at a low speed will continue in the next 10 years.

In fact, the major luxury groups never gave up their expectations of the Chinese market.

To improve sales, since the first half of 2015, Chanel (CHANEL), Patek Philippe (PatekPhilippe), Estee Lauder (EsteeLauder) and so on

The price of products in China has been reduced.

However, this rescue attempt failed to retain the hearts of Chinese consumers.

After nearly 10 years of explosive development, why did the "luxury" brand of high quality "lose" China's position? In the face of the "cold winter market", what kind of choice will the luxury big guys make? Luxury brands will soon take advantage of the "disgrace" in the Chinese market. Recently, the reporter took these questions to investigate the domestic luxury market.

Domestic and foreign spreads lead to consumption outflow

In recent years, the domestic outbound travel market is quite active, and people who have gone abroad have found that they have been shopping abroad, which has affected the sale of luxury goods in China to a certain extent.

"I often travel abroad on holidays, and buy some bags and cosmetics back by the way."

Liang Wenjing, former New Oriental English teacher, told reporters.

Despite the fact that many luxury brands have lowered their prices in China in order to balance global prices, there are still significant differences in the price of luxury goods at home and abroad after the price cuts.

Take Chanel's 11.12 handbags as an example, after the price adjustment, the price in the domestic market is RMB 30 thousand yuan, while the price in the European market is only about 23 thousand yuan / two, and the difference between the two is about 7000 yuan.

The same is true of high-end cosmetics.

Liang Wenjing said, with a bottle of 50 ml of Estee Lauder special muscle repair essence, for example, although the price in the domestic market has been reduced from RMB 950 yuan / bottle to 850 yuan / bottle, the price is still 328 yuan / bottle higher than that in the European market, and 279 yuan / bottle higher than that in the United States.

"For those who travel abroad frequently, such a decline is not enough to shake up their habit of buying luxury goods from abroad."

Liang Wenjing said.

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The data also confirmed Liang Wenjing's statement.

The 2015 spring report of global luxury market surveillance released by the Italy luxury industry association in May 25, 2015 shows the fluctuation of exchange rate and the pricing of luxury brands in various markets.

And the difference of distribution channels is the main reason for the large outflow of luxury consumption in China.

Affected by this, the Asia Pacific luxury market led by China was almost stagnant in the first half of 2015.

Light luxury is becoming popular.

"Although COACH has increased in China this year, its growth has slowed sharply over the past few years."

Yang Baoyan, President and chief executive officer of Cox China, looks at the plight of luxury goods in China, which shows that China's luxury consumer market has returned to a rational state and has entered a relatively mature stage.

Faced with such changes, he adjusted his brand strategy in the Chinese market.

Yang Baoyan noted that over the past few years, more and more consumers have been less enthusiastic about highlighting LOGO's high-end products, and began to focus on low-key and restrained mid marketing products.

"Before, the sales of bags with branded LO-GO are very impressive, but the situation is quite different now, and few of them are interested."

Yang Baoyan said that after seeing this change, he launched a leather bag to dilute LOGO.

The maturity of luxury goods market is not only reflected in the rational consumption of large brand products, but also in its attention to light luxury brands.

"Rather than the domestic luxury market matures, it is better to say that China's luxury consumption needs have been differentiated."

Zhou Ting, President of the Institute of wealth and quality, believes that although the performance of traditional luxury goods has slowed down in China, sales of some light luxury brands still maintain double-digit growth in the Chinese market.

The US luxury brand MichaelKors is a good example.

According to its 2014 earnings report, the total revenue of the company in 2014 was 917 million 500 thousand US dollars, up 53.6% over the same period last year, and the sales in the Chinese market increased by 64% over the same period last year.

The reason for the rise of light luxury brands is that Zhou Ting believes that domestic consumers are tired of traditional luxury brands, so once emerging brands emerge, they will easily attract their attention.

With this change, luxury brands will divert consumer groups when the growth rate of luxury goods is declining.

Chen Rui, the partner of domestic management consulting company, is more optimistic about the future of light luxury brands. "The mainstream purchasing power of China is changing from the high-end to the middle class, and the positioning of the luxury brand products coincides with the demand of this group of consumer groups. Therefore, it will have a relatively stable growth space."

Chen Rui predicted so.

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Wasteful gift giving is curbed.

In 2014, the major luxury brands encountered an unprecedented cold wave in the Chinese market.

The 2014 China Luxury Market Research Report released by Bain, a global consultancy, shows that in 2014, the mainland of China

The market saw negative growth for the first time, and its growth rate was 1% lower than that in 2013.

In sharp contrast, the growth rate of luxury goods in China in 2013 was 2%, which was 7% in 2012 and 30% in 2011.

Why did the luxury goods that had always been good at HUAFA exhibit a sudden setback? I'm afraid this is not related to the impact of the Chinese government's anti-corruption policy.

"Gift giving has always been an important part of luxury consumption in China, but since the promulgation of the" eight regulations ", the phenomenon of gift giving has been restrained, and the number of people who buy luxury goods for the purpose of gift giving has decreased significantly.

According to Tang Jianjun, an angel investor in the daily chemical industry, the average consumption of the Chinese affluent group decreased by 15% in 2014, and the luxury consumption for gift giving was 25% lower than that in 2013.

In the luxury of declining performance, high-end watches are the hardest hit areas.

Tang Jianjun said that the sales growth of high-end watches in China has dropped to 11% in 2014, and by 2011, it has maintained an astonishing 40% per year.

The slowdown has also helped the once optimistic Swiss watchmakers tighten China's market share.

According to reporters, since 2014, the Swiss watch enterprise Audemars Pigeut has closed 6 retail stores in China, "China's Gold Rush has ended."

Francois, the chief executive of the brand, has publicly stated that "we will slow down the pace of expansion in China, and now we must be very careful in every step."