Is Luxury Brand Leaving The Chinese Market?

As soon as November arrived, second Lotte World of Seoul silkworm room could not wait to erect a large Christmas tree up to 15 meters in Arena square.

Gorgeous advertising blockbuster, beautiful window layout...

From Seoul to Tokyo to London, department stores,

They all began to prepare for the craziest Christmas shopping season at the end of the year, and "grind with a knife" to meet the world's largest gold owner, Chinese tourists.

However, it is among the best in the world.

The hometown of consumption power, China, businessmen are experiencing another scene.

Also in November, LouisVuitton shops in the east of Guangzhou city closed quietly.

LV also closed its two stores in Harbin and Urumqi, according to the financial times.

The "Fashion interview notes" also learned that the flagship brand of the world's largest luxury group will soon be closed in the store of Shanghai's friendship and Tianjin friendship, which will be merged into the galaxy Shopping Center store.

And this is just the beginning.

"LouisVuitton will close more stores in China in the future", "Gucci will start closing some stores in China at the end of the year, of which Shanghai stores will be reduced by nearly half, from the original 8 stores with only 5 stores", "to shop and Zegna".

The information revealed to us by commercial real estate and luxury goods shows that luxury stores have begun to shop in China.

From the beginning of the year, luxury brands have lowered the prices of some products in China, and look at the trend of LV nowadays. It is easy to see that the market that once brought luxury brands to the market is becoming the most difficult problem.

You know, like Chanel's global price coordination, luxury stores are also a complex issue.

A high-end shopping center to the "Fashion interview notes" revealed that, in fact, last year, the beginning of the second half of this year, with Gucci, Bettega Veneta and many other luxury brands of Kai Yun group is quite volatile, several brands are not optimistic about the operation, and many owners began to talk about rent reduction or closing shop, but has not changed.

Because there are too many factors to consider. From the return of investment, to the staff, the guests to the external relations, all the luxury brands must be balanced and played.

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"From the perspective of retail operation, there are many problems involved in closing stores.

How can employees be closed? Employees who are closed shops can not be digested by the remaining stores, so they need to pay for compensation, especially for old employees who are already without fixed deadlines. They need more than just financial and legal risks. What is budgetary do? Usually, brand headquarters will not accept it, because closing stores will reduce sales expectations, which requires the remaining existing stores to digest, so it will affect the year-end sales targets of existing stores and the interests of all relevant people, such as achievement rate, year-end bonus and so on.

"There are also external relations to be settled. Big cards are usually opened in some well-known business circles. If the owner has brand stores in other parts of the country, you have been a strategic alliance for many years. If you close a shop, you will have to think clearly that the space for negotiations on the future lease conditions of existing shops will be narrowed. This is the game between the two sides. What else do the guests do? If I am a shop in the same city, and do not plan to open a shop in a short time, how will the existing customers' after-sales service be solved?" the view of RetailGag, a slow quoted company, points out the complexity of the luxury goods store.

But that's not all.

China's luxury goods that flourish and flourish in the past

Let many big brands frantically expand the number of stores, and even the same brand in Shenyang's The Strip opened 3 stores unreasonable layout.

TheDemandInstitute, a think-tank in the US, recently reported that multinationals have been fooled, making too many wrong investments in Chinese cities, misleading foreign investors for China's overly optimistic growth and consumer forecasts.

Whether we are fooled or not is unknown, but the fact is that the kidnapping between some luxury luxury brands in the past and the rapidly rising high-end real estate has become one of the factors contributing to their crazy expansion in China.

High end real estate, especially those lots are not particularly good business circle. In order to attract more brands to shop and attract more people, the decoration subsidies for some big brands have become their sweet "poison" in the Chinese market.

"The subsidy for LV is usually 4-6 yuan / square meter, and 15 thousand yuan -3 per square meter."

A senior businessman in real estate told us.

According to this calculation, LV a 200 square meter shop, from the commercial real estate department to get more than ten million decoration subsidies.

In the past, LV has always been regarded as the gold signboard of attracting business by commercial real estate.

In the market carnival, a large number of shops still have the support of performance, but once the market is cooled, they become a real burden.

Usually, the rent charged by the commercial real estate to the brand is taken as high as the bottom rent and the selling point. The bottom rent varies from several dozen yuan per square meter to a different owner, and the rent of the first floor of Shanghai's Hang Lung Plaza is even more than 100 yuan per square meter per day.

In the first tier cities, the 300-500 yuan shops of general luxury brand shops are required to pay to the shopping center about 10 million yuan a year, which is not human cost.

