LV And Hermes Are Building New Factories. Will This Make Luxuries No Longer Luxurious?

In recent months, LVMH group and Hermes group are building new factories and expanding production capacity.

In January of this year, LVMH Group Chairman and CEO Bernard Arnault announced that it will open 4 new Louis Vuitton workshops in 2019, of which 3 are in France and 1 in Texas. A month later, LVMH group announced that it will be in Italy. fashion Glasses group Marcolin co operates second factories, which can produce 4 million 500 thousand pairs of glasses per year for the group.

The Hermes group opened 1 new leather workshops in France in April, and 3 leather factories are being built. In addition, it plans to expand its production of silk scarves in France. Spin The center employs more than 1/4 employees.

A series of moves by LVMH group and Hermes mean that they need to produce more handbags, shoes, glasses and scarves. It is also doubting that maintaining the scarcity of products has always been the foundation of luxury goods. "Products can not be obtained immediately" is an important reason why luxury goods are so attractive.

So, when getting a platinum bag and old bag is no longer difficult, will luxury become no longer luxurious?

More people want to buy luxury goods.

Rogerio Fujimori, a luxury analyst at Royal Bank of Canada, has just participated in the closed door meeting of LVHM group in early June, listening to Louis Vuitton executives. brand Development briefing. He said to interface fashion that these brands must invest in building new workshops to meet consumers' growing demand for leather goods.

The first thing to be clear is that the products of Louis Vuitton and Hermes are very strong in the market, and the contribution of Chinese consumers is especially outstanding.

In the 2018 fiscal year, Louis Vuitton contributed 10 billion euros in revenue to the group. It is the group's most important driving force for growth. In the first quarter of fiscal year 2019, Louis Vuitton combined with Dior, FENDI and other brands to increase the overall revenue of the group by 16%.

LVMH group focused on the Chinese market in the first quarter earnings conference. Jean-Jacques Guiony, the group's chief financial officer, said that many brands in the fashion and leather goods sector were strong sales growth because of China. The sales growth of Chinese consumers for Louis Vuitton continued to maintain double-digit levels for many years.

Hermes's revenue rose 10% in 2018, approaching 6 billion euros. Axel Dumas, the group's chief executive, revealed that sales in China were very strong, and the Chinese Millennial Generation was the main force in Asia's growth.

Besides, China's luxury goods market is experiencing a huge consumption reflux, that is, many Chinese tourists who have purchased luxury goods abroad have begun to buy luxury goods in the mainland of China.

Louis Vuitton told analysts at a closed door meeting that the demand for Louis Vuitton products in the mainland market was unheard of, and online channels were excellent. Although analysts say that only 1/3 of the brand's Chinese consumers are completed in the mainland, sales in mainland China are soaring at a rate of two times.

Fujimori predicts that mainland China will become the main position of the luxury industry in the next few years.

For this reason, Louis Vuitton has just announced that it will increase product inventories in the mainland of China. Looking at the Louis Vuitton official website, you will find that all the products of the brand are already on the shelves.

For more flexible business strategies and richer categories

At the same time, in addition to increasing product output and increasing capacity, it can help brands react rapidly to the changing luxury market.

The life cycle of luxury brand products is shrinking. If a handbag of luxury brands can be used decades ago, Popular In the past 5 years, a new It Bag may take 1 or 2 years to be shot on the beach. Nowadays, in order to cope with the changing needs of consumers, luxury brands need to be faster and more flexible.

Fujimori has revealed to interface fashion that Louis Vuitton is striving to become more agile in order to further achieve growth, such as accelerating the time to market new products and becoming more flexible, such as rapidly adjusting the productivity according to the sales volume of existing product lines.

"Now Louis Vuitton has reorganized the factory and added two shifts, changing from 8.5 hours to 14 hours / days." Fujimori said to interface fashion.

In addition, Louis Vuitton and Hermes build factories not only to increase the output of core products, but also to make other categories develop better and introduce new categories, enhance brand competitiveness and find new growth points.

Guiony said at a group closed door meeting that a richer product portfolio helped brand profits increase substantially in the past 6 or 7 years. That being the case, Louis Vuitton has no reason not to continue to offer more categories of goods.

Fujimori said that Louis Vuitton CEO Michael Burke told him that jewellery and watches are the most potential departments of Louis Vuitton. The brand hopes that jewelry and watches alone can achieve sales of 1 billion euros, so as to ensure that the brand can accomplish the goal of spanformation in 2013 - becoming a high-end luxury brand.

Not only is Louis Vuitton a jewellery watch, but Gucci, Armani and Prada have launched a series of premium jewelry in the past one or two years.

Now that we need to enrich the product mix, Tiffany Co., which is originally a luxury jewellery brand (Tiffany), of course, needs another way. At the end of 2017, Tiffany, which was in the process of change, introduced household products such as tableware, accessories and even table tennis racket, and released perfume products after 15 years.

Hermes also took a look at home products as the next direction of brand development. silk Products and upcoming beauty products.

In introducing Hermes's first quarter results, Dumas focused on some niche products, which showed that the sales of automatic jukeboxes, surfboards and skates were all very good. One of the top selling products of the US official website was 12 inches long.

