What Is The Influence Of "Vanishing" On The Luxury Market?

2019 China's luxury market keyword: consumption reflux.

Trillions of scale buying industry is at a low ebb, and consumers are buying back to China.

The electricity business law promulgated in January 1, 2019 stipulates that purchasing agents must register as market entities and pay taxes accordingly.

When the total value of the imported goods exceeds the allowance limit of 5000 yuan (about 750 US dollars), the purchasing agent needs to be registered as an e-commerce operator, and at the same time obtaining a license in the countries of China and the shopping country, the commodities will be taxed.

Those who purchase illegally will be fined up to 2 million yuan and potential criminal charges.

Under the high pressure policy and strict control, the new electricity supplier law has achieved remarkable results.

According to a Japanese Xinhua overseas Chinese magazine article, a survey of overseas Chinese in Japan showed that since the implementation of the electricity business law, the total number of overseas Chinese buyers has decreased by 70%.

Japanese department store association data showed that in January, sales of Japanese department stores decreased by 7.7% compared with the same period in the first half of this year, the first decline in two years.

Bain global partners BrunoLannes recently said that the electricity business law, which was introduced this year, is strictly rectifying the purchasing industry. Its goal is to guide consumption reflow to stimulate domestic GDP.

For domestic luxury goods, this move is very good.

But luxury stores in London, Paris, Milan and Japan urgently need to find ways to make up for the loss of Chinese consumers.

In addition, many existing legitimate cross-border e-commerce platforms are enough to satisfy consumers' demand for cross-border purchases of luxury goods, so trillions of scale purchasing industry will disappear completely.

Luxury shopping cool, who is panic in the market?

The reason why the purchasing market is large is the Chinese people's natural preference for luxury goods.

China's luxury education is obviously behind the western countries, so the demand for luxury goods is on the rise stage. In addition, China's increasingly wealthy groups are promoting luxury consumption.

According to Hurun data, the number of rich people in China ranks second in the world, and the number of middle class (50 thousand to 500 thousand dollars) is the highest in the world, up to 109 million.

The bain report shows that Chinese people buy almost half of the world's luxury goods.

According to statistics of the Institute of wealth and quality, the number of luxuries purchased by Chinese people in 2016 amounted to 120 billion 400 million US dollars.

It is estimated that by the year 2020, the consumption of luxury goods by Chinese consumers will reach 1 trillion yuan.

In addition, the price difference between domestic and foreign luxury goods is also given to the purchasing space.

On the LouisVuitton e-commerce website, click on the "change area", you can find the same single product in different market pricing.

The Vuitton handwritten Speedy30 handbag retail price in France is 760 euros, the current exchange rate is about 854 U.S. dollars (about 5678 yuan), while the United States sells for 970 dollars, up 12% compared with the original price; Japan sells for 1046 US dollars, up 21%; in China, the price is 1138 dollars, the price is 32%.

In addition to the natural preferences and price differences of Chinese consumers, China's luxury goods are highly digitalized, and the fragmented purchase path is also a great help to the rise of purchasing agents.

BCG and Altagamma released the fifth edition of the annual report "true luxury global consumer observation" data, 55% of the global luxury consumption is on mobile devices, and for Chinese consumers, this kind of consumption mode penetration rate is as high as 77%.

Therefore, active overseas purchasing of WeChat, Xiao Hong, micro-blog and other major social software will be able to outshine others and become the first choice for many consumers to acquire foreign famous brand goods.

Luxury brands are the winners behind the purchase?

The relationship between luxury goods and purchasing agents has been at a delicate stage.

In the early stage of luxury goods entering China, purchasing is a shortcut for all luxury brands to Chinese consumers.

They have won the fame of the brand by purchasing the market free of charge, and the explosive products have been spread on the social media such as WeChat.

Therefore, after the news that China will crack down on purchasing agents in 2018, stocks of luxury brands such as Gucci, Herm, s and LouisVuitton fell sharply.

Gucci's parent company's group's share price fell 5.36% to 437.8 euros per share, while LV's parent company LVMH shares fell 4.89% to 287.9 euros, while Burberry shares fell 5.67% to 19.13 pounds, while Hermes and L'OREAL group shares also fell 3.12% and 3.7% respectively.

