How Do Luxury Brands Maintain Product Innovation?

Many families Luxury goods Group recently released the first half of the financial report, the performance of each division is obvious.

LVMH Latest fashion and Leather goods Sector revenue and profits showed negative growth, its brand Christian Dior operating profit fell 30.2%, DKNY was also sold for poor performance, while the general revenue of the group's Bottega Veneta in the first half of the year was down by 19.4%. However, thanks to the growth of Gucci and Yves Saint Laurent brand, group income and profits have risen, while the clothing and accessories department, the silk and textile business lines of Hermes group have both negative growth, while leather goods and harness supplies show a slight upward trend.

The performance of the major luxury goods groups in the first half of the year can be described as several happy worries. Under the unfavorable circumstances of the fashionable consumption environment, how to adjust the strategy of global development, how to achieve online and offline business interaction and how to maintain product innovation has become an important issue for luxury brands to consider.

Structural adjustment period

Dior and BV fell sharply

According to the first half of 2016 earnings report, the major luxury group is generally relatively stable, but the differentiation between brands. Many brands or group business performance fell sharply. For example, LVMH group's fashion and leather goods department has seen a negative growth in revenues and profits, and its brand Christian Dior has fallen 30.2% of its operating profit, and DKNY has been sold for poor performance.

Kai Yun group's brand Bottega Veneta revenue decreased by 19.4% compared with the same period last year; Hermes group semi annual report shows that its clothing and accessories Department revenue decreased by 2%, silk and textile business line revenue fell 7%.

In the first half of 2016, the French security problem led to a decline in the number of French tourists, which led to the unstable economic situation in Europe, which made the development of luxury goods industry difficult in the first half of the year.

Taking the number of tourists as an example, according to the 2015 China luxury report, 78% of Chinese luxury goods consumption is overseas, spending nearly 100 billion dollars, buying 46% of the world's luxury goods. If Chinese consumers' luxury consumption abroad decreases, the performance of the global luxury market will be significantly affected.

"These events have a certain impact on short-term store sales, but the most fundamental thing is the structural adjustment of luxury brands since last year." Zhou Ting, President of the Institute of wealth and quality, said, "on the one hand, consumers are becoming smarter, the trend of personalization and diversification is more and more obvious. They are no longer limited to the consumption of big brands. On the other hand, the trend of brand multi polarization has emerged in China. More and more high-end, niche and custom brands have entered the Chinese market, which has changed the pattern of market competition. Meanwhile, the rapid development of the Internet in the luxury industry has brought about structural changes in the whole industry. Therefore, they must quickly change the global business model, so the short-term performance decline is relatively large.

In Zhou Ting's view, the decline in the performance of the luxury goods industry is no longer a novelty. Zhou Ting recalled: "initially began to feel that the industry downturn was in the second half of 2012, and the change of China's luxury market began gradually in 2012. Nearly four years ago, almost all of them were growing at double digit rates.

However, luxury group is not a depression. Although the Bottega Veneta brand of Kai Yun group is not performing well, its brand Yves Saint Laurent business income reached 109 million euros, up 80.2% over the same period last year. Gucci also contributed significantly to Kai Yun group's revenue and profits. The sales of leather goods and harness products of Hermes group increased by 16%.

The reason for this differentiation is mainly due to the changing global market in recent years, and consumer lifestyle and consumption habits are constantly upgrading. Especially the change of Chinese market makes luxury brands face many challenges. So last year, the major luxury brands began to carry out global price adjustment, narrowing the price gap at home and abroad, and preparing for better innovation and development of e-commerce business.

Pressure of innovation

Luxury brand "test the water" business platform

One of the hot topics in the circle of friends recently is that Dior opens its sales channels on WeChat, sells Dior's Tanabata Limited Edition Lady Dior Small handbag, and sells 200 handbags in a short time. It also allows more luxury brands to see the potential of e-commerce channels. Some media said that this attempt is a luxury brand to the electricity supplier, but in Zhou Ting: "this is not a yield, but a change in the market, so that the luxury industry must be Internet based transformation, because consumer habits and consumption habits are constantly changing, not just Internet, but mobile terminals."

There is a saying that in 2015, when luxury brands entered the first year of the electricity supplier, they began to "shock electricity". At the same time, they adjusted the offline stores and adjusted the global price system to match e-commerce in the future.

"Dior is selling new products on WeChat, which is a new attempt in the field of e-commerce. Luxury brands are starting to try micro commercialization, because WeChat is easier to interact with, enhance the spread of layers, and is easier to direct the flow of passengers and sales. This is actually another form of display of the luxury brand's official website, and it is also the best way for the brand to get customers directly and sell the goods best. "

Similarly, as early as 2014, Burberry, the first flagship store opened in Tmall, has recently released its first quarter results in 2016. It shows that with the promotion of mobile technology, 60% of Web site traffic is coming from mobile phone users.

In addition, according to the 2015 China luxury report, Chinese consumers are very interested in the brand's own e-commerce platform, 44% of which are purchased through the brand official website and APP. Therefore, how to transform the flow of mobile terminals into passenger flow and bring sales is a challenge that many brands need to face.

In addition to the innovation and attempt of the e-commerce channel, the product innovation of the luxury brand itself is the fundamental.

Through analysis, it can be found that the performance of luxury brands is always closely related to innovation. For example, the personalized design launched by Gucci creative director Alesaandra Michele has been recognized by consumers and brought good market performance. Hermes has achieved good results in its landmark leather products and harness products. Earnings analysis shows that this has benefited from the diversification of product range, including Birkin, Kelly, Constance, Halzan and Lindy, etc. the rapid growth of Yves Saint Laurent is better than "product winning".

As Zhou Ting said, "now the whole luxury market has returned to the product era. Although it is a big brand, if the product innovation capability is not enough and it is not enough to attract consumers, it will still go downhill. Therefore, it is necessary for the luxury brand to win back the old customers who have been lost and acquire new customers, so we must strengthen product innovation.