The Key To Chinese Consumers Becoming GUCCI And LV Giants

Bernard Arnott could not lie down in the paper.

although

The group's earnings report last year was exhilarating enough, but its peers could not ignore it.

After Arnott boarded the fifth Hurun rich list, Francois Pinault, the competitor's cloud group, was also ranked twenty-eighth.

What is more tangled is the performance of the two groups.

In 2017, LVMH group's year-on-year sales increased by 13% to 42 billion 600 million euros.

Kai Yun group's growth rate is faster, the group's annual sales growth of 27.2% to 15 billion 500 million euros, of which

The organic growth of the Department reached 30.5%.

Although its size is less than LVMH, its amazing potential makes it a big winner in the global luxury industry.

Since last year, the group's stock price has risen by 90%, and its market value has broken the historical record, currently about 50 billion euros.

Even the world's fifth billionaires are suffering from headaches.

Rival rise

Last year, Arnott successfully reversed the performance of LVMH in the past few years, leading the group to climb to the top again.

However, this is also accompanied by the overall warming of the luxury goods industry.

At the same time, compared with the warmer of LVMH, the outside attention is focused on Kai Yun group.

According to the world clothing and shoe net, in 2017, the whole group relied on its brand.

The power of one family has achieved astonishing growth.

According to the root earnings report, Gucci's year-on-year sales rose 42% to 6 billion 210 million euros, accounting for 40% of the total revenue of the whole group.

The outstanding performance of Gucci has promoted the group's luxury sector's performance by 27.5% over the same period last year.

This data is also higher than the LVMH fashion leather Department's 10% increase in the same period, and Hermes expects to increase sales by 9%.

Consumers all over the world are willing to pay for Gucci.

Gucci has been strikingly growing in every region: Gucci2017 rose 57.6% in the Western European market year-on-year, while the data in Asia Pacific and North America were 48% and 44% respectively.

But three years ago, Gucci struggled in the slump of its earnings.

At that time, Gucci was not a strong agent for the group, but a poison.

Since 2014, Gucci's performance has started to fall, and Gucci's operating profit has fallen by 6.7%.

The situation lasted until 2015, and its operating profit fell 5.7% again in the first quarter.

Dragged down by Gucci, profits in group earnings fell 2.7% in 2014.

In 2015, Gucci, who was anxious to recover, began a discount sale.

In the summer of that year, Gucci launched its first ever discount sale season in Beijing, Shanghai and other places, and many commodities were directly 50 percent off.

When the outside world hasn't recovered from shock, Gucci's winter promotion season is coming again.

But this practice is like drinking poison to quench thirst. For luxury goods, discount will have a great impact on brand value. The last thing to prove this is the light luxury brand coach.

Subsequently, coach had to save the brand value and pay a heavy price.

Fortunately, Marco Bizar, the chief executive, who was confused in the price mire, finally found the right direction.

In 2015, he appointed Alessandro Michele as creative director, who started his efforts to turn the tide.

Michal began to reinventing the brand. He used street graffiti and animal and plant totems in shoes, fashion, bags, and woven a magic dream in the show.

At that time, although Gucci had received an evaluation similar to "exaggeration" and "too retro", Gucci's image has been completely new.

Since then, Michal has continued to strengthen these factors in subsequent design so as to maintain continuity between products and enhance consumer awareness of brand image.

Today, the Gucci logo is no longer limited to "double G". Bees, lions and tigers have become brand spokesmen.

In the first half of last year, Gucci operating profit surged 69% to 907 million euros.

Previously, Arnott tried to buy Gucci but failed. Now the brand has become a strong rival. LVMH needs to face up to the challenge.

However, before taking action, the giants need to understand the changing market.

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Changing consumers

On the Champs Elysees street in Paris, the seven storey building belonging to LV headquarters stands high. This shop is only 200 meters away from Triumphal Arch. It is one of the landmark buildings. It usually needs queuing.

Over the past few years, this is a must for Chinese tourists to travel to Paris.

Not only is the headquarters building beautiful, but tourists prefer to buy luxuries representing France here.

At headquarters, tourists found that the goods were complete and the prices were lower than those of Chinese stores.

However, this phenomenon is decreasing and consumers are changing rapidly in recent years.

Luan LAN, a deputy director of McKinsey Global, said tourism upgrading is an important factor: after many trips abroad, consumers are less enthusiastic about cross-border shopping and more focused on enjoying the scenery.

More importantly, consumers from China are returning.

According to Deutsche Bank data, about 60% of luxury purchases last year occurred outside China.

