Luxury Brands Once Made China A Banknote Printer But Are Now In Jail.

In Yuexiu District, Guangzhou, Libai square is a symbol of luxury.

This high-end shopping mall opened in January 2004, and is the first stop for international brands to visit mainland China for a long time.

Time passed by and life changed.

A few weeks ago, Libai square lost one of its largest tenants, Louis Weedon (LV).

Since then, LV has also closed a store in two other mainland cities, Harbin and Urumqi.

The company said closing stores is part of the "marketing strategy adjustment".

This strategy has just been used by many other international luxury brands.

Reports say that after 10 years of rapid expansion in China, many of these big names are reducing their stores in the mainland to adapt to the slowdown in the economy, continuous anti-corruption, and the increasingly declining market of Chinese consumers under the influence of overseas shopping.

This year, luxury goods sales in the mainland will only grow by 3% to 25 billion 800 million dollars, which is much lower than the 11% growth rate in the global market that is recovering, according to the Institute of wealth research, a Shanghai based Market Research Institute.

The Institute also found that although Chinese consumes 46% of the world's luxury goods, it buys only 10% of global sales in the market, down from 11% in 2012 and 13% in 2013.

The weak growth is reflected in the expansion plans of luxury brands, which are opening fewer and fewer new stores and increasing number of old stores.

In the past 2 years, Burberry (Burberry) has closed 4 mainland stores, Coach has closed 2, Hermes has closed 1, Armani (Armani) has 5, Prada (Prada) has changed from 49 to 33.

Regina Yang of Shanghai, a real estate consultancy, says this trend will continue, especially in smaller cities.

"Luxury brands don't need to open two or three stores in one city.

Three shops will be reduced to one. "

Similar cases also occur in Hongkong, which is heavily dependent on mainland tourists.

In August this year, the watch brand TAG Heuer shut off its store in Tongluowan, and it closed its flagship store in central. They all said that because of the high rent, the number of mainland tourists was decreasing.

Zhou Ting, Dean of the Institute of wealth and quality, said: "opening stores is no longer the way for international luxury brands to expand in China.

Over the next two years, we expect these brands to close more stores than before. "

"But if you think that luxury brands take defensive tactics in China, you may be wrong.

Closing stores is only a small part of their overall strategic adjustment in China.

The report said that while closing smaller and poorer stores, these top brands are also investing more resources to upgrade and expand other stores and even cross boundary into different fields.

They are also setting up an e-commerce channel to reduce the spread of products in China and foreign markets.

The first batch of luxury brands entered China in the 90s of last century.

Most of them set up shop in five star hotels and high level shopping malls in big cities. The target customers are foreign businessmen, overseas Chinese and government officials.

In 2004, the Chinese government relaxed its restrictions on foreign retailers. In the past, luxury brands that relied on local distributors began to directly participate in sales and expansion to shopping malls.

The golden age arrived around 2009. Wealthy Chinese consumers began to spend money on high-end leather products and jewelry, making China the world's fastest growing luxury market.

Encouraged by the rapid growth and huge potential of the Chinese market, luxury retailers are rushing to open their stores.

Bain & Co, a global consultancy, estimates that between 2010 and August, 15 luxury brands opened more than 80 new stores in 1.

The rapid expansion is also driven by the growth in the number of shopping malls.

"The developers of the two or three tier cities attract large brands through the provision of very flexible tenancies," said Kenith Kong, director of retail services at DTZ and Gao Wei, China's real estate agent.

Reported that China

The watershed of the market appeared in 2013.

The Chinese government has launched a large-scale anti-corruption campaign to prohibit government officials from receiving gifts.

These expenses used to be the main driving force of luxury consumption in China.

Recently, the rapid growth of overseas shopping has also worried retailers.

Chinese consumers travel more frequently than before.

Now, more than 70% of their luxury spending will be spent in Europe, North America, Japan and other countries with lower prices, better choices and better services.

This demand has even spawned "purchasing", which they buy from foreign countries and then sell to domestic customers.

All these changes are pushing luxury.

We have to change their business models.

"In recent years, we have noticed that the proportion of large luxury stores is on the rise," said Frank Chen, director of research at the world bank real estate agency.

In October of this year, Cartire (Cartier)'s online shopping network in China.

A month ago, he returned to Tmall mall 3 years later.

Other brands, such as Burberry and Heuer Watch, are working with local e-commerce giants, such as Alibaba's Tmall and Jingdong, to provide other network sales services outside the official website.

Zhou Ting said: "many luxury brands have begun to narrow the price difference between China and other markets."

"One of the objectives is to establish a comprehensive global pricing system and prepare for their future network expansion."

CB Richard Alice found that between January 2013 and July 2015, 3/4 of the luxury stores were renovated in 8 major cities.

The company said that the proportion of luxury shops with a floor area of more than 800 square meters increased from 18% in 2013 to 22% in 2014.

In February of this year, Louis Weedon opened the store in China World Trade Center, Beijing.

3000 square meters of shops not only provide a variety of customized services, as well as bookstores, art galleries and tea art district.

In July 31st, Louis Weedon opened a store on the Bank of West Lake, Hangzhou, to get a share from the growing tourist market.

Gucci is also discussing innovation strategy (Gucci).

The brand opened a restaurant 1921 Gucci in iPAM mall in Shanghai.

Versace (Versace) opened a cafe at the most expensive shopping mall in Shanghai, and the first beauty salon of Burberry was in the mall.

At the same time, Hermes, Armani and D&G are expected to open restaurants and cafes in the mainland to create new revenue growth engines.

"These strategies create a new profit model based on experience based consumption, which can increase the chance of selling physical goods by attracting more shoppers to stay in their stores for longer," said Frank Chen, CB Richard Ellis.

While reducing physical stores, luxury brands are also embracing e-commerce.