"China Economic Weekly" reporter Hou Jun丨 reported from Beijing.
Winter is hitting the entire luxury industry.
On December 11, the share price of Farfetch, the world's largest luxury e-commerce platform listed on the New York Stock Exchange, exceeded 40% and closed at 0$7304 shares, hit 0A record low of $7,196 was recorded, and the market capitalization shrank from a peak of $25 billion to 2$8.9 billion.
At the same time, a number of institutions expect the poor economic outlook to affect the consumption power of the masses, and a number of luxury groups have recently said that the situation will be more difficult than what will be seen in 2023.
After experiencing price increases in 2023, will the ** of luxury brands return rationally?The global luxury market is on track for record sales in 2023, but is it about to start to decline in 2024?
Although there are gimmicks for Christmas and New Year's Day, many stores have few customers.
This summer, customers lined up in front of luxury stores. Photo by China Economic Weekly reporter Hou Juni.
Luxury e-commerce Farfetch "technology story" has become a phantom.
At the end of 2023, the global luxury e-commerce leader Farfetch has become the focus of the entire luxury industry.
On November 28, the British "Daily Telegraph" reported that Jose Neves, the founder of Farfetch, is in discussions with shareholders such as Richemont Group and Alibaba Group, as well as investment institutions such as JPMorgan Chase. In response, Farfetch declined to comment on the news, but things fell like dominoes, and they were out of control.
The next day, Nov. 29, the company announced the postponement of its quarterly earnings and earnings releases. Farfetch announced that the company will not release financial data for the third quarter of 2023 as scheduled, and plans to release relevant information in due course.
Richemont, one of Farfetch's shareholders, immediately announced that it would not inject capital into Farfetch and was re-examining Farfetch's acquisition of Ynap, another luxury e-commerce company owned by Farfetch. and Alibaba President and Board Member JMichael Evans has resigned from Farfetch's Board of Directors, effective November 30.
According to foreign ** reports, the founder of Farfetch, Jose Neves, has been obsessed with programming since he was a child, and founded Farfetch in 2007, although it is a fashion company, Jose Neves often says to the outside world, "We are a technology company" "I am not the best in the world in terms of fashion, nor the best in the world in terms of technology." But the truth is that very few people can understand both worlds at the same time".
In Jose Neves' "Technology Story", Farfetch chooses a platform-light model to provide a "solution" for boutiques, boutiques and luxury brands around the world to solve the problems they encounter in e-commerce such as platforms, digital marketing, logistics and customer service, and take a percentage of the transaction value.
As a result, Farfetch soon became an industry star, and successively received investment from luxury groups, well-known investment groups, and even Chinese Internet giants such as Tencent, JD.com, Alibaba, etc.
However, the good times were short-lived, and after two years of glory, the Farfetch "Tech Story" became a phantom. As consumers fully return to rationality in 2023 and offline consumption gradually recovers, Farfetch has to face the embarrassment and loss of control after the dividend disappears.
Since Farfetch has been losing money since 2022, at the end of August 2023, the US investment research platform Seeking Alpha rated Farfetch as a "strong sell" or "sell".
The end of the high-growth phase of global luxury goods.
At present, Farfetch has fallen into the darkest moment, and Secoo, a Chinese luxury service platform previously known as the "first luxury e-commerce stock", has also received a delisting notice from the NASDAQ in the United States.
Not only is the "luxury + e-commerce" model difficult to get through, but offline physical stores are also facing the loss of customers.
A reporter from China Economic Weekly visited Beijing SKP and Guomao and found that although there are gimmicks for Christmas and New Year's Day, there are few customers in many stores, and there is no longer a grand occasion of queuing up to enter the store in summer. The shopping guides at the counter also said frankly that the intensity at the end of 2023 is not as strong as in previous years, and customer consumption is more rational.
Bruno P**lovsky, president of Chanel Fashion, admitted in an interview a few days ago that while top consumers are still buying, consumer visits to brand stores for first-time and occasional purchases are declining. "As the global economy slows down, it is normal for the luxury industry as a whole to slow down, and luxury goods cannot maintain double-digit growth forever, and Chanel is preparing for an even more difficult 2024. Bruno P**Lovsky said.
In late November 2023, Bain & Company, a global consulting firm, released the 2023 Global Luxury Industry Research Report (Autumn Edition). According to the study, the global luxury market sales (including luxury goods and luxury experiences) are expected to hit a new high of 15 trillion euros, but a broader slowdown in the luxury consumer market is foreseeable in 2024.
Previously, the industry believed that the biggest reason for the high growth of the luxury market was the significant price increase.
According to the data of the VIP Research Institute, in the past three years, the average price increase of the top luxury brand bags has exceeded 32%.
In September 2023, Chanel once again raised the prices of its products in markets such as China, Thailand, Japan and Australia, by between 6% and 8%, including the classic flap handbag and 255 handbags in the Chinese market** are all from 7490,000 yuan** to 8050,000 yuan, the Chinese market of CHANEL 19 handbags rose to 5050,000 yuan, breaking the 50,000 yuan mark.
LV made its third global price adjustment this year in November, with an overall range of about 3%.
Zhou Ting, president of the VIP Research Institute, told the reporter of China Economic Weekly that in recent years, consumption upgrading and other reasons have brought about the explosive growth of the luxury market, and price increases have become one of the most commonly used market strategies for luxury brands. It has become a trend for luxury brands to raise prices, and super brands compare with each other and use price increases to show brand status, while the following brands can only passively follow up, resulting in continuous price increases. "The more the price increases, the more you buy, which is the effect that the brand wants to see, and it is also the reason why the brand has increased its price uncontrollably. In addition, after the price increase, the top luxury brands are also pinning their hopes on the so-called high-net-worth individuals, tilting towards top customers who can afford the most high-end products. Zhou Ting said.
However, the luxury ** is already so high, who can support this market?
Judging from the performance of major luxury groups, in October 2023, the luxury group Kering announced its results for the third quarter ended September 30 this year, and the sales of Gucci, Kering's core brand, fell by 7% to 22200 million euros, down from 25 percent in the second quarter100 million euros. Sales at Yves Saint Laurent fell 12% to 76.8 billion euros.
On the evening of October 31, the Italian luxury group Prada announced its results for the nine months ended September 30, 2023, with sales of the Prada Group increasing by 16% year-on-year at constant exchange rates8% to 334.3 billion euros, retail sales increased by 10 percent in the third quarter4% to 11100 million euros, which did not meet market expectations.
In late November, British luxury goods group Burberry (Burberry) announced its 2024 first half financial year performance report ended September 30, showing that same-store sales growth in the second quarter was only 1%, Burberry said in the report that because the company's second-quarter performance barely increased, the 2024 fiscal year revenue target may not be achieved.
Perhaps, as netizens said, luxury goods have "betrayed" consumers' wallets, and when the rich people can't buy them, will their good days last long?
This article was published in China Economic Weekly Issue 24, 2023).