But this data will continue to shrink with the price adjustment in the future.

Price is one of the reasons.

The price difference between luxury brands in Europe and China has continued to shrink, according to the financial times.

From 2016 to 2017, the premium of European luxury goods in China has shrunk by 25%, and this trend will continue.

Chinese consumers are richer, making them more willing to shop in China.

Luan LAN pointed out that the consumption power of Chinese consumers has been rising, so the sensitivity to price differentials has weakened.

Consumers return to local shopping to make more changes in luxury brands in China.

Boston's Consulting Director, Hong hung, told the author that luxury brands are trying to curry favor with Chinese consumers, whether they are to increase the supply of core products to Chinese stores, or to adapt the lunar calendar to launch products with Chinese characteristics.

But this is just not enough. The more core change comes from the consumer group.

Gucci's previous changes have conquered consumers of the millennial generation (aged 20-34).

In the fourth quarter of 2015, sales of young consumers surged by 70%.

This is an important signal.

To regain the favor of the millennials means that Gucci caters to the core customers.

According to Research Institute Pambianco, the current generation of luxury goods consumers account for 25%, and the proportion will rise to 40% in the next 5 to 7 years.

In the 2017 China luxury market research, consulting firm Bain discovered that the millennial generation is the main driving force for the growth of the luxury market in 2017, not only for consumers but also for opinion leaders.

Such consumers need to attract special tools in the past.

Luan LAN told the author that the millennial generation has a stronger sense of self-expression, and they like to pay for goods that are consistent with their values.

This means that luxury goods need to tell stories to consumers and enhance emotional ties between the two sides.

Chinese dependency syndrome

The major brands are trying to face up to consumers and increase access channels.

This is especially evident in the Chinese market.

The most direct is the brand spokesperson, besides global spokesperson, LV, Dior, Fendi, TOD 'S and other brands, have their own Chinese spokesperson, this situation rarely appears in other areas.

With the increasing influence of celebrities and KOL on consumers, big brands need to sign up popular spokesmen quickly, otherwise they will be preempted by their rivals.

At the same time, due to the development of China's digital media, flexible use of major media channels is far more influential than opening stores.

Hung Liu said that the luxury market in the Chinese market is at the front end, which has a high frequency of use for micro-blog and WeChat, and the application of digital marketing is thrived. This is due to the huge drainage effect on the line.

Why is this phenomenon more obvious in the Chinese market? For luxury goods, the development blueprint of the industry is not in the statements of LVMH group headquarters in Paris, nor in the Research Report of JP Morgan analysts, but on the behavior of consumers in the Chinese market.

The Chinese consumer is maturing, Luan LAN, a deputy director of McKinsey Global, told the author.

In the past, the behavior of Chinese consumers would imitate the consumers in developed areas, but now Chinese consumers are at the forefront.

For brands, understanding and predicting the needs of Chinese consumers will be beneficial to global development.

The underlying reason for this change is that the luxury industry's dependence on the Chinese market is deepening.

Luan LAN pointed out that this luxury industry is getting warmer, which is directly related to the rise of Chinese consumers' personal consumption and the change of consumption concept.

Today's Chinese consumers are willing to spend money on quality and experience.

According to Deutsche Bank data, China's market accounted for 31% of global luxury demand in 2017, and this figure will increase to 34% by 2020.

McKinsey's prediction coincide with that.

According to forecasts, the global luxury consumption of Chinese consumers will reach 44% in 2025.

Luan Lan said that in the next ten years, the Chinese market would win almost half of the world's share.

This trend has been reflected in the earnings report.

LVMH reported year-on-year sales growth of 13% over the same period last year. The Greater China region promoted Asia (excluding Japan) to boost other markets with organic sales growth of 17% over the whole year. "We benefit from highly active China market," Arnott said at a conference call after earnings.

The luxury sector of Kai Yun group also gave a similar answer.

Last year, the sector's revenue exceeded 10 billion euros, showing rapid growth worldwide. Asia Pacific region grew by 33.4% in most regions, and the consumption potential of emerging areas is evident.

The three quarter results, which are based on hard luxury, also show that the Greater China region and Chinese tourists are the main driving force for growth. The Asia Pacific region accounts for nearly 40% of the group's revenue.

Whether the industry as a whole, or all the giants, all need the support of the Chinese market.

But the consumer's mind is always changing. The Swiss watch brand Swatch once relied on the continuous growth of China's market performance, but in 2015 it fell due to China's economic slowdown and Hongkong's tourism downturn.

To become a winner, it is a required course to detect the needs of Chinese consumers in time.

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