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How Does China's Luxury Market Develop Under The Trade War?

2019/1/4 16:10:00 109

China's luxury market under trade war

Tang Xiaotang: I am trying to sum up the changes and trends in the luxury industry this year with 10 events. They also represent risks and opportunities in the coming year or a few years.

At the beginning of this year, in summing up the 2017 and looking forward to the global luxury market in 2018, I put forward a warning of "more optimistic and more dangerous" and referred to the credit problem of China. Trump's opening up was a great success.

When we sum up 2018 and look forward to the luxury market in 2019, there is no need to answer the question at the beginning of this year whether the optimism is pessimistic or pessimistic after optimism.

Looking back at the luxury market in 2018, I hope to sum up the changes and trends of the industry in the past year with 10 events. At the same time, they also represent the risks and opportunities that the industry will face in the coming year or even several years.

1, Sino US trade war - 3-12 months

If there are 10 symbolic events to describe the luxury market in 2018, the Sino US trade war is undoubtedly the first to bear the brunt. Although in the past three quarters, the luxury industry rarely recognized the impact of events directly, but in 2011, when asked about the negative impact of China's anti-corruption policy on the luxury market, the executives of the luxury goods industry also denied it.

In the strict sense, Sino US trade war is not only the most important event that the luxury industry has encountered in the past year, it can even take the lead in the summary of all walks of life.

The two most important economies in the world face economic and trade conflicts, and are considered to be close to the new cold war. And near the end of the year, the number of countries involved and the intense queuing up are far beyond the imagination of all.

The direct impact of Sino US trade war is the negative impact on the two economies, which is undoubtedly a huge negative impact on the luxuries industry of non essential commodities.

Under such a grim situation, China's long-term surplus countries and manufacturing industries still occupy a large proportion of GDP. China's economy is bound to face more serious shocks in the short term. As we all know, the Chinese are still the biggest buyers of the global luxury market.

2, Shandong Ruyi purchase Bally, Fosun international acquisition Lanvin - February

In 2018, China's luxury market began with an excellent start. After the exaggerated growth in 2017, when Chinese people were longing for Moutai's share price to break through 1000 yuan, it was also doing the "Chinese version of LVMH" dream.

Although the government has tightened the external investment of Chinese enterprises to a certain extent, the consumption oriented international investment in enterprises still does not see any signs of strict control. After all, most luxury goods are eventually consumed by the Chinese themselves.

However, when Shandong's Ruyi chairman Qiu Yafu attended the New York Times Luxury Summit in November, he admits that it will slow down the pace of acquisitions. The group's Hongkong high-end men's clothing, Li bang, was accused of distributing "big envelopes" and streamlining the redundancies.

At the same time, Folli Follie Follie, a Greek jeweller owned by Fosun International Holdings, has been making false accounts and money laundering news since May. The vision of China's richest man "to make every family life happier" is not easy to achieve. At least, Fosun international investors have been dissatisfied with the investment due diligence of Fosun international.

3, spelling a lot of listing - 6-7 months

The advertising bombing during the world cup was very controversial, but a large number of low priced cottage products on its platform also triggered the hot words of "consumer demotion", which contrasts sharply with the "consumption upgrading" advocated by the economic boom and white horse consumer groups in 2017.

With the deepening of trade war, "consumer demotion" has become a sensitive word.

This tells us that in the process of China becoming the second largest economy in the world, a large number of crises are buried.

Economists and folk began to reflect on Japan's "Plaza Accord", which has borrowed the past and the present.

In any case, we recognize a fact that under the consumption mode of Chinese consumers, a LV white collar worker with the latest version of CBD can buy 10 3 pieces of underwear.

4, Burns Hudson Institute speech - October

The day of October 4th was the most intense day in the Sino US trade war.

Global luxury stocks are facing the craziest selling since 2011.

The long speech of the vice president of the United States is full of cold war thinking, which is even more shudder under the background of trade war.

In October 4th, it could also be seen as a turning point in the luxury market.

In the first two quarters of 2018, the luxury market remained quite positive with the growth momentum of 2017, especially the double-digit growth of the two brands of Gucci and LV, which made almost all luxury goods and most industry analysts ignore the huge risks before October.

But Burns's speech has made analysts aware that once the Sino US conflict intensifies, the Chinese economy, which is the engine of luxury growth and the highest consumer sentiment in the wake of the financial crisis, may soon lose its luxury consumption.

Later in late October and early November, the data released by the Swiss watch industry association and the Hongkong Statistical Office both confirmed the risk.

5, LVMH acknowledges the weakening demand of Chinese consumers for LV in the three quarter - October

If Burns's speech is an important turning point in the luxury industry, LVMH will lead the panic market to a new level in October 10th, after leading the three quarter of the year, leading to second plunge in luxury stocks.

In fact, LVMH's quarterly results were not bad, but the market's concern 200% was put on the statement of the group's chief financial officer, "Chinese consumers' weaker demand for LV in the three quarter".

Although he strongly explained that in 7-9 months, the sales growth of LV Chinese consumers dropped from nearly 20% to about 15%.

But investors simply ignore the fundamentals of double-digit growth, but are full of uncertainty about the slowdown.

After the first two weeks of October, most of the luxury stocks have cleared the growth rate at the beginning of the year and moved into a downward trend.

Although the Gucci group opened the cloud group to ease some of its anxiety after its expected three quarter results and share repurchase, so far in 2018, luxury industry stocks no longer had the biggest doubling of -2017 in the second half of the year.

