Global luxury consumption will be sluggish in 2023, and the Chinese market is no exception.
According to the insight report "China's Luxury Market in the New Normal" released by OC&C Strategy Consultants, the pace of China's economic recovery will stabilize from the third quarter of 2023. However, due to macro and micro factors such as the real estate crisis, geopolitical risks, income and employment, personal consumption remains cautious.
In the third quarter of 2023, global luxury consumption showed a weak trend, and the growth rate of China's luxury market also slowed, but the top luxury brands still have strong resilience, and more local brands are gradually standing out from the fierce competition. With the gradual recovery of physical stores, offline channel marketing will also become a competition arena for major luxury brands.
The top luxury is full of toughness
The insight report shows that due to the macroeconomic environment, the trend of consumption polarization is becoming more and more obvious, with the income and luxury spending power of high-net-worth individuals relatively stable, while the middle class and low-income groups are significantly affected. At the same time, the highly sought-after Gen Z (the generation born between 1995 and 2009) consumers has seen their overall luxury purchase intentions decline due to declining income levels.
At the same time, with the resumption of overseas tourism, some Chinese luxury consumption has begun to flow back to overseas markets.
However, under the current economic situation, top luxury brands still show relatively strong resilience thanks to their own brand loyalty and the anti-risk ability of high-end customer groups.
The report pointed out that although the performance of global luxury giants such as LVMH and Hermes fell short of expectations in the first three quarters of last year, they still maintained double-digit growth. In the first three quarters of 2023, the French luxury group LVMH achieved revenue of 6220.5 billion euros, or about 481.6 billion yuan, a year-on-year increase of 102%。In the first three quarters of 2023, the Hermès Group's consolidated revenue reached 1006.3 billion euros, or about 768 yuan0.6 billion yuan, an increase of 22% year-on-year at constant exchange rates, Axel Dumas, executive chairman of Hermès, said for the third quarter of 2023 that the solid performance in the third quarter reflects the global popularity of Hermès' product range, which still maintains a continuous growth momentum in Asia and the Americas. "In an uncertain global environment, we are strengthening our investments and teams to support growth more than ever. ”
It is worth noting that in the case of performance that is not as expected, the top luxury brands are still increasing prices. At the beginning of 2024, luxury brands have set off a new round of "price increases", and on January 1, Hermes completed the increase of the full product line, of which the mini kelly generation** 10,000 yuan to 56,500 yuan, an increase of 215%, birkin30 handbags rose from 92,750 yuan to 105,000 yuan, breaking through the 100,000 yuan mark.
Wang Chong, partner of OC&C Greater China, analyzed to the ** Times reporter that the core consumer group of the top luxury brand is mainly high-net-worth individuals, and even in the current downturn in the economic situation, its ability to resist risks is still strong, so the overall consumption still shows strong resilience.
Therefore, in addition to rising costs and limited production capacity, top luxury brands hope to more effectively stratify consumers through price increase strategies, accurately identify and anchor high-net-worth groups, so as to promote revenue and profit growth, and maintain the long-term brand value of high-end luxury goods. Wang Chong pointed out.
Light luxury sinks, and local brands emerge
Affordable luxury brands struggled even more last year. According to the report for the second quarter of fiscal 2024 released by Capri Group, the parent company of the affordable luxury brand Michael Kors, sales revenue increased by **8 year-on-year6% to 12US$900 million, net profit **60% to US$90 million, including sales of 8% from core brand Michael Kors**6% to 8$7.9 billion.
Coach's parent company, Tapestry Group, performed slightly better, with the latest report for the first quarter of fiscal 2024 (the first three quarters of 2023) showing a flat year-on-year sales of 15$100 million; Net profit was 1$9.5 billion, of which Coach brand sales increased 3% year-over-year to 11$5.7 billion. However, Tapestry's sales in Greater China grew by only 9 percent.
At present, luxury brands are in the global market with a trend of ebbing, and in this case, some luxury brands choose to start the road to the sinking market to seek survival space, such as Coach will enter China from 2022.
Third- and fourth-tier markets.
Wang Chong believes that as the first-tier markets approach saturation and the consumption power and retail formats of lower-tier cities gradually mature, lower-tier cities are becoming a new growth engine for China's luxury market.
