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Jun
2015

Fashion & Accessories February 2013

Sales of men’s products are on the up

Bucking its poor sales results of the previous quarters, Burberry benefited from a rebound in the Chinese market, particularly in men’s clothing which was up 50% overall. No doubt in some degree this was due to new store openings, new designs, heavy promotion and of course Q4 being the peak sales period each year. Ferragamo and Zegna also performed well as a result of the rebound, in particular across tier two and three cities where men show an interest in fashion. According to Hong Kong based financial services consultancy CLSA, 55% of luxury consumers in China are male, compared to 40% on average elsewhere in the world. However, they are not as consistent in their buying habits under challenging economic conditions as woman.

 

Quality and not quantity

The expression ‘quality and not quantity’, has been muttered by many senior executives of luxury brands over the past few months, as many, probably hit by decreased growth numbers and a changing consumer attitude, realised that they could not continue to expand their footprint in China, and needed to enhance the stores they already have.

We saw some of these brands redevelop some of their existing flagship stores in tier one cities in 2012, making them new and more engaging for consumers with an acknowledged short attention span and limited brand loyalty. Many also need to go back to their core values, which have now become a driver from consumers looking for real value for money, and for whom, many brands are burnt out through over exposure.

The President of LVMH Bernard Arnault indicated recently that the group will slow the expansion of Louis Vuitton into second and third tier cities of China to avoid over exposure, will focus on developing its high-end product line to maintain the top brand image and update existing stores rather than opening new ones.

Gucci likewise plans to focus on relocating and updating some of existing stores in China. “It’s not store numbers, more
importantly it’s how you engage with your customers. Gucci will open more stores targeted at male customers and children” According to Patrizio di Marco, President and CEO of Gucci.

However, less well-established brands talk of continued expansion; handbag and leather goods brand Furla plans a strong expansion in China, Hong Kong and Macau, targeting the opening of more than 100 boutiques within the next four years, according to the media. The balance between a growing presence across the smaller cities in China and improving the brand experience in the big stores in the major cities will always be an issue. Consumers in Tier one cities now appreciate what good service is and expect it from luxury brands. In a country with a poor service culture, this soft touch point will be more influential in the long run than hard touch points like the store itself.

Our experience is that service in tier two or three cities can in some cases be better than that in the top cities, due to staff attitudes. For many consumers, it’s the product they currently focus on, but given how many Chinese now travel overseas and shop, it won’t take long before service is the key differentiator in any store in any city.

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Store openings

In the first month of 2013, Givenchy added another new store in the Reel department store in Shanghai. It is claimed that its men’s store on the second floor will be opened in April this year.

Bottega Veneta opened 2 new stores in Guiyang Lavant and Chongqing Starlight 68 Plaza respectively, and on 19th January, Michael Kors opened a store in Nanjing Deji Plaza.

In 22th January, the first concept and flagship store of Chloé opened in the Shanghai Citic Plaza, and two days later the first Vera Wang store in Asia opened in Shanghai Xintiandi introducing a new and untested approach of charging 3,000 RMB for a fitting session, and banning cameras from the store.

In February Dolce&Gabbana added its first store in Changchun.

Promotional activities

Traditionally, Chinese New Year is a time to buy gifts for friends and family, in addition to oneself. Via our own sources confirmed by media reports, this year discounted products were introduced earlier than before to attract consumers to spend. These products became available before Christmas and were offered between 30 to 50% off list price.

Discounting is applied by almost all the luxury brands with the exception of Hermes who maintain a no discount policy. In most cases, there is no in store promotion of the discount as it is expected that the customer will ask about it and will then be shown the products to which this applies. Our own mystery shopping over this period supports this activity, but we did also find that sales staff would mention the discounted product as a final resort to try and keep the consumer from leaving the store. In general, on arrival at the store, the staff will always mention or lead the consumer to the latest collection or products.

According to one report in a Guangzhou newspaper they interviewed luxury shoppers to ask about discounting, and this is an example of the response. Miss Lu claimed that some luxury brands in high-end department stores of Guangzhou such as TaikooHui and La Perle Plaza started to introduce discounts discretely at Christmas. She claimed that Coach offered 30% to 50% discount, Armani introduced 50% discounted shoes and Ferragamo shoes have a 30% discount. Longchamp also offered 50% discount on bags. 40% discount was given on shoes and bags in Bally. According to Miss Lu, “The discounted products will be placed at the corner of the store or on a special counter without any signage at the entrance. The salesmen wouldn’t mention discounts unless you ask them first.”

Our own research in January in a number of cities including, Shanghai, Nanjing and Chengdu verified the report and we also found that some collections that had never been discounted in the past were being reduced this year.


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