LV Brand Began To Launch A Craze In China.

Since the end of last year, LV It began to close the store in China. Although the LVMH group announced that it had slowed down the expansion speed and closed unreasonable stores in the mainland and Hongkong, China's LV stores closed nearly 20% by the middle of this year. However, industry analysts believe that the direct cause of LV's big closes in China is the continued decline in performance.

Evacuate two or three tier cities

Since the end of last year, LV brand The store began to launch a craze in China. Reporter survey found that in a year, LV has gradually closed Guangzhou, Harbin, Urumqi, Shanghai, Taiyuan, Tianjin, Suzhou 7 brand stores.

It is understood that in November last year, LV closed shop in Libai square in Guangzhou. This is the first store where LV has been stationed in Guangzhou. After 12 years of operation, it finally closed shop. So far, LV has only 1 flagship stores in Guangzhou. Before closing the shop in Libai square, Guangzhou, L

Another two shops in Harbin and Urumqi have been shut down.

According to statistics, as of 2015, LV has nearly 50 stores in China. Besides 7 shops in Beijing and 4 stores in Shanghai, there are only 1 stores in Guangzhou and Shenzhen.

For closing the shops in China, LV explains that more often, due to the expiration of the lease and the closure of poorly managed shops. However, in the eyes of the industry, the reason why LV will soon close its stores in China after 2015 is to pay for its rapid expansion.

According to LVMH's latest financial report, the group announced that it would slow down the expansion speed and close unreasonable stores in the mainland and Hongkong. Among them, China's LV stores closed nearly 20% before the middle of this year, while in addition to three cities in Beijing, Shanghai and Hangzhou, the number of LV stores in other cities may be at most one.

In response, people close to the LV brand said that the decision to close LV stores in China before the mid 2016 was made last year, and the company plans to close a shop in China every month on average. Last year, LV assessed 8 stores in second tier cities in China. The Emmanuel Hemmerle partner of the consulting firm also said in an interview that 20% of China's LV stores were closed before the middle of 2016, and at that rate an average store would be closed every month.

Related data show that the LV performance in 2013 has seen a sharp decline. This has also made the brand stop the expansion of the two or three tier cities in China, and launched the strategy of opening up a fast sinkage channel before replacing the store strategy in the Chinese market. The strategy mainly includes closing the stores in two or three cities of China, Hongkong and the mainland, making the first tier city stores or spanferring the first tier city stores to the core business circle.

In this regard, Zhou Ting, President of the Institute of wealth and quality analysis, said that about three years ago, Luxury goods The trend of market development has shown a downward trend, showing a sharp contrast with the 2010-2012 years of rapid growth. At that time, rapid expansion and increased market share were the dominant strategies. Now, with the change of the environment, it is not surprising to readjust the strategy.

In fact, frustrated luxury magnates are not just LV's. It is reported that in 2014, Hugo Boss closed 7 stores, Ferragamo and Zegna closed 6, Burberry 2015 closed 10 stores, and plans to close about 5 in the 2016 fiscal year. Also facing the crisis is the US brand Coach, after which the company announced in a high profile that in fiscal year 2015-2017, it plans to spend about 570 million dollars on rearranging the store.

Performance is declining LV self rescue

In 2014, China's luxury goods market fell for the first time in eight years, down 1% from 2013 and sales fell to 115 billion yuan, according to the annual report on luxury goods released by Bain, a consultancy.

Since 2013, China's luxury market has gradually entered the downlink period. As the first batch of brands entering the Chinese market, LV also entered the weak period of China's regional performance along with the environment of China's luxury market.

Data show that as of the end of June 2015, the first half of the fiscal year, the Asia Pacific region is overcast. In the first half of this year, LVMH group suffered an organic decline of 5% in the market (except Japan), with a decrease of 6% and 5% respectively in the first quarter and the two quarter. The profit margins of the fashion and leather goods sector plummeted 160 basis points to 28% in the first half of 2015. As China's mainland market continued to slack and the Hong Kong and Macao markets continued to deteriorate, the share of the Asia Pacific market (except Japan), which dominated the Greater China region, further shrank from 31% in the same period last year and 30% in 2014 to 29%. In the first half of the year, there were 16 new stores in fashion and leather goods sectors, far less than 56 in the second half of last year.

Last year's performance was a mess, and this year's performance is even worse. LVMH group's latest performance report shows that in the three quarter, the group's overall sales revenue was 9 billion 138 million euros. Although the LV fashion based leather goods department earned 3 billion 106 million euros in revenue, the actual revenue growth of the sector in the first three quarters fell to 1% from 16% in the same period last year, showing the worst in eight years, resulting in an increase in LVMH group's real income from 18% in the same period last year to 4%.

In addition to declining performance, consumption outflow is also one of the reasons why luxury brands choose to shop in China. Nelson's China outbound travel monitoring report shows that nearly half of Chinese tourists choose to buy luxury goods while traveling abroad.

It is worth mentioning that, although domestic consumers are keen on overseas shopping, LV seems to be no longer on the list of consumers. According to a recent annual survey, only 10.7% of the 1277 overseas travellers surveyed bought LV in the latest trip, down 15.5% compared with 2014. Meanwhile, in the high-income tourism group, the brand attractiveness of LV declined significantly. Only 12.9% of the high-income earners (family income of more than 350 thousand yuan) bought LV on a recent trip, which reached 24.3% last year.

Urgent layout

According to Amazon statistics, the amount of overseas orders made by Chinese consumers in Amazon in the past 1-9 months increased by nearly 10 times over the same period last year. Over the past two years, the phenomenon of consumption outflow has been prominent.

It can not be denied that nowadays, the poor sales of luxury brands in China have caused a lot of pressure on the stores that have opened up in the past, and even many shops have been reduced to showrooms.

In the Research Report of the luxury goods distribution channel, the Research Institute of wealth quality pointed out that from last year, 95% of luxury brands will choose strategic shops. This behavior is initiative, which is the premise of brand seeking new layout, and the future O2O format will become the mainstream.

In this regard, Zhou Ting said, as we all know, with the increase in costs of human resources, rent and so on, too many stores will undoubtedly occupy too much operating costs. With the advent of Customs store, international luxury brands will undoubtedly choose a more suitable sales strategy. Now the LV store is rearranging the shops in China, and it can also be considered that the brand is rearranging the Chinese market. Although luxury goods in China do not have too many moves in the e-commerce channel, this is the trend, and which brand can not be avoided.

A few days ago, it was reported that the LV e-commerce platform will soon be listed, but the time and mode of the specific listing will not be released. The reporter interviewed LVMH group's Shanghai headquarters on the strategy of closing stores and electronic business platform, but LV brand PR department did not give any reply before the press release.

Industry experts believe that LV is also paying for the rapid expansion of its brand in China. This is the usual way to increase revenue and reduce expenditure for luxury goods. It may improve the financial statements in the short term. But such a rapid closure of the two or three line city shops will cause long-term damage to the brand and the consumption of the local market.

Zhou Ting said that this is the pain that luxury goods must experience in China. Only when we get through this stage and rearrange the online and offline can we meet the needs of domestic consumers. At the same time, Zhou also predicted that the LV will adjust the price of the goods after the layout of the store in China. Price adjustment is aimed at the global market, and its purpose is to complete the global price integration. Only after price integration can the layout of e-commerce channel be carried out.