Luxury Price Rise Makes "Noble And Cool"

This is not to rush to buy special eggs in supermarkets, but to buy luxury goods ranging from tens of thousands to hundreds of thousands.

Friends, do you have a lot of question marks?

Indeed, after the outbreak, the luxury market "ice and fire" stimulated everyone's nerves.

On the one hand, it is the poor management of luxury goods abroad; on the other hand, luxury goods are frequently "bought" in China. On the one hand, luxury goods start to rise strongly; on the other hand, it is the "fearlessness" of domestic consumers to "buy more and more".

Recently, the domestic luxury market ushered in another round of boom buying tide, which is in sharp contrast to the ordinary people's scramble to save money and finance after the epidemic.

Who is buying it? Where does the money for luxury goods come from?

Rising luxury prices

In 2020, the sudden epidemic situation will make the "noble and cool" luxury giants suddenly "fall down".

Bain expects the global luxury market to shrink by 20% to 35% this year. With the results of the first half of the year, all the first-line high-end luxury brands have "fallen" without exception.

In the first half of the year, LVMH sales fell to 18.393 billion euro, a 28% decrease, and operating profit fell 68% to 1.671 billion euro, while net profit was only 522 million euro, a sharp drop of 84% year-on-year.

In the first half of the year, total revenue of kering group, a leading luxury goods company, decreased by 29.6% to 5.378 billion euro, operating profit plummeted by 57.7% to 952 million euro, and net profit fell by 53% to 273 million euro. Among them, Gucci, the core brand known as "holding up the cloud and opening the sky", saw its sales drop 33.5% to 3.072 billion euro in the first half of the year, and its operating profit was almost cut back to 929 million euro.

"We have never seen such a radical, one-sided, negative situation," said LVMH's chief financial officer Analysts said it was the most severe contraction in the history of the modern luxury industry.

In order to save the low performance, the global luxury has chosen to open the emergency mode: price rise.

There are different opinions on this emergency mechanism.

Analysts said that although it seems illogical to implement a price increase strategy during the global crisis, it is actually an emergency mechanism for luxury brands to maintain their performance. In the short term, price increases can stimulate consumers to place orders before price increases and increase brand cash flow; in the long run, it can increase profits and make up for the loss of brand income during the epidemic period.

In addition, a little-known fact is that luxury goods have been rising in price, and the annual increase is not low. Some media have done data statistics. Take Chanel brand's next handbag named "2.55" (medium size) as an example. From the data of the last 10 years, the average annual growth of this handbag has reached 9.1%.

The understanding of the concept of "luxury" by the former CEO of LV in luxury management can be regarded as an industry model: "luxury is a kind of earned goods. The greater the resistance to gain (tangible or intangible), the greater the desire for it. " Therefore, for luxury goods, the real price rise is a magic weapon.

Having said that, there are still many people who are "not optimistic".

At the beginning of 2020, the global luxury goods began to rise in price. Taking the Chinese market as an example, consumers generally reflected that "if you raise your price, I will not buy it anyway". At the same time, the mainstream view of public opinion is "saving money and financial management", and the data such as bank deposits which continue to record high seem to confirm this mainstream view.

However, with the passage of time, the situation is changing, and the development of things suddenly changes!

Originally thought that "price increase" was already the limit of luxury goods, but unexpectedly, a more extreme phenomenon appeared: rising prices.

In 2020, LV has raised its price twice. The price increase in May is related to the whole line of products, and the price of some popular models has increased by more than 10%;

In 2020, the price of gucci handbags in Italy, the UK and China has risen by an average of 5% to 9%.

Recently, there are rumors of rising prices of luxury goods again. Tiffany staff said that if the price is adjusted, it will be around 8%.

Is there anyone else to buy this?

It's true!

And more and more people are buying!

Recently, the phenomenon of "queue up to buy luxury goods" has become a shot in the consumer market.

In the SKP shopping mall in Chaoyang, Beijing, there are also a large number of consumers who come to buy luxury goods on weekdays, and they have to wait for more than 15 minutes before entering the store with large passenger flow.

On August 27, a long line of people lined up in front of the LV counter of Shanghai IFC, and a large number of consumers came to buy. Sales of a baogeli store in Shanghai said that the sales volume had increased significantly.

