Is It Still Too Late For Luxury Brands To Curry Favor With Local Consumers?

After years of relying on large numbers of tourists to earn high profits for handbags and diamond watches, luxury goods manufacturers are now starting to curry favor with the local news people who have long neglected.

According to Bloomberg report, handbag manufacturer Bottega Veneta moved the Manhattan store from Fifth Avenue to nearby Madison Avenue, which has more shops that New Yorkers like to visit. While Italy luxury brand Gianni Versace plans to open boutique stores in Hongkong, it should cater to Hongkong residents instead of Chinese tourists.

These moves reflect a new strategy for high-end luxury brands after the rapid cooling of tourism demand after the terrorist attacks in Paris and Brussels.

According to one data, tourism consumption expenditure rose almost 26 months in 2015, but almost no increase in the first two months of this year, which has hurt the sales of luxury goods industry by more than 1/3.

"Luxury companies must reconsider how to maintain and value the loyalty of local consumers," said Armando Branchini, founder of Intercorporate, a consultancy.

Take Bottega Veneta as an example, brand turnover fell by 3.1% in the fourth quarter, which was mainly dragged down by the Asian market.

According to the brand owner Kai Yun group, the brand's income in Hongkong is higher than that of the United States and Italy.

According to MainFirst Bank AG, 80% of its performance comes from

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CEO Francois-Henri Pinault said that Bottega Veneta will move the store to Madison Avenue, which will give the brand more space to display the expanded product line, including shoes, jewelry and clothing.

Francois-Henri Pinault revealed, "from the penetration degree of Bottega Veneta in local consumers, we can see that, based on brand strategy, caters to local consumers will be a priority for the company."

He added that the company will adjust its product direction to better accommodate local consumers' preferences in major markets.

Hongkong, once a strong luxury market, was affected by China's fight against corruption and domestic economic slowdown, coupled with the continuing turbulence in Hongkong's society, resulting in the reduction of mainland consumers' consumption to the city, thus affecting their sales. Hongkong's market has almost become the hardest hit area of luxury goods groups.

However, China

Philip Guarino, the European marketing director of the consultancy, said that catering to local consumers is not a panacea.

The European and US economies are still hard to stimulate luxury consumption, and Chinese consumers will still choose to buy luxury goods abroad.

Some analysts say that luxury brands need to be more innovative, and try to attract Chinese consumers when they travel overseas. For example, they can do marketing through social media rather than relying on old and corrupt guides to do business.

Philip Guarino points out: "some luxury brands still don't understand these simple principles."

According to Versace CEO Gian Giacomo Ferraris, Versace is also making strategic adjustments to local consumers in Hongkong.

In an interview with Bloomberg, he said that although Japan and South Korea have the potential to accept more Chinese consumers, Hongkong is still an important market.

Gian Giacomo Ferraris stressed: "Versace will pay more attention to the promotion of local consumers rather than tourists."

At the same time, according to the Swiss watch maker Zenith CEO Aldo Magada of LVMH group last week at the Basel world watch and exhibition, the brand began selling more steel watches instead of gold watches.

Exane BNP Paribas analyst Luca Solca said Rolex, OMEGA and Cartire will also pay more attention to the use of steel materials to meet the growing consumer demand of the local middle class.

The change in luxury demand has kept Hermes group's decision to postpone the price increase of European leather goods.

Last year, brands such as Chanel raised prices in European markets in order to narrow the price gap between China and Europe as a result of the weakness of the euro.

But Hermes CEO Axel Dumas said, "raising prices means giving up local consumers, and we do not want to do so."

However, Versace and other brand initiatives reveal the grim reality facing the luxury industry: the days of rapid growth are gone forever.

For example, Harbour City, Hongkong, as the landmark for mainland tourists to buy luxury goods in Hongkong, the first decline in retail sales over the past ten years means that the road to luxury consumption by tourists has reached the crossroads.