04
Feb
2013

As the journey slows, more luxury ‘scenery’ appears

The announcement by Bernard Arnault last week that LV will slow down its global store expansion, should be no surprise to any of us, especially those based in China. The brand established its name here as ‘the’ luxury brand many years ago, and has lived off this ever since. But nothing lasts forever.

Unfortunately the market in China moves forward at a very high pace, new players come in and consumers become savvier. The result; a touch of ‘burn out’ amongst the pioneering consumers, and a view by many that LV has become a bit like a 7/11 on every street corner. Naturally it’s not the exactly the case, but wherever one turns in a big Chinese city, there is an LV advert, or a store.

My personal feeling is also that with consumers becoming more knowledgeable over the past few years, their wants and needs have changed, and LV didn’t adapt to this challenge quickly enough. The slow down of sales in 2012 naturally affected the sales of luxury product in China, and the profits of many brands. When profits ran at 20 to 30%, there was money to reinvest in new stores, but at 8 or 9% the lesser money is more wisely spent redeveloping existing stores where profits can be improved, and not waiting for a three year break even.

To make an analogy, from 2008 to 2011, the Chinese luxury consumer was in effect driving very fast down a highway, with a focus on the big brand names ahead of them. In 2012 they began to slow down, which in term allowed them to look around, and start to see other brands and other choices, and to focus less on those of the past. They started to notice and appreciate their choices.

Now that this journey has slowed, greater appreciation of the surroundings is acknowledged, and should the consumers begin to speed up again in future, I think we’ll find them being a great deal more observant and demanding.

Share

Top