On August 28, in the second phase of Vientiane City in Luohu District of Shenzhen, a long line of people waiting to buy luxury goods was also lined up in front of LV and other stores on weekday night. A consumer in line said that he had been here four times this year, and had to wait in a long line every time. This time, he came to buy luxury goods because he heard that the price of luxury goods would rise again on September 1, which may rise by 10%, so he came to stock up quickly.

Under the phenomenon of "explosive buying", consumers use real gold and silver to create solid and beautiful data.

Boston Consulting Group released "fashion and luxury industry: China's market outlook after the epidemic" that the recovery of China's luxury industry is accelerating. Since August, there has been a wave of queuing outside luxury stores across the country. Under the global epidemic situation, China's luxury consumer market has taken the lead to recover. Although the global fashion industry will fall between 29% and 37% in 2020, China is likely not only to keep up with the losses at the beginning of the year, but also to grow up to 10% against the trend.

According to Savills' 2020 China luxury retail report, the number of top shopping malls in six major cities, including Beijing, Shanghai and Guangzhou, fell sharply in February, about 80% lower than the historical average, but began to rise rapidly to 54% in March. The average passenger flow of the six shopping malls exceeded the historical average by 1% in June, completing the first breakthrough in the year.

In the first half of the year, the retail sales of Shanghai Henglong Plaza rose 17% against the trend, and the overall revenue increased by 4% to 860 million yuan. The occupancy rate reached 95%, and more than 50% were luxury brands. Take LV Shanghai Henglong store as an example. The sales volume of the store is estimated to be 150 million yuan in August, with an average daily amount of 5 million yuan, setting the highest monthly sales record of LV in China! In the past, the monthly sales of a single store only fluctuated from 80 million yuan to 90 million yuan.

Real gold and silver, amazing.

So, who are these "hot buying" people? Where does the money come from?

buy whatever you want!

This problem is not difficult.

The first to bear the brunt is the large consumers of luxury goods returning from abroad to China. According to chinanews.com, the global luxury market in 2019 will be about $381.7 billion, while the global luxury consumption of Chinese will reach $152.7 billion, accounting for 40% of the global luxury market. Among them, the consumption of luxury goods in China accounts for only 12% of the global luxury market, and the outflow of luxury consumption is serious, with 69% of luxury consumption abroad.

After the outbreak, the situation suddenly reversed!

July and August coincide with the summer vacation, which is also the discount season for luxury brands. It is often the peak time for Chinese consumers to buy luxury goods abroad. However, as the global epidemic continues and the tourism industry is stagnant, Chinese consumers who cannot go abroad can only buy at home.

Secondly, luxury "rigid demand" consumers have the characteristics of "not affected by price".

At present, the luxury purchasing power of Chinese consumers is still mainly concentrated in people with more than 10 million assets, accounting for 3% of the population. Consumers with net asset value of more than 10 million contributed 62% of the luxury market consumption in 2019, totaling US $94.7 billion. They have high brand loyalty, low price sensitivity, high consumption frequency and high customer price.

In other words, luxury consumption after the return represents that high-end consumption has become one of the main forces driving domestic demand.

In addition, the arrival of domestic duty-free shops and the outbreak of rich consumers' shopping desire after the outbreak of the epidemic have also become the reasons for the explosion of domestic luxury market.

In the financial reports of major brands in the first half of the year, the explosive buying trend in the Chinese market has been very obvious. Compared with the recession in Europe and the United States, China's strong consumption power of luxury goods shows a "turning the tide" in the global luxury market! LVMH said that the strong recovery of China's market helped the Asia Pacific market reduce its decline from 32% in the first quarter to 13%; Kaiyun said that the unique Chinese market not only offset the negative impact of its store closure in the first quarter, but also showed a positive growth of 6.4% in the second quarter of this year, driving the decline of the Asia Pacific market to 25%.

As a result, China's market has suddenly become the "place of greatest hope" for global luxury companies!

We believe that in the global turmoil, China, which is the first to stabilize the epidemic situation and promote economic construction, will surely have more majestic surprises and become a beautiful scenery on the ship of the global economy in turbulence.

Friends, have you bought luxury goods this year?