6, Dolce & Gabbana China show aborted November

The Dolce & Gabbana incident and the subsequent Canada Goose postpone the Beijing shop opening event are two comparable events.

In a large number of interpretation, virtually all interpretations are totally different from two things.

The Dolce & Gabbana incident was a real start in the private sector and ended in official events. On the contrary, the collapse of the stock price of Canada Goose, triggered by the HUAWEI incident, and the delay in opening shops in Beijing were the victims of the official conflict. It was similar to the protest against the amore Pacific and Lotte caused by the sad anti missile system in 2017. In 2017, the fire department sealed off some Lotte Mart stores. In December 15, 2018, the new media "new China Jingwei" visited the canadian goose Beijing store. The cleaning staff of the next store said: "before hearing people say, it seems that the fire did not pass."

The main reason for the fermentation and deterioration of Dolce & Gabbana events is that the luxury brands are inclined to social media KOL in recent years. KOL, aiming at profitable traffic and fans effect, aims at vultures, and even creates "bloodshed".

Even Wang Lifen, a well-known host and countless friends of the most wealthy entrepreneurs, was self complacent at the beginning of the year when Mao Kankan committed suicide because of a 100 thousand + WeChat article.

But ironically, Dolce & Gabbana is the first luxury brand to use KOL power and even replace all KOL models.

It is the folk proverb that should be "mixed up, sooner or later".

The incident of Dolce & Gabbana KOL rises from culture and prejudice to racial discrimination, coupled with the growing inner fear of Chinese entertainment circles, and finally develops into a carnival farce.

All in all, Dolce & Gabbana is a devastating event in the fashion industry with the success of marketing only. All brands, models and artists fail.

7, Coach China's first show - December

15 years after entering China, Coach moved the show to China, behind most of its competitors.

With the intensification of Sino US trade war, the outbreak of the yellow vest campaign in France, the disagreement between the United Kingdom and Europe, the EU's rejection of the Italy Budget Act, and the absence of Germany in the European economy, the Coach Shanghai China show is neither creative nor innovative. It is only something that the entire luxury industry must do.

The art exhibition, including Gucci, is also a dull waxy wax.

Sima Zhao's heart is only hoping to take advantage of the weakness of the Chinese tourism channel and make the growth of China's local market make up for the loss.

It is not always good to do something, but not necessarily worse.

Younger consumers, and less loyal millennials, are the prevailing psychology and expectations of the luxury sector's massive marketing of the Chinese market.

8, Canada Goose shop postponed in Beijing - December

The arrest of HUAWEI chief financial officer in Canada made the relaxation of Sino US trade war again tense after the G20 summit in Buenos Aires. The major stock indexes in the world almost fell back to the level of G20 in the two weeks.

Canada Goose is obviously one of the lucky ones. Its good luck comes from the Chinese proverb "the gun shoots out the head bird".

If it is not the Canadian brand with the highest voice in Chinese social media, "good luck" is clearly not going to come to its head.

The conflict between China and Canada is obviously not as fierce as the Sino US conflict, and it needs to be counted as an economic account. China's attitude is undoubtedly and indeed strengthened.

Canada Goose Beijing shop has no timetable, and even the Tmall shop which has already opened is actually accompanied by great uncertainty in the progress of HUAWEI in both countries.

In contrast to the public sentiment in the Dolce & Gabbana incident, KOL is obviously more cautious about the Canada Goose incident.

It's the social media bloodthirsty rule: safe places are crowded and dangerous places are empty.

9, LVMH acquisition - December

In December 14th, LVMH announced a huge sum of $2 billion 600 million to buy the Belmond of the hotel tourism group, which undoubtedly added a layer of uncertainty to the traditional luxury industry.

Although Chinese consumers are still pursuing luxury products, the affluent group has begun to shift to more experienced consumption upgrading such as tourism, health and education. The National Bureau of statistics of China has proved the change of consumer spending from the data.

The global decline of high-heeled shoes in the past 5 years and the global strong performance of sports industry have proved the continuation of this trend.

Even in the 2017 year of the retaliatory rebounding of the luxury goods industry, the truly outstanding brands are few and far between, and a large number of medium-sized and second-line brands are still unable to recover in the 2011 round of industrial recession.

The social media attributes of the Selfies (self timer) brought by the liquor industry are more conspicuous than luxury products. Even in Shanzhai, China's wine brigade Selfies is more authentic than luxury Selfies.

10, Millennial Generation and younger generation - 1-12 months

By the end of 2018, China's cash and loan companies listed on US stocks had at least nearly double digits.

China's younger generation has no savings, high debts, no buying houses and no marriage.

A millennial generation using a cash loan platform to make ultrasonic knives may not be a common phenomenon, but in Chinese society, it is not a common phenomenon.

The millennial generation of the oldest is the most important force in the social economy in 2018.

The rise of the millennial generation advocated by the luxury industry in the past two years is very confusing. Just as trying to save the previous LOGO theory of recession, it is a sugar coated bullet for consumers, advocating that most consumers actually have no taste and economic ability at all.

During the 2011-2016 years of recession, luxury stores have conducted large-scale stores and adjustments after overdraft of China's sub cities. At this stage, the growth of the luxury industry is also based on the new and overdraft capacity of the younger generation of China.

After the beating of the Chinese incident at the beginning of the year, the brand of the parlour family, at the time of commenting on the sale of Balenciaga Triple S, which sells for 850 dollars, the chief executive Cedric Charbit claimed that at the party, the friends and the (millennial generation of consumers) father complained to him that he would not manufacture these shoes because they spent too much money on it.



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