In The Past Ten Years, What Changes Have Taken Place In The Luxury Industry?

Over the past 10 years, the luxury industry has been expanding, and its growth rate is about two times that of the global GDP growth. It is very healthy. This is largely due to China's rise. China's new wave of wealth creation has generated millions of new luxury consumers. Ten years ago, Chinese consumers accounted for less than 15% of global luxury consumption. In 2019, their share will be as high as 35%.

In recent years, China's early luxury consumers have become more and more mature. Some people may have left the personal luxury market. Long ago, the market had already begun to rely on the upward mobility of "new rich" consumers. The second generation of luxury goods consumers in China are different: they want to be more and more fresh. As these groups become the main driving force for the growth of the luxury goods market, they are also beginning to shape the new aesthetics of luxury goods. In recent years, the Chinese society has further penetrated into Pyramid, providing the main driving force for the luxury magnates, so that the industry no longer needs to talk about "Chinese consumers". They are now a large number of Chinese consumers, rather than the concept of generalities.

In the past ten years, the digital revolution has also changed the pattern of luxury goods industry. Digitalization has changed the way in which brands communicate with consumers: From Monologue to dialogue, from low frequency to high frequency, from mass market communication to subdivision in one field, all are supported by explosive data. This new media has expanded the audience of luxury brands, forcing companies to develop new professional skills and processes, as well as a steady stream of new products. In this world, the rise of social media platforms such as Instagram has also promoted people's need for freshness.

The figures also restart the operation mode of Luxury Retailing, forcing the brand to increase the power of e-commerce, and invent various ways to bring traffic to stores through strategies such as anti standardization flagship stores, temporary exhibitions and flash shops. This is a major shift from the stereotyped retail network and the "sales ceremony" rules at the beginning of this century.

In addition, over the past 10 years, we have seen the emergence of multi brand retail e-commerce providers and participants in the gray market. They sell products at discounted prices and attract consumers to leave the full price brand websites, so that the ambition of selling fashion brands online is greatly hindered. Now, brands are experiencing the painful process of reducing wholesale and gray market exposure.

More importantly, the rise of the Internet has opened the door to new competition: new electronic retailers have new business models, but there are also new direct consumer oriented brands. In fact, in the past ten years, celebrity stars, net red and innovators have successfully launched many new digital brands, from spectacles to cosmetology, from shoes to fashion. These brands are usually less expensive to manage because they skip expensive stores, at least in the early stages, so they can offer lower prices. To a certain extent, digital technology has also damaged the product itself, especially in the field of watches, smart watches are replacing Swiss watches made at less than 1000 Swiss francs.

At the same time, to a large extent, due to the promotion of China's rise and digital revolution, the complexity of the luxury goods industry has escalated, which has made the scale more important, and the situation is conducive to those companies that have the necessary human and financial resources at the forefront of competition. The larger brands have become a few brands with strong financial resources, which can provide funds for higher marketing costs, offset the impact of reduced traffic flow in the shops, develop top-notch digital activities and are not resisting the impact of traditional wholesale and gray markets. As a result, over the past ten years, the performance of luxury companies has been greatly different. LVMH, Herm s and Kai Yun group (Kering) have all been rewarded, while Prada, Salvatore Ferragamo and Tod's have suffered losses.

For the same reason, there has been another wave of mergers and acquisitions in the luxury industry over the past ten years. LVMH has always been the biggest protagonist. In the acquisition of Bvlgari (Bulgari), Loro Piana and the latest brands such as Tiffany (Tiffany), it has no doubt reached the peak of the industry. However, the latest deal is still in progress and will not be completed until next year. But we must not forget the success of LVMH's acquisition of Dior and the failure to try to acquire Herm s.

Meanwhile, Richemont, the competitor, initially stripped Net-a-Porter, which merged with Yoox and repurchased YNAP. The interim results of this transaction remain to be seen. But LVMH's acquisition of Tiffany will be the largest acquisition in the history of the luxury goods industry, which may trigger a market reaction. This undoubtedly puts the peak in the face of greater competition pressure and reduces the space for Kai Yun group to enter hard luxury. The assets and expertise of the group are mainly concentrated on watches and jewelry. To be sure, the remaining major acquisitions in the market will be less and less, but in the next ten years, it is unlikely that the trend of further consolidation will become boring.

Looking forward to the future, luxury companies also seem to increase upstream investment, add substantive content to handicraft and sustainability requirements, and increase their market penetration to better coordinate supply and demand and achieve customization. But the future of the luxury industry fundamentally depends on the sustained development of China's economy.

How governments around the world will cope with rising income inequality is also crucial. The consumption of luxury goods depends on the liberation of social economy, which depends on the public's recognition and belief in the future self improvement. If more and more people lose their optimism and no longer believe in the future and fall into a pessimistic and introverted state of mind, wealth may once again be regarded as a crime. Luxury consumption is regarded as inappropriate. The rise of nationalism in Europe and elsewhere is a warning signal that everything is not beautiful here.