Luxury Brands Actively Change Store Strategy In China

In the early 1990s, luxury buying fever was also seen in Japanese society.

According to Goldman's luxury global survey, in 1995, Japan ranked 68% of the world's luxury goods market with 49 million consumer groups (almost half of all the people in the world), and only more than 5000 of its LVMH stores were in Japan.

Before that, Europe promoted the luxury industry.

Today, the developed countries have gone through the frenzied pursuit of luxury. This is the stage that luxury goods go through in almost every market. Now it is China's turn.

In May 26th, L'OREAL, the world's largest cosmetics group, announced that it would lower the prices of most of its imports in the Chinese market, and said in its statement, "actively respond to national policies".

The previous day, the Ministry of finance has just announced the tax rate adjustment, since June 1st, reducing the import tariff rate of some consumer goods, the average decline of more than 50%.

This is related to the Chinese government's attitude towards luxury consumption.

An economics professor who specializes in financial and Economics Universities in China believes that from the perspective of Chinese government, with the growth of residents' income and the rapid expansion of the middle and high income groups, the demand for high-grade cosmetics is growing. The deeper meaning of policy adjustment lies in promoting positive changes and upgrading of national consumption, which has far-reaching significance for upgrading domestic industrial status, increasing employment, expanding domestic demand and ensuring growth.

China's economic growth is mainly driven by domestic demand, while the contribution rate of foreign domestic demand to economic growth is only 35%, compared with 68% in the United States in the same period.

The growth of China's domestic demand can not find new growth points, and the national demand for fashion and luxury goods is undoubtedly a new breakthrough.

In the short term, the loss is only part of the makeup of the customs tax revenue, but in the medium to long term, with the continuous increase of its imports, according to the "Lafite curve" principle, it will inevitably bring about such sustained growth of tariff revenue and economic and social benefits in all aspects.

Wang Jing believes that both the Chinese government and the brand want to spend their money in the local market. Overseas consumption is high. The government is also looking at it and wants to promote domestic sales. This is a big trend.

At present, cosmetics are a pilot project to reduce taxes, and will expand to other categories in the future.

A few years ago, ArmandoBranchini, Secretary General of the Italy Luxury Goods Association (Altagamma), suggested that the Chinese government cut tariffs to reduce the spread of luxury goods at home and abroad.

He believes that this will encourage European enterprises to invest in China, directly invest in production and open shop, provide jobs, publicize more, and contribute more to China's economy.

Although tariff reduction is a signal of promotion, its influence is very limited at present, at least not like many brands have shown, which is the direct cause of price reduction.

In fact, the price of imported cosmetics in the Chinese market includes 17% VAT, 5-6.5% import tariff and 30% consumption tax. Tariffs only account for a small proportion of the final sale price of luxury goods, and the seemingly large "reduction of more than 50%" is only 5% from 2% to 2%.

The consumption tax and VAT that affect the selling price have not changed for the time being.

In short, tariffs have little effect on prices, because the discount of tariff reduction is not so convincing.

"As soon as L'OREAL reduced the price, we became very anxious within us.

We have discussed this matter for several years. "

LVMH group's luxury makeup brand insiders told reporters.

In fact, whether they are listed or not, the budget of these 2015 companies has already been worked out well. Suddenly, the price adjustment will completely upset the budget. At the beginning of your home, you will tell investors how much money you expect to make, although it is only expected that investors will also be regarded as an informal commitment; if suddenly a sharp turn comes in the middle of the year, the financial results at the end of the year will be hard to predict.

"Tax reduction, exchange rate fluctuations..."

These events merely pressed the button for luxury goods to depreciate in China.

Luxury industry consulting expert Emmanuel Hemmerle said.

If not planned and prepared thoroughly, it would be impossible for us to decide and implement it in a matter of days.

The "BrandZ world's most valuable brands list" released in 2015 by Millward Brown, the global market consultancy, showed that the overall value of luxury brands decreased by 6% in 2015, while 2014 was a positive growth of 16%.

In addition to LV and Chanel, the valuation of other luxury goods declined significantly this year, while the total value of the ten luxury brands shrank by 7 billion 600 million dollars.

Among them, Prada declined the most and the brand value dropped by 35%.

For the luxury goods whose value is shrunk, the Chinese market is a key to saving the crisis.

"Some brands have been discounted for a long time in foreign countries, but they never discount in China.

The brand must now give the same treatment to the Chinese market. "

A luxury brand insider said.

fashion

In China, domestic prices are higher for a long time.

It has spawned huge purchasing groups and disrupted distribution channels. Chinese tourists have gone abroad to frantically sweep goods and sometimes are ugly. China's domestic consumption has been largely lost to foreign countries, and domestic investment attraction is limited.

In today's China, with the growth of national income, the proportion of luxury consumption in personal consumption is expanding rapidly. The original industry rules are becoming more and more deformed.

"On the face of it, the price reduction seems to be because it does not sell well in China, so it needs promotion.

But in the long run, in the past twenty years, the luxury brand just caught up with China's "show off" mentality, and made a lot of money here.

But that era is gone forever, and now it is just returning the overdraft money to make the industry return to normal.

A senior luxury industry practitioner told reporters.

Therefore, the team that appeared in front of China's major Gucci stores in May 27th should be the unique scene of this market pformation period.

When the price system of luxury goods in China is in line with that in foreign countries, the market will return to normal after the policy level is completely normalized to the attitude of luxury goods, the operation of luxury goods companies and the mentality of consumers.