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Market Research: Overlooking The Layout Of Luxury Brands In Chinese Market

2022/10/24 12:47:00 0

Luxury Goods

Fashion heat wave made by luxury goods swept through the past September.

On September 22, Valentino, an Italian luxury clothing brand, landed in Anaya on the gold coast of Qinhuangdao, China, in the autumn and winter of 2022. It was a "pink laboratory" exclusively owned by Valentino.

Less than a week ago, the French luxury brand Louis Vuitton's spring and summer 2023 men's fashion show also opened in Anaya. According to the public data of Louis Vuitton social media, the total number of live online watching of the fashion show exceeded 270 million, a record high.

In only half a month, two luxury shows were held in Anaya, a "fashion exclusive town" in the north. On the surface, it is the switch and transfer of new big brand shows. In fact, it is the movement track and radius of luxury brands in China are shifting. This is also the communication strategy for luxury brands to seek market increment. It is also self-evident that big brands are fighting for the Chinese market.

According to Savills' report, China is the market with the largest number of luxury brand stores in 2021, and nearly 55% of new luxury brand stores are located in China. As we all know, the concept of luxury brand is broad, and the differentiation of ladder level is obvious. Among them, the top luxury camp represented by Hermes, Chanel, Louis Vuitton, Gucci, Prada, Dior and so on, has a status that other luxury brands can not match.

The move of the head brand often means the wind direction, which has a decisive impact on the development of the industry pattern. This issue of lianshang.com focuses on the above six luxury brands to explore the current development situation of luxury giants in China, as well as the trend of luxury consumption and high-end business development in China.

  01、 Scale PK

According to the relevant data disclosed by major brands at present, from the perspective of store size (here refers to boutiques, excluding cosmetics independent stores), Gucci, an Italian luxury brand, has the largest number of stores in mainland China, reaching 87, followed by lv62 and Dior 60, which are in the top three of the store scale list. There are 42 Prada, 25 Hermes and 16 Chanel.

With the opening of Lv's third "Maison" concept boutique in mainland China in January in Yuanyang taiguli, Chengdu, the luxury brands began to fight in the Chinese market in the new year. By the first half of 2022, China has at least 59 luxury stores open. In August, heavy luxury brands ushered in new stores entering the market. A number of high luxury brands led by LV and Gucci appeared in Guiyang, lifting the luxury consumption market in Southwest China to a new height.

There is no doubt that luxury brands are speeding up their stores in China. Take Hermes as an example. In March, Hermes's first boutique in Henan and the third store in Central China of the brand settled in Zhengzhou Dennis David city. In the following four months, Hermes opened two new stores in succession. According to the latest news, the brand will open a new store in Shanghai by the end of this month. Hermes entered China in 1996 and has only opened 25 stores in 26 years. Now, the speed of opening stores is much faster than before.

In the future store opening plan, China is becoming a must and increase item for major luxury brands to lay out their global market, and the pace of opening stores is getting faster and faster. In the spring and summer 2022 Shanghai fashion show, LV announced that it would strive to open stores in every provincial capital of China by 2025.

In the middle of this year, Chanel also said that it plans to strengthen its exclusive strategy and open exclusive independent boutiques to serve customers. The plan will start in early 2023, with China's Asia as a pilot region.

Prada also recently announced that the number of global stores will double in the next three years, adding 80 stores a year. By the end of 2013, the number of global retail stores is expected to expand to 550. In this plan, the Asian market, especially the Chinese market, is in an important strategic position. About half of the 550 new stores will be in Asia and China.

  02、 Accelerating subsidence

According to Bain data, from 2015 to 2019, the global consumption scale of Chinese consumers' luxury goods shows an upward trend. In 2020, affected by the epidemic situation, it will decrease to about 59-63 billion euro. However, Bain predicts that the luxury consumption of Chinese consumers will recover soon, reaching 150-180 billion euro in 2025. It can be seen that China's luxury consumer market is still huge, and China is also becoming a global luxury market.

