2019 Of Luxury Industry: Development And Challenge

Recently, Rhodes public relations and precision Market Research Group jointly released the 2019 China luxury forecast report, which revealed the success of various brands of luxury goods in mainland China and Hongkong in terms of brand awareness and sales.

Among them, Chanel leads fashion products, leading sales in jewelry, clothing, handbags and leather products, as well as beauty and cosmetics.

This year, a survey by foreign media shows that although the insiders in the luxury goods industry are more optimistic about the development, the global macroeconomic trend, the digital revolution and the new generation consumption concept of the millennials are also challenges that the industry must face.

Simon Tye, executive director of precision marketing research group, said: "since digitalization is now providing consumers with sufficient information access opportunities, brands need to constantly innovate in product development and marketing activities in order to become effective leaders in Hongkong.

In addition, the brand must ensure the uniqueness of every detail, especially through a consistent and full channel consumer experience.

The following is the brand survey result of the report:

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Rolex (Rolex), Cartire (Cartier) and OMEGA (Omega) are the three most recognized brand names in Hongkong and China.

Rolex ranked first in Hongkong's sales rankings, followed by Cartire and OMEGA.

However, on the mainland of China, Cartire takes the first place, while Rolex follows the gap. Longines is almost equal to OMEGA.

About half of the surveyed luxury shoppers in Hongkong bought Rolex in the past 12 months.

In mainland China, sales of Rolex and Cartire are almost the same.

The report also points out that the millennial generation surveyed and the Z generation under the age of 35 tend to buy Cartire.

Jewelry

Cartire, Tiffany (Tiffany&Co) and Chanel (Chanel) are the three most famous jewellery brands in Hongkong, while Cartire, Dior (Dior) and Chanel are the most popular brands in mainland China.

The report shows that Cartire, Tiffany, Dior and Chanel are the top selling brands in mainland China and Hongkong in the past 12 months, while Cartire's sales are much higher than those of other brands.

Clothing

In Hongkong, Chanel, Gucci, Dior and LV (Louis Vuitton) are the four most fashionable brands with the highest brand awareness. In mainland China, Hermes is well-known, followed by Gucci, Dior and Chanel.

On the whole, consumers in two regions all say that Chanel, Gucci and Dior are the three major brands that they like to buy in the past 12 months.

The survey also found that UNIQLO is the two most popular fast fashion brand in the region.

UNIQLO is far ahead of the mainland, and it is H&M after UNIQLO in Hongkong.

Handbags and leather products

Gucci, LV and Chanel are the three most famous luxury leather brands in Hongkong.

In mainland China, Hermes, Gucci and Coach rank the top three.

Gucci, LV and Hermes are the three most popular brands surveyed by consumers in the two regions in the past 12 months.

Beauty and cosmetics

Hongkong consumers like Chanel best, while mainland consumers like Estee Lauder best.

SKII, Chanel and Shiseido are the three most popular brands surveyed by consumers in Hongkong in the past 12 months, while Estee Lauder, Chanel and Lancome are the three most popular brands of mainland consumers.

It is worth mentioning that for the first time, Estee Lauder ranked first in the mainland's brand awareness and purchase volume.

Wine and spirits

Hongkong consumers like Hennessy best, while mainland Chinese consumers like Remy Martin best.

Hongkong consumers surveyed said they liked to buy red wine and whisky, while mainland consumers preferred to buy red wine, white wine and whisky. This shows that wine and whisky are widely accepted by Chinese luxury consumers.

2019 of luxury goods industry

However, how will the luxury industry develop this year?

The "Luxury Daily" and the marketing consultant Unity Marketing jointly released the third annual luxury industry internal report. The report has conducted a continuous three year survey of luxury goods, service / experience departments, and advertising, marketing, consulting and other support services for luxury goods companies, measuring the trend of luxury goods business for three years.

According to a survey of more than 600 luxury goods insiders, respondents were generally more optimistic about the industry development in 2019, including industry companies and executives providing support services.

Two years ago, less than 1/3 (29%) of the surveyed 600 people thought that the business environment of the luxury market would be improved than that of last year. Now quite a few people (56%) think that the situation will improve.

Looking forward to the future, most respondents (52%) think that the business environment will improve again next year.

The innovation of product and service is the most influential trend that respondents believe to achieve the growth of luxury marketing in 2019.

On the other hand, the most worrying trend of the insiders is political instability and macroeconomic trends, mainly due to the unstable foreign trade policy of the United States, the slowing demand for luxury goods by Chinese consumers and the reduction of tourist expenditure, and the "yellow vest" campaign of Paris.

In 2017, Paris was appraised by the real estate research company Savills as the global luxury retail capital, because Paris was the most complete city of luxury stores in the year.

But in 2018, Paris became the home of the yellow vest protest. The police needed to launch tear gas and water cannons to disperse the crowd. Luxury boutiques had already been boarded up for preventing robbery. French finance minister Bruno Le Maire estimated that Paris's recent sales fell by 20% to 40%.

