For a long time, luxury goods manufacturers have relied on consumers keen to snap up bags with prices of up to $ 1,000 and other high-priced and profitable single items to make a profit. Now that the aesthetics of Chinese consumers are changing, these changes are likely to slow down the rapid expansion of luxury brands in China. Louis Vuitton Shanghai Flagship Store
In big cities like Beijing and Shanghai, LV bags, Gucci wallets and Omega watches are everywhere. Nowadays, consumers try to avoid buying products with highly recognizable logo patterns, but prefer to buy some unique items.
‘As the luxury industry matures, the Chinese are becoming more experienced in buying luxury goods. It’s not just about showing off.’ Said Fflur Roberts, global president of luxury research at Euromonitor.
According to HSBC estimates, after the collapse of Lehman Brothers in 2008, consumers in Europe and the United States prefer those low-key and expensive luxury products, which may be the reason for the significant decline in sales of LV and Gucci. Only recently have they reversed the situation, selling more than half of their bags in the world’s second largest economy.
Such sales also happen to other established luxury goods, such as Bottega Veneta and Yves Saint Laurent, which belong to the PPR luxury goods group. Although this year’s sluggish economic growth situation has sounded alarm bells, they have still tripled their sales volume. Compared to cheaper bag manufacturers like Coach, it may benefit more because more and more consumers are turning to investment bags in order to avoid cash depreciation.
‘Now Chinese consumers still have strong spending power, but their consumption patterns are completely different. Today’s luxury goods companies need to focus more on consumers than they did five years ago. This is the balance Question, ‘said Uché Okonkwo, president of Paris-based luxury consultancy Luxe Corp.
China’s gross domestic product grew by 7.6% in the second quarter from earlier this year, the slowest quarter in three years. According to Euromonitor (European business market research company) revealed that China is the fifth largest consumer of luxury goods in the world, total luxury goods consumption in 2011 reached 92 billion US dollars.
Massive price increase
LV, PPR Group’s Gucci and Burberry have all responded to this by raising the price of their products and launching more animal fur products, such as Gucci’s $ 4100 python shoulder bag and Burberry’s £ 6,000 alligator clutch Package while taking this to enhance the brand’s image.
However, recent sales reports have shown that this strategy does not work. Burberry said same-store sales have declined since August this year, and Chinese tourists traveling to Europe are spending less and less on trench coats and other products.
‘We are the first to report a decline in sales, but we will definitely not be the last.’ Burberry CEO Angela Ahrendts said at the end of the 2013 spring and summer London conference.
After the Gucci press conference at Milan Fashion Week on September 19, CEO Patrizio Di Marco declined to comment on the company’s performance. The PPR Group will release its third quarter financial statements in October. A spokesperson for LVMH Luxury Group said that it will also release quarterly financial statements next month and declined to comment on Vuitton sales. HSBC predicts that Chinese consumers will contribute approximately 25% of global luxury sales.
Logo aesthetic fatigue
As more and more domestic consumers travel abroad, they find that designer clothes and accessories are actually half cheaper than domestic prices in European and American stores. This has also led to the gradually increasing sales of luxury goods in China. slow. Ahrendts also emphasized that China’s once-a-year national leadership session also affected the sales of luxury goods, because many people slowed down the pace of gift giving and waited to see who was in power.
Prada’s current bag series prefers to use leather materials than LV. It realizes that products with less logo can be used to distinguish LV products, so it can provide another choice for those LV consumers. The person in charge of Prada said yesterday that although the economic situation is getting worse and worse, same-store sales have not fallen in the past two months.
‘LV, Omega and some other big brands have already shown signs that they are experiencing a period of brand aesthetic fatigue, because they are the first to enter the market. We summarize this as the ‘preconceived disadvantage’.’ HSBC analyst Erwan Rambourg wrote.
‘Generalization’ of luxury goods
LV has 39 stores in China, Gucci has 54 stores, Burberry has 66 stores, and Hermes has 21 stores. And Hermes raised its sales growth target for 2012 last month, as revenue in the first half proved that they underestimated demand from Asian consumers.
The so-called absolute luxury sector has always been a competitive advantage for Hermes and the fastest growing part of the market. Until 2014, this area will continue to maintain a good posture.
It is very likely that it will become too ‘ordinary’ at your fingertips. Hermes CEO Patrick Thomas warned the manufacturers of scarves and Birkin bags on August 31 this year, because the sales of these items in the first half of Asia Sales volume increased by 25%. The Paris-based company estimates that sales will not decline in the second half of this year, and plans to protect the image of its products by controlling store expansion. In the next five years, a maximum of 20 stores will be opened worldwide.
Burberry’s unexpected warning has made some analysts more worried about LVMH Group. UBS (Bank of Switzerland) Eva Quiroga has lowered LVMH’s credit rating to medium and lowered its sales estimates for apparel and other leather items in the second half of the year. This part is the largest and most profitable business of the LVMH Group. Revenue will increase by 5 to 6 percent, a decrease of 10 percentage points from the first half of 2012. Quiroga also predicts that LVMH’s total revenue will increase by 8.5% in 2012, a performance that dragged down the average increase of 9.2% in the European luxury segment.
Some of Hermes and PPR Group’s luxury products may be better, with growth between 12% and 13%, but Gucci, a subsidiary of PPR Group, may continue to decline. Prada estimates sales will increase by 15%.
The beauty of luxury goods is that they are so scarce that they become very expensive. You don’t want to spend a lot of money on something that is not scarce. ‘Rahul Sharma, founder and general manager of Neev Capital, concludes .