LV has more than 10 stores in Beijing and Shanghai, and 40 stores are distributed throughout the country.

Gucci alone has 8 in Shanghai.

And those brands that are attracted by the strong brands to rush to shop need to invest more. They also need to pay for the preferential subsidies provided by the commercial real estate for the strong brands.

In the book "luxury retail management", MichelChevalier said, according to the rule of thumb, luxury brands can calculate the reasonable rental cost according to a specific proportion and their expected sales volume.

In Europe, this specific ratio should be between 10%-20%, while in Asia, the reasonable rental cost should be 20%-30% of the expected sales volume.

Now let's look at the sales performance of these luxury brands in China.

"China's Asia Pacific market, led by China, continues to be weak and continues to deteriorate". These are official statements that often appear in luxury brand earnings reports over the past one or two years.

But how serious is the form? Even though the luxury stores are so complex and difficult as they are in the beginning, they still have to make up their minds to take action.

"Too much pressure on performance, too many stores," and "two digit sales in China," I think, is now the performance of most luxury brands, "severe form, 20%-30% falling underground, the domestic market is very difficult", "it's not easy, it seems that how to do little improvement."

A city's total sales volume is difficult to break through or keep falling, reducing the number of shops is an inevitable choice.

People who are engaged in luxury goods are all so impressed with us.

But how to close and how to close is also a problem.

Those shops that originally accepted commercial real estate decoration subsidies were not so easy to lock up, but also involved in compensation. Closing down without a repair meant a bigger investment sunk.

People in the commercial real estate market tell us that luxury brands will give priority to shutting down some shops that do not involve decoration subsidies and decline in performance. Most of them are new type shops that have been opened for 2-3 years, all of which are opened in recent years when luxury brands are expanding here.

Of course, another point is that, in addition to reducing costs, luxury brands ultimately consider profits as a whole.

RetailGag said: "if the store is only a cost reduction, it will not bring any increase in profits, so it will not necessarily be shut down, or at least not in the priority list, especially those with decoration subsidies."

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Of course, closing shop tides have a direct impact on high-end commercial real estate in China. Over the past few years, they have been oversaturated.

"The impact will be quite big.

Developers had higher demand for rent than before. They would not give up their growth voluntarily. Last year, they were forced to rent down this year. Even next year, even rent reduction could not stop the tide of luxury brands.

After the shop is removed, the new brand does not have a budget for opening a store, so you have to add it to it, but even if it is added to it, it does not necessarily bring good benefits.

It's terrible that you don't know when the market will get better.

A businessman who was engaged in shopping center told us frankly.

From the perspective of luxury brands, closing stores is also a good thing in the long run.

"The time has come for luxury brands to be cultivated in China," an insider told us.

From the expansion of quantity to the improvement of the quality of single stores, many luxury brands have begun to pform their business ideas in the past year.

But now the Chinese market seems to be in a "no solution" situation.

Anti corruption began in 2012, which severely damaged domestic luxury gifts and sales. Although Chinese luxury consumers are still the most luxury consumers in the world, the Internet has brought unprecedented information pparency and people's sensitivity to prices, resulting in the increasing consumption of luxury goods in China. According to Bain consulting, only 380 billion of Chinese luxury goods purchased by the Chinese people in 2014 amounted to about 1/3 of domestic luxury goods, and overseas tourism consumption and rising purchasing and sea fishing accounted for 70%.

Under pressure, the luxury brand headed by Chanel began to adjust the price of domestic products at the beginning of the year. However, the price of luxury brands in the domestic market is only about a drop in the face of the domestic and foreign market spreads, which are exacerbated by exchange rate and other factors. 10%.

We learned from the luxury circle executives that even Chanel, which made 20% domestic prices for three classic products, only harvested the performance improvement when the price announcement was released just now. After that, the domestic business is also not optimistic.

L2, a luxury digital institution, shows that if luxury brands are still not synchronized, the price at home and abroad will drive more people to buy luxury goods through such gray channels as purchasing agents and Hai Tao.

However, the price reduction of domestic luxury goods is related to various taxes in China besides the brand itself giving up some profits.

It is only hoped that the government's massive tax cuts will still feel hopeless.

"Next year is still hard..."

On the one hand is the exclamation of luxury circles.

"Now there are developers who insist on making high-end products, take out higher decoration subsidies than previous years to pry the existing stores, subsidize the brand compensation to the original shopping malls, and even the highest 80 thousand or square meter of decoration subsidies to dig a big French card, which is by no means a good phenomenon."

Madness has been staged here.