The protests in Paris and the slowdown in consumption of Chinese tourists have spread to the stock market.

In November last year, the Savigny Luxury Index showed that the average share price of 18 leading luxury goods companies fell, below the level of 2018 in early November.

In November, Savigny's luxury index rose briefly, but then fell 11.3%, closing down by an average of 5.7%.

This is the second month in a row, and 17 of the 18 companies have fallen.

Societe General, a French investment bank, predicted that "the luxury industry has just started to slow down, because people worry that the consumption trend of China's affluent millennials will continue to decline, as well as the impact of the French yellow vest protest."

Goldman Sachs also agreed that sales of luxury goods in 2019 increased from 7% to 5%.

Although other luxury goods are unlikely to have violent demonstrations like Paris.

But the luxury market will be more competitive in 2019.

Three macro trends in the industry

The report also pointed out the three macro trends of luxury business in 2019:

In addition to the market turmoil caused by political and macroeconomic factors, the luxury sector will face more challenges this year, even though the rich are starting to grow. Including the ability to use digital revolution, the major brands need to actively seek ways to attract young digital consumers.

Wealth increases and anxiety increases.

Luxury brands want to see that the wealth class is growing, so that more people can afford luxuries.

In its 2018 World Wealth Report, Capgemini said that in 2017, the global high net worth personal wealth grew by 10.6%, more than US $70 trillion, for the first time to achieve this level and the global growth of wealth for six consecutive years.

Capgemini defines wealthy people as those who have $1 million or more of the investable assets, excluding major housing, collectibles, consumables and durable consumer goods.

At the current rate, the wealth of the global affluent may reach 100 trillion dollars in 2025.

However, despite the growth of the rich group, the cultural trend is changing, and the rich are more inclined to "leisure" lifestyle, such as the rich group in Paris.

Moreover, in 2019, the rich were more concerned about privacy, and they had the way to achieve this goal, which would make it harder for luxury brands to contact them.

Sustained digital revolution

Luxury brands began to invest heavily in catching up with the digital revolution when they first slowed down.

Most brands now have online sales channels, and many brands (Chanel exceptions) are developing digital markets in depth.

Overall, luxury insiders surveyed said they would spend more than 8% of their budget on digital advertising in 2019, while nearly 80% of respondents would enhance their website sales capabilities.

Moreover, the continuous digitalization of advertising and marketing is also the direction of luxury brand development.

For example, Calvin Klein has just announced that it will reduce paper advertising from February and adopt "digital priority and enhance social function mode".

Although other luxury brands are not exactly the same, digital advertising strategy will accelerate.

New digital customers have new ideas for luxury goods.

The development of luxury brands also needs new customers, that is, the millennial generation this year.

This generation is huge, almost a new customer of luxury brands in the next 20 years.

The Pugh Research Center defines people born in the millennial generation from 1981 to 1996, and the most important groups for luxury brands are high-income but not wealthy (high-earners-not-rich-yet, HENRY).

Compared with other millennials, young HENRY groups are better educated and are often imitated by low income peers.

For the traditional luxury brands, most of the super rich income groups come from the HENRY group. Therefore, these people are not only the target consumers but also the main buyers in the future.

However, a problem with luxury brands is that HENRY has different ideas about luxury goods than its predecessors.

They value shopping experience more than products themselves.

For example, a recent survey by Euromonitor International found that over 50% of the millennial generation of the United States would prefer to spend money on the brand of quality shopping experience, which means that luxury goods are no longer a status symbol.

Now that technology is developing rapidly, they have more channels to understand products and to buy more products from different parts of the world.

Mickey Alam Khan, editor in chief of New York luxury daily, said: "the biggest danger to the luxury industry is no longer special."

"Luxury business is facing an unprecedented identity crisis," he said.

When people no longer believe that these brands are mysterious or special, big names will start thinking about how to resonate with the target audience. "

Although the traditional luxury goods haven't started to cut down a lot, the HENRY group began to choose more low-priced but still high-quality brands such as Everlane, Gilt and Outnet.com.

And with the HENRY group paying more attention to experience instead of ownership, the market was born to use luxury services and renting services, including Rent the Runway, RealReal, Flont, Armarium, Zipcar, Airbnb and best practices.

Consumers do not need to spend high cost of ownership and maintenance costs, they can be used.

The traditional rich and old customers want to have luxury goods, but the idea of young customers is the opposite, and the latter is the future development of major brands.

Unity Marketing President Pamela N. Danziger said: "luxury brands will face complex balance problems in 2019 and beyond.

They need to deal with the potential disturbance factors brought about by market turbulence caused by political turbulence and macroeconomic trends, as well as the influence of the rising rich groups on privacy, digital technology, the sale and marketing of luxury goods, and the new idea of increasing wealth for the next generation of customers.

Author: Carly Feng