In the 25 groups of statistics, the market capitalization has evaporated at least 2 billion 800 million US dollars or about 10 billion yuan.

However, although the introduction of the new electricity supplier law will bring pains to luxury industry in the short term, in the long run, its advantages in maintaining the luxury brand image and expanding the Chinese market will outweigh the disadvantages.

The first is the dilution of the rare attributes of luxury goods.

As LVMH's chief financial sense said, luxury goods should remain scarce despite the slowdown in the global luxury market.

Luxury consumption is, in the final analysis, a cultural experience. When purchasing luxury brands, they can sell their luxury goods to a large number of consumers at relatively low prices.

Before the big group's share price fell due to China's restricted purchase, Jean-JacquesGuiony, chief financial officer of LVMH group, said: "LVMH group supports China to crack down on purchasing agents. We think this is a good thing for the group's brand.

Purchasing is never a group's welcome or advocacy. We strictly limit the number of goods that customers can buy in shops, especially in Paris stores, and restrict purchasing will not prevent tourists from buying luxury goods overseas, or even increase the scarcity of commodities.

On the other hand, in the parallel market, buying and selling has strongly squeezed the living space of luxury brand domestic entity stores.

In order to fight against purchasing agents and cross-border electricity providers, LouisVuitton has lowered some of its product prices in China's official website and offline stores. The price range is about 300 yuan to 1500 yuan, and the price range is between 3% and 5%.

Hermes also announced that it has adjusted the retail price of some Chinese products recently. The price range of products is about 100 to 500 yuan, covering belts, purses, scarves and other accessories, as well as some styles of women's clothing.

By reducing the proportion of purchasing agents, the luxury market hopes that Chinese consumers will no longer concentrate their attention on commodity prices, but instead pay more attention to shopping experience and brand culture.

Only when Chinese consumers buy more at home can they achieve this.

Consumer reflow, China's luxury market will grow two times?

In fact, Chinese luxury consumption is showing signs of reflux.

In 2018, the proportion of luxury goods consumed by Chinese consumers in the mainland rose from 23% in 2015 to 27%, and is expected to reach 50% by 2025.

Among them.

The millennial generation has led the development of the domestic market, and the growth rate of female category is obviously faster than that of male category.

In addition to the new electricity business law, the Chinese government has also cut tariffs and further escalation of consumption and the change of Chinese consumer attitudes for the purpose of consumer reflow in China. UBS also pointed out that the narrowing of the difference in the price of luxury goods is an important reason for the weakening of overseas consumption power. In 2018, the difference between the price of luxury goods in Europe and the countries in Europe and the United States narrowed from 19% to 4% in Asia.

All these new changes require major luxury companies to establish better strategies in China - developing more retail outlets and online platforms, and selling them through official channels.

However, it is not smooth sailing for Chinese market to get rid of the phenomenon of purchasing.

For price sensitive Chinese consumers, luxury consumption demand is inseparable from purchasing demand.

The fashion business Express has analyzed that consumers are not looking for purchasing space because of the price seeking room, but also because they think luxury goods abroad are "better".

In China, fakes have been a difficult problem on the online business platform. In recent years, Tmall, Jingdong and other flagship stores frequently exposed fake goods to consumers, which greatly discounted the goodwill of Chinese flagship stores.

On the other hand, there are fewer luxury stores in China's two or three tier cities. Many of the "millennials" choose to stay in China's two or three tier cities to avoid higher tier cities because of the rapid industrialization and urbanization.

To seize the fast-growing young market, luxury brands are increasingly opening their stores to two or three tier cities in China. For example, Prada opened 7 stores in Xi'an; LouisVuitton opened 1 stores in Wuhan; Hermes opened 1 stores in Xi'an in September.

However, there is still a big gap between the expansion speed of luxury brand stores and the rapid growth of consumption demand in the two or three line cities. It will take a while to change the concept of consumers who rely on purchasing agents.

Because of the purchasing habits of consumers over the years and their persistence in foreign luxury goods, the buying and selling industry will not completely die out because of the introduction of the new electricity business law. Perhaps shunting may create a more complete supply chain, perhaps improving the profit model of the industry. The "disappearing" purchasing will continue to have a profound impact on China's luxury market in other forms.