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Jun
2015

Fashion & Accessories March 2013

Is 2013 an era of opportunities for niche luxury brands entering and expanding in China?

The first-quarter sales results for many big luxury brands were not promising. According to a Reuters report, fewer Chinese tourists are shopping in Europe, and of 23 brands in London, Paris, and Milan that they recently surveyed all reported diminished earnings from tourists, particularly Asian visitors. An appreciating Euro and increased general pricing of luxury goods in Europe, appears to have encouraged a significant number of middle class Chinese to visit Korea, Macao, Hong Kong, Taiwan and Singapore for luxury shopping.

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First quarter winners and losers

According to the British media reports, although there were fewer tourists and poor market conditions, Burberry achieved first quarter growth of 8% overall and a double digit increase in China, which has been attributed to its high priced product range’s such as Prorsum and Orchard, and the Blaze handbag collection, favored by many young consumers in China. The brand plans to open 25 more new direct and 10 franchise stores focusing on China and Latin America market in 2013, while closing poor distribution channels.

By contrast on April 15th LVMH announced that in the first quarter of 2013, the group achieved sales of 6. 95 Billion Euro’s, a 6% year on year increase, but far less than 25% of 2012. In particular, the important fashion and leather goods division only increased by 0.4% to 2.38 Billion Euro in Q1, the lowest increase since 2008 and far less than last year’s 17%. It’s worth noting that the Asian market, led by China has slowed down significantly, attributed to the side affects on sales exerted by the price increases in Europe.

Increased prices and changing attitudes

In 2012 the price of Louise Vuitton product in China was 50% higher than that in Europe, and many Chinese consumers shopped abroad especially in Europe for this reason. However, LVHM revealed recently that there is now only a 30% premium in China after price increases in Europe, which may have reduced European sales. Our research related to luxury consumption during CNY reported in the last issue of Luxury Insights China also supports this point. Of 33 consumers’ questions who bought luxury products during the holiday period, 80% purchased in Asia including Greater China, Singapore and Korea.

As Chinese luxury consumers are becoming more sophisticated and discerning, those who already have LV and Gucci handbags are looking for expensive niche brands rather than purchasing luxury labels consumed by a less sophisticated, more mass segment of Mainland shoppers placing a higher requirement on brand personality, experience and service in stores. To avoid over-exposure of the brand and rebuild their positioning, we have seen luxury groups led by Kering (PPR), LVMH and Richemont reduce store opening in second and third tier cities and focus on new consumer demand and store quality in first tier cities.

The door has opened for niche and low profile brands

This shift has created a huge opportunity for the brands with lower presence and exposure in China such as Hermes, Prada , Chanel, Balenciaga, Céline, aswell as the designer brands such as Alexander McQueen and Michael Kors that are building brand recognition among Chinese consumers.

The current realignment in the market represents a consumer engagement opportunity for those niche brands with and without a presence in China that previously would have been very difficult. The larger brands are consolidating, and reducing spending on promotion which opens a door for others to squeeze through. For these niche brands, it is crucial to build brand awareness and positioning in advance of their entry, or during the early years of their presence.

By their nature, niche brands may have maintained low-key positioning in international markets, but in China, singing your own praises is necessary to gain attention, even if that involves explaining why you are low-key and exclusive; play the role of educating consumers and leading market. As with advertising, many large brands are reducing their spend on large events, concentrating on smaller more personal activities. The same opportunity exists to run similar brand building, awareness and trust building events, for newer and less well-known brands. Consumers are ready for them, and are looking for new and original experiences. The door in more widely open now than over the past few years, we would encourage niche brands to step through.

Store opening and events

In the last two months, we have seen few major luxury brands opening new stores in China, instead, many less exposed brands are taking the opportunity to expand. Having stopped expansion, larger brands are focusing on enlarging and updating existing stores, and engaging with consumers with a series of marketing activities such as exhibitions. For the lesser-known brands, they are concentrating on fashion shows and customer events to impress and win those who have abandoned the bigger names.

Store openings

Early in February, Valentino men’s only store in Beijing’s Intime center came into operation, and on the 18th, the fifth Juicy Couture store in Shanghai opened in Raffle’s square. Collaborating with I. T, Dior opened a ‘Pop Up’ store in Beijing Sanlitun lasting one month starting from 23rd February. And at the end of February, Hermes refined and reopened its store in China World Shopping Mall in Beijing.

On 8th March, Givenchy opened a new store in the Tianjin Galaxy Mall covering 244 sqm in the same month, Marc By Marc Jacobs added a store in Shanghai’s Raffles Square as part of its expansion strategy. Salvatore Ferragamo held an opening reception of its shoemaking exhibition in Plaza 66 in Shenyang to celebrate its new store opening. Bottega Veneta updated and reopened its store in the Beijing Intime Center, and on 21st March, Coach also reopened its store in Nanjing Deji Plaza after refurbishment, holding its first men’s product exhibition in APAC at the same time. In late March, a new store for Sergio Rossi was opened in the Beijing China World Shopping Mall.

Badgley Mischka Haunt Couture opened in Beijing Shin Kong Place in April, and in the same month, Bottega Veneta announced their store reopening in Tianjin Hisense Plaza covering 386 sqm.

On 3rd April, Tod’s entered the Jinan market by opening a new store in Guihe Shopping Center a week later, they also celebrated another new store opening in Shenyang Plaza 66 with a grand reception. On the following day the Chloé flagship store opened in Shanghai’s Citic Square, which is also the first one in the APAC region. On 18th April, Dior opened a new boutique in L’Avenue, its third store in Shanghai, offering women’s and men’s wear, luxury jewellery and watches.

Events

In March, a series of fashion shows were executed in Chengdu Yanlord Landmark Square. 11 luxury brands include Kiton, Loewe, Ermenegildo Zegna and Gieves&Hawkes presented their new collection for spring and summer in 2013. Coach announced that it had donated US$326,000 to Half the Sky Foundation for the pre-school education project in the same month, which was also when Dunhill cooperated with Elle Men by holding an exclusive customer event in the Dunhill Maison of Shanghai with a famous movie star. At the end of March, the Dior Spring/Summer 2013 women’s fashion show was held on The Bund, which is their second show in China. In addition, the Dior Homme Autumn/Winter 2013 fashion show was presented in the Central Academy of Fine Art, which was the first one held in China on 25th April. From 31st March to 19th April, Louis Vuitton ‘Fantasy Zoo’ exhibition ran in Dalian for the first time in China, and Art of Travel Exhibit that will be displayed in several cities include Guangzhou, Wuxi and Shenyang from 17th March.


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