The French textile center, announced by Hermes, is a workshop that produces silk scarves. In fact, the performance of the Hermes silk and textile sector is not very good at present. Sales in fiscal year 2018 increased by 3.2% over the same period last year. In order to make the star products of the brand have a higher quality exposure in the public view, Hermes has opened a scarf flash shop in Madrid, New York, Seoul and Beijing in 2018, so that young consumers can notice the integration of scarves and music and art.

In March 2019 Hermes announced that it would launch its first beauty series in 2020 and then launch personal care products. Dumas said it hopes to become a global company in the cosmetics industry, and of course it is also a way to balance the growth of category products.

We need to know that cosmetic products have always been considered as cash cows of luxury goods companies. They have a very substantial profit margin. In recent years, the development of beauty and skin care market is improving. This will undoubtedly bring new growth points to Hermes.

Balance of luxury

However, increasing capacity and expanding product lines do not mean sacrificing the scarcity of core products.

Luxury brands will still be controlled and remain scarce on core products. For example, you can't buy an Hermes platinum bag easily.

"For luxury brands, the key is to achieve a very good balance between expanding output and maintaining uniqueness." Fujimori said to interface fashion.

Besides, luxury brands are also stepping up control over product distribution channels, which is another important way to maintain brand scarcity.

Louis Vuitton and Hermes did not sell goods through wholesale channels. They never discount. Consumers only buy online bags and scarves online and offline. The brand maintains the image of "tall and tall".

Many luxury brands who have been more tolerant of wholesale channels are also beginning to realize that they need to make changes. For example, Prada announced in March that they should further reduce the wholesale network, make the pricing of each channel more consistent, and stop the end season promotion activities, so as to enhance the control over distribution channels and enhance the brand image.

Although many analysts say this will have a negative impact on the Prada group's performance in 2018, it is a measure of pain and pain.

Besides, luxury brands are still scarcity by fighting against gray and second-hand markets.

Louis Vuitton joined the Alibaba's Alibaba alliance in 2017 and joined dozens of brands at home and abroad to crack down on counterfeit goods, because only when the counterfeit goods on the market became less and less, consumers could see products with better brand quality.

In order to combat counterfeit goods, Louis Vuitton even played block chaining technology. LVMH launched its first luxury block chain platform Aura in May, which is first used in Louis Vuitton and Dior perfume. Using block chaining, every step of Louis Vuitton product life cycle will be recorded, including where goods are initially bought and when they are sold, so that consumers can distinguish the authenticity of products in the gray market such as purchasing and purchasing.

And CHANEL on the second hand market. It was in November 2018. trademark Infringement, fraud, the use of false advertising and unfair competition and other reasons, the second-hand luxury electric business The Real Real to court.

After all, if the authenticity or unwarranted quality of goods is too much circulation in the market, it may damage the brand image, and it will make consumers discover that having a luxury item is not a bad thing. This is something that luxury brands absolutely hate to see.

How to maintain scarcity in the digital age?

In fact, in order to cater for the needs of the digital age, there should be new directions for maintaining the scarcity of luxury goods.

Herve Ballantyne, a partner of DDT Middle East, recently interviewed The The, saying that in a changing trend, luxury companies are reviewing the value of brand heritage and history in order to focus more on the needs of consumers in the new era.

This means that the importance of luxury brands to brand value will not rise. For example, we should strengthen the way of invocation, pass the history of brand, or develop new cultural and artistic labels. For example, investing in repairing historic sites is something that luxury brands have been doing. CHANEL is the only and long-term sponsor of the The Grand Palace restoration and reconstruction project in Paris. FENDI has exclusively funded the restoration of Italy wishing pool.

Today, these collaborations are increasingly being held through exhibitions. Walking show Try to cross geographical restrictions.

Since renting the house of Shanghai Jingan District North Shaanxi Road in 2011 and having spent 6 years repairing it, Prada has held many exhibitions including "ROMA 1950-1965", "allegory narratives" and "what I have been for".

It is necessary to admit that these art exhibitions have an appreciation threshold. The background of the exhibition of "what I was" is set in the end of the world after the collapse of human technology due to over development of technology. The endless speeches of robots in the exhibition may not be read by all audiences, but they will clearly perceive the artistic gene of the brand.

Louis Vuitton and CHANEL, respectively, through the "flight, navigation, travel" and "into Chanel", the two focused brand history exhibition, not only let the Chinese younger generation of consumers close to themselves, but also let old and new customers get a good sense of the brand through a telling story.

Of course, a local fashion show is more direct than an exhibition. So FENDI, Chlo, and Prada came to Shanghai at the turn of spring and summer, and Prada simply launched the traffic star Cai Xukun almost as much as anyone else.

Prada the controversy between the temperament of the intellectuals and the new spokesperson is controversial, but you have to say that this cooperation has brought a surge of concern to the brand in a short time.

In the age of social media, the marketing strategy of luxury brands is constantly changing. No matter whether they are stationed in a noisy or open shop, these new digital strategies undoubtedly attract more young people's attention. Although we still can not confirm the challenge of the Internet to the elite mode, we will be able to dilute the meaning of the word "luxury" to a large extent. Author: Zhang Xinyu