The Pformation Is Hard To Work. Tiffany Faces Difficulties.

After reporting the disappointing three quarter earnings report, Tiffany, the veteran jeweller, said in January that due to the global consumption of Chinese tourists and the weakness of the European and American markets, the global sales of the same store decreased by 2% during the critical 11 to December period, and net sales fell 1%.

Tiffany, chief executive of Alessandro Bogliolo, said, "we see that the consumption of Chinese tourists abroad has dropped sharply, and the drop has reached 20-25% and 30-35% respectively." (Bogliolo)

Berg Rollo also said that the decrease in overseas purchases of Chinese tourists was mainly due to the strength of the US dollar, and the demand for Tiffany store customers in mainland China remained strong during the holiday season.

However, this is still unable to convince Wall Street.

Tiffany shares fell to less than $80 from last July's high above $140, and now rebounded to around $95.

Tiffany's dilemma

For Tiffany, its dilemma is not sales in China, but sales to Chinese tourists.

Berg Rollo once said at the three quarter earnings conference that the decline of Chinese tourists' consumption can be offset by the increase in domestic sales.

But judging from its latest earnings forecasts, the situation is not so optimistic.

Tiffany now expects full year earnings in the 2018 fiscal year to be at the lower limit of $4.65 to $4.80 a share.

Earlier, the brand executives said that about 2/3 of Chinese consumers would choose to spend abroad.

Tiffany's strong two digit growth in the domestic market is still unable to offset the decline in foreign consumption, which means that Tiffany, who is trying to create a brand image and attracts millennial consumers, is facing another challenge -- the change of consumption pattern.

A report released by HSBC at the end of last year showed that in terms of luxury goods, the gap between Chinese consumers in overseas and domestic spending is shrinking, and the 55 balance node is already in sight.

Pascal Martin (Pascal Martin), a Hongkong partner in Hongkong, also said: "it's clear that the consumption pattern has changed: more and more Chinese are buying at home."

Transformation is not effective.

For a long time, Tiffany has been counting on Chinese tourists to spend in the famous Fifth Avenue or Rodeo Drive, which needs to be changed.

"Allowing Chinese consumers to buy foreign brands at home is more advantageous to brand loyalty," said Thibaud Andre, director of Daxue Consulting research.

In August last year, Tiffany opened a flash store on Tmall luxury platform Luxury Pavilion to sell the latest Rhyme Series at the time. This is the first time that its new jewelry has been released online through the Internet.

It can be seen that Tiffany is already taking action against the changes in the consumption pattern mentioned above.

But the question is whether domestic marketing in the future can maintain a strong momentum, especially when other luxury goods companies are scrambling to make adjustments and compete fiercely.

Luxury insiders say they will spend more than 8% of the budget on digital advertising in 2019, while nearly 80% of the companies will enhance their website sales function.

This pressure comes not only from Tiffany's usual rivals, Cartire and Pandora.

Research firm McKinsey has predicted that in the future, the growth of brand jewellery is likely to come from non jewellery companies in the luxury sector, such as Dior, Hermes, Louis Weedon and other jewellery series to expand its sales category.

Moreover, more than ten years after entering China, Tiffany has only 32 stores, and is densely distributed in the first tier cities such as Beijing and Shanghai.

While continuing to digitize, Tiffany also needs to further develop the consumption potential of second tier cities.