At the same time, in August 2023, Tapestry Group, the parent company of Coach and Kate Spade, announced the acquisition of Capri Group, the parent company of Michael Kors, for $8.5 billion, aiming to jointly meet the challenges of new consumer trends and jointly maintain competitiveness, which also became the largest transaction in the fashion industry in 2023.
In 2023, many local Chinese brands will gradually emerge with the improvement of positioning and design, and move towards a higher-end market segment.
According to the insight report, in 2023, among the top 25 footwear and apparel brands, the proportion of local brands will increase from 58% in 2019 to 62% in 2021, an increase of nearly 4 percentage points.
In addition, with the prevalence of national fashion in recent years, Hanfu and new Chinese style have gradually become synonymous with fashion, and major brands have also continued to dig deeper into traditional culture. **Data shows that from 2020 to 2022, the sales of intangible cultural heritage-related goods on the Tao platform nearly doubled.
Optimize the layout of offline stores or become a key focus for luxury brands
Against the backdrop of a slowing economy and consumption, it has become critical for luxury brands to actively explore new growth**.
For example, the top luxury brand will further focus on high-net-worth individuals in 2023, and promote both revenue and profit growth by improving**; Some mid-to-high-end brands targeting the middle class are helping to find an adaptable and sustainable growth path against the trend by launching more cost-effective product lines or lower-priced categories. At the same time, even in the face of adversity, companies should continue to invest in brand building to increase consumer engagement and address longer-term growth through deeper consumer engagement and rich experiential elements. Wang Chong said.
From the perspective of brands, Wang Chong believes that luxury brands need to start from their own core consumer groups, explore growth points in an all-round way from brand positioning, product design, channel layout, communication methods, etc., and find a path of adaptability and sustainable development in the face of the trend. For the Chinese market, brands can enhance compatibility with Chinese culture in product design, marketing strategies and consumer experience to better cater to the aesthetics and values of local consumers.
In addition, brands need to be agile and adapt to the changing channel landscape, and actively explore new channel opportunities, such as high-growth Douyin or outlet channels. Wang Chong further analyzed.
With the gradual recovery of physical customer flow, how to continuously optimize the layout of offline stores will also become the focus of major brands, Wang Chong pointed out that brands may be able to optimize offline stores from three aspects.
First, in addition to shopping, consumers are increasingly looking forward to interactive and diversified experiences with brands after the pandemic, so brands should actively create offline spaces to enhance consumer engagement through deeper consumer interaction and rich experience elements.
Second, in the context of increasingly abundant store formats, brands also need to clarify the positioning of each store and plan and manage it by category to create a store matrix that is in line with the brand strategy.
Third, brands need to be agile in responding to the changing channel landscape and actively explore new channel opportunities, such as high-growth outlet discount channels.
Wang Chong said that under the current economic environment and the uncertainty of consumption recovery, luxury companies need to consider six key dimensions if they want to continue to grow steadily, including exploring the pillars of business growth, resonating with consumers, integrating local culture, optimizing sales channels, maintaining the agility of the ** chain, and reasonably cooperating with local partners. 
Editor-in-charge: Zhang Qianyao Proofreader: Wang ChaoquanThese, users are watchingFosun, continue to sell, sell, sell!
This bank suddenly withdrew its A-share IPO!
Never profitable"? Evergrande responded late at night!
It's set! The first A-share delisted stock in 2024.
The epitome of Zhejiang businessmen in "Flowers": In the 90s, the old clothing company really asked Fei Xiang to endorse it.
Good start! Listed companies frequently sign large orders at the beginning of the year [Actual Investigation] The Yellow River Road under "Flowers" has been promoted to the top, and the "Zhizhen Garden" in reality is crowded.
On the same day, the two companies withdrew their IPOs!
The opening fell by more than 36%! JD.com's Dada Group insiders are suspected of fraud? Company: Reported!
Evergrande suddenly! Liu Yongzhuo was detained, and Evergrande Automobile dived in a straight line
Welcome to scan the code**e company app
First-hand informationFrontline interactionsOne-click publishingSettled in the capital circleA little little hands, a new experience! ▲