Just opened, Gucci Roppongi in Tokyo is the first-ever Japanese flagship store designed by Alessandro Michele, the Italian fashion brand’s creative director.
Covering 228 sqm, the store is in Westwalk Roppongi, Minato-ku.
It features both women’s and men’s collections including ready-to-wear, footwear, handbags, luggage, accessories and jewellery.
There are also special items such as exotic clutches and rare Gucci handbags exclusive to the boutique.
Luxury goods and apparel giant Kering has reported a 10.5 per cent global rise in revenues in the latest quarter, with luxury sales up 11.3 per cent and sports and lifestyle brands up 9.3 per cent.
Most significantly, at a time its peers are battling falling sales in Hong Kong, Macau and some brands even in Mainland China, Kering seems to have experienced respectable results in those core markets.
Paris-based Kering’s brands range from luxury labels Gucci, Bottega Veneta and Yves Saint Laurent through to lifestyle brand Puma. The company says sales in directly operated luxury stores enjoyed double-digit growth across all geographic regions excluding Japan, with strong growth of 24 per cent in Asia-Pacific, a very steady 17 per cent increase in North America and an “extremely good performance” in Western Europe, which expanded by 12 per cent.
“In a complex environment, we stepped up the pace of revenue growth and continued to gain market share,” said Francois-Henri Pinault, chairman and CEO. “Thanks to the creativity of our brands and the outstanding customer experience they offer, we achieved double-digit increases across all geographic regions excluding Japan.
“We have laid