Analysis Of Key Strategies For Stimulating Luxury Sales

With the international market becoming saturated, the growth rate of China's market is slowing down.

The opportunity for brands to seek growth through expanding new markets is also less and less.

Although the overall situation is still full of challenges, a report jointly published by Bernstein (Bell Sten) and Boston Consulting Group (Boston consulting, hereinafter referred to as BCG) shows that emerging luxury goods

And the Americas market still brings opportunities for the development of the luxury industry environment.

In this report entitled "Luxury Goods' Store Wars' 2016 - AShiftin Focus From Expansionto Profitability," a database of 7000 stores including 36 luxury brands was analyzed.

The database will be updated once a year, the last update is July 2016.

Retail network expansion blocked

The author points out that there are many new luxury brands such as Fendi, C, line, YSL and Balenciaga.

The business scale is still small, and there is still a lot of space for development and growth.

Large brands such as Louis Vuitton, Gucci, Herm s, Burberry and Prada have generally begun to slow down the expansion of retail networks, or even adopt a shrinking strategy.

However, the environment of Luxury Retailing is still very difficult.

"In the past ten years, as the most important sales channel for the luxury goods industry, retail channel sales have been growing steadily, but under the influence of China's economic slowdown and other factors, it has begun to lose momentum of growth."

FedericoBonelli of BCG said: "the luxury industry is at the stage of adjustment.

In the past, brands had opened two new stores on average.

But over the past three years, the current situation is that 9 of the existing stores are closed when they open 10 new stores.

In those saturated markets, the total number of stores is even declining. "

In various regions, the number of stores in Japan and Western Europe and other highly saturated markets is decreasing.

The number of stores in the United States increased by more than 1% over the same period last year, an increase of 3%. In the world's major cities, the number of luxury stores in Tokyo, Seoul, Beijing, Shanghai, New York and other world-class metropolises has been almost saturated. It is difficult to meet more needs to meet new stores.

At the same time, as the world's largest luxury center, New York, Tokyo, London, Paris, Seoul and Hongkong remain the main outlets for the retail industry of luxury goods.

Many luxury goods markets in the United States still need to be developed, and there is room for expansion of the retail network.

But the report said that the impact of e-commerce on the traditional physical retail network is very serious, especially in the highly developed electricity market in the United States, so the average number of stores in each city in the United States is likely to be lower than that in other parts of the world.

The report said that the decline in tourist consumption will have a further impact on the expansion plan and sales growth of luxury brands.

Map of saturation of luxury stores in some parts of the world

Store renovation

Brand can enhance the performance of existing retail network through a series of strategies, including improving the appearance of the store, so as to better cater to the needs of consumers for brands.

Bonelli said that the survey of 15 luxury brands in France and Italy showed that the frequency of refurbishment of their stores dropped from 7 to 8 years every 4 to 5 years.

"As the pace of market development slows down, brands begin to reduce capital expenditure and extend the average duration of investment," the report said.

Of the 15 brand stores that were analyzed, only 40% had an average opening time of less than 5 years, and the remaining 40% were between 5 and 10 years, and 20% more than 10 years.

The report said: "in the next few years, a large proportion of stores must be remodeled to make the appearance of the store more modern.

In the future, a large number of sales growth will come from existing stores, so if the existing stores can not continue to attract consumers, brand sales and profits will be affected.

According to the world clothing and shoe net, 25% of the stores in the top 20% are located in Japan, the highest in all regions, followed by Western Europe (20%) and the United States (10% to 12%).

The renovation of the store appearance will have a great impact on sales.

Bonelli mentioned that a luxury brand located in Tokyo's flagship store was not well sold, but after they redecorated it, "the traffic doubled and the conversion rate increased by 5%."

At present, the brand is being rebuilt in all parts of Japan to store stores with great potential.

Store migration

In addition, the report offers another feasible strategy: to pfer stores to less expensive but equally attractive areas.

According to the analysis of the rental data of Cushman&Wakefield in various top commercial areas, the report points out that the gap between the highest cost areas in Milan and New York and the second highest and third highest areas is very large.

For example, the rent of Upper Fifth Avenue (upper Fifth Avenue) in New York is 70% higher than that of Lower Fifth Avenue (next five Avenue).

By moving stores to these areas, profits can be greatly increased.

In addition, in some cities, there are some areas with potential to become new "luxuryhubs" (luxury center business district), such as South Audley Street and Mount Street in London, including Balmain, Christian Louboutin, Balenciaga and Marni, and many other brands have opened new stores in these two regions.

The SoHo area in New York is another example. The rental price of shops in this area is 77% lower than that in the upper east side.

But the report said, "there are risks in setting up stores in these areas. Only a few large brands can fully explore the potential of this site."

However, the report mentioned that those brands that are on the rise and have excellent products can also create a special "niche" luxury business circle by attracting customers.

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