In terms of shop location, luxury goods are extremely strict with the location of stores. Brands often choose a city that is in line with their own brand positioning based on their own positioning, urban location, consumption level and other conditions.

As a matter of fact, luxury brands have always regarded the first tier cities in Beijing, Shanghai, Guangzhou and Shenzhen as the main areas for store expansion. This can be clearly seen from the representative shopping malls of major luxury goods in lianshang.com.

But China's market has already undergone earth shaking changes. Judging from the location of luxury stores in recent years, the sinking market seems to be included in the consideration of major luxury goods. Prada's store plans in China include discount stores, and the second and third tier markets are likely to be its expansion targets, which will be very attractive to second and third tier cities.

Savills pointed out in the related reading articles that the luxury market performance of China's second tier cities is better than that of first tier cities, and luxury brands are beginning to accelerate the sinking and market expansion speed. The opening of high-end shopping centers in second tier cities provides luxury consumption opportunities for the territorial market. In addition, the improvement of supply chain and relatively low rent are also important reasons for luxury brands to enter the sinking market.

Judging from the market performance after heavy luxury sinking this year, the brand is not wrong.

In March this year, Hermes Henan's first store opened in Dennis davidsong, a high-end shopping center in Zhengzhou. On that day, the stores were very popular. Many local users posted a record of the bustling scene on the opening day. There were long queues outside the store, and some customers even waited outside the store for as long as four hours. According to local media reports, Hermes dispatched 18 sales staff on the first day of its opening, but it was still unable to meet the reception demand. In the afternoon of that day, the products in the luggage area were almost out of stock, leaving only display goods; Photo frames, paper towns, ashtrays and other daily necessities were almost sold out.

In August, the first store of LV in Guizhou was unveiled in Lixing center of Guiyang. LV brand side, in order to show the importance of Guiyang market, not only the president of China attended the opening ceremony, but also officially opened the door to welcome guests even before the facade enclosure was removed. What did not disappoint all parties was that LV Lixing Center store won the first day sales ranking of new cities in China in terms of sales data.

  03、 Anchoring China

According to the latest global data report, the Asia Pacific luxury market will grow by 29.7% in 2021, up 10.8% compared with 2019. Among them, it is estimated that by 2025, Chinese consumers will contribute about 50% to the total global luxury consumption, which will become the key engine for the rebound growth of the global luxury industry.

However, judging from the financial data of major luxury brands in the first half of the year and the third quarter, the Asian market is still commendable, and the performance of big brands in the Chinese market is on the rise as a whole.

LVMH group achieved a sales revenue of 36.7 billion euro in the first half of 2022, a year-on-year increase of 28%, and a net profit of 6.532 billion euro, a year-on-year increase of 23%. Although China was restricted by the epidemic and its revenue rose by only 1%, the chief financial officer of LVMH said "there was no significant impact". Sure enough, by the third quarter, growth in the Asian market (including China) accelerated. According to the financial report, all departments of LVMH group achieved double-digit growth in the first three quarters of this year, while Dior may become a good performance brand of the group, and its ready-made clothes, leather goods, perfume and skin care products all perform well.

The parent company of Gucci, Kaiyun group, had a sales volume of 9.93 billion euro in the first half of the year, a year-on-year increase of 23%, and a 30% increase compared with the same period in 2019 before the epidemic. Among them, sales in the Asia Pacific region fell 8% in the first half of the year due to the impact of China's epidemic restriction measures in the second quarter. In addition, 30% of stores in mainland China were closed in April and may due to the outbreak. Jean Marc duplaix, chief financial officer, said of the Chinese market: "since June, the situation has gradually eased, but it is still unstable." And said the strong performance of global retail offset the impact of China's new crown epidemic control in the second quarter.

According to Prada's mid-term results for 2022, net income in the first half of the year was 1.9 billion euro, up 22.5% year-on-year; Net profit was 188 million euro, up 93.6% year on year; The gross profit rate also increased from 74.3% in 2021 to 77.7%. From the perspective of region, the Asia Pacific region is still the largest contributor to sales in the first half of 2022. However, the sales volume decreased slightly by 3.8% to 620 million euro, accounting for 33.1% from 43.6% in the same period last year.

Chanel's performance in the Asia Pacific market is also better than expected. According to its financial performance data in 2021, the sales volume of the brand in the Asia Pacific region exceeded 8 billion euro, which was 53.5% higher than that in 2020, accounting for 51.5% of the global sales of the brand.

On October 20, Hermes released financial data for the third quarter. The financial report showed that despite the poor global economic situation, the top luxury market did not receive obvious impact. Hermes's revenue in the third quarter still increased by 32.5% to 3.1 billion euro, 24% higher at the fixed exchange rate than analysts expected.

From the business point of view, Hermes achieved significant growth in all businesses in the third quarter, with platinum bag's leather and harness division revenue up 21% to 1.305 billion euros, mainly due to the strong rebound in Greater China and continued consumer demand.

  04、 Who can play best?

Under the collective rush for the beach, the "Involution" of luxury brands in the Chinese market is undoubtedly intensifying. In order to win over Chinese consumers, the major luxury brands set forth their creative ideas, demonstrated the pioneering spirit of active exploration, and further enhanced their brand value through innovative actions such as breaking the situation and crossing the border in different dimensions.

In September last year, prada food market x-net red market fair Wuzhong market Shanghai first exhibition was unveiled on Urumqi Road, Xuhui District, Shanghai. During the exhibition period, the strong contrast between the well grounded vegetable market and the tall luxury goods caused a lot of hot discussions and made a lot of attention. This cross-border activity also shows Prada's desire to quickly break into the young circle. In January this year, LV opened a limited time coffee shop, Valentino opened a limited time bookstore, and Burberry launched Thomas Burberry inspired flower coffee and other kinds of shops

At the beginning of 2021, prada specially customized a new retail plan for the Chinese market, including the development and implementation of a new creative retail mode in Shanghai. The group launched a series of time Limited stores and immersive retail spaces, bringing unique shopping experience to customers. This strategy now seems to be working very well. In the first half of 2022, Prada's retail channel performed well. Retail business became the main driving force for the group's growth, with sales of the channel up 26.4% year-on-year, and the revenue of Direct stores increased by 31%.

Dior also relies on its advantages in the field of fashion, Internet, big data and media to enter the field of fashion play. In April this year, Claude (Dalian) science and Technology Development Co., Ltd. joined hands with Dior to enter the field of fashion play. In May, Dior was set up to release Fanjing series, deep love series and chaoku series. It is reported that the main business system of Dior is the design, production and sales of toys and sports equipment, and the research and development of e-commerce SaaS system.

In addition, many first-line brands also follow the consumption trend and choose to enter the live broadcasting field. LV was the first to enter the studio. In March 2020, LV appeared on the live broadcast of xiaohongshu, becoming the first luxury brand to eat crabs. Since then, burberry and tmall each made a "shop search live broadcast"; The givench fashion line has also adopted the mode of shop exploration; Gucci also tweeted a 12 hour marathon fashion show.

Nowadays, more and more luxury brands focus on digital strategic layout, hoping to reach and attract more young consumers with the help of digital technology of new retail and omni channel interaction with customers.

The meta universe, which is gradually moving from the concept stage to the industrial exploration stage, is also attracting the attention of luxury goods giants. "We're going to use Web3.0 to meet new and old customers in the meta universe," said Gregory bout, chief customer and digital marketing officer of Kaiyun group and one of the 12 senior executives of Kaiyun's Executive Committee Through meta universe, "we can establish a new shared creative language among brands, players and customers.".

In September 2021, the brand of Kaiyun group, barishijia, cooperated with the game "Fortress night" to produce virtual clothing for several popular characters in the game. In contrast to the real world, players can wear the "authentic skin" of Balencia for only $8.

Gucci also launched virtual Gucci garden and Gucci town jointly with game platform roblox. A digital version of Gucci Dionysian bag, which was launched in the Gucci virtual flash store opened by roblox, has been fried up to $4100, more than the $3400 sold in real packages.

From physical products to virtual services, luxury brands face young people with all their strength, and broaden the brand marketing track to meet the preferences and pursuit of more young customers.

  05、 Growth rate of luxury retail property

Benefited from the substantial growth of luxury consumption in recent years, the performance of domestic high-end shopping malls has also risen. According to the monitoring statistics of Lianshang Retail Research Center, the total sales volume of Wang shopping mall of 52 retail business enterprises in China will exceed 300 billion in 2021, and the performance of 39 stores will increase year on year, 3 will decline and 4 will be basically flat. Among them, high-end shopping malls have achieved growth almost without exception.

The high-end commercial pyramid combination composed of Beijing SKP, Beijing International Trade mall and Nanjing Deji Plaza is still strong. Among them, SKP was nearly 24 billion, with a year-on-year increase of 35.59%; Nanjing Deji Plaza 20 + billion, with a year-on-year increase of 30%; Beijing International Trade mall was 20 billion yuan, an increase of 21.21%.

In terms of the performance growth of high-end shopping malls, IFC of Shanghai Guojin center has a high growth rate, reaching 68.18%. In 2021, it has set a sales record of nearly 18.5 billion. The growth rate of Shanghai Henglong Plaza also reached 55%, second only to IFC of Shanghai national financial center.

It is also seeing the great prospect of luxury consumption. The major high-end shopping malls have followed the trend and started to transform and upgrade in varying degrees, focusing on high-end retail and accelerating the expansion of luxury brands.

Taking Hangzhou building of Hangzhou dingshe department store as an example, the three-year adjustment and reform was started in October 2018. By introducing new brands and upgrading existing brands, the head brand matrix of the whole category has been continuously improved, and the luxury lineup of block B has been strengthened, so as to achieve a "higher level" of brand level. In this round of adjustment and reform, 54 brands have been upgraded, and the adjustment area exceeds 65% of the business area, and the intensity of adjustment and reform is unprecedented.

There are many reasons behind the explosion of luxury brands and high-end shopping malls. Some analysts believe that during the epidemic period, the wealth of the rich increased and the purchasing power of luxury goods increased due to the "water release" of central banks. At the same time, the rising prices of luxury goods also promoted the performance of all parties. Also affected by the epidemic, overseas consumption returned, making the domestic luxury market continue to be hot.

In China, the top developers and operators of the industry are the same for the luxury retail properties that are deeply bound up with a number of luxury brands. The domestic capital is mainly represented by China Resources and SKP, while the Hong Kong capital includes Hang Lung, Sun Hung Kai and jiulongcang. In addition to the national chain type large-scale layout, there are also regional players in high-end malls. They are famous all over the country or dominate one side, making high-end businesses flourish, such as Nanjing Deji Plaza, Hangzhou building, Zhengzhou Dennis David City, Qingdao Hisense Plaza, etc.

According to the Research Report of CITIC Securities, as an important channel of luxury goods, heavy luxury retail properties (shopping centers and independent department stores that can place high-value luxury boutiques, excluding duty-free stores, airport stores and outlets) have the basis for stable growth of total space. For brands, China is still one of the potential luxury consumer markets in the world. Now, there is still room for improvement in store coverage. The rise of consumption level in new first tier cities is also attracting new positions of luxury brands.

According to the industry forecast, the number of luxury offline stores in China will further increase, and there is room to further improve the total amount of luxury retail properties in China. In the next five years, the average annual opening growth rate of luxury shopping centers in China will be 3-5. However, some people believe that at a time when the epidemic situation is still unstable, the ability of high-end shopping centers to maintain stable growth has been weakened, and luxury brands, which had been expanding rapidly, will be more cautious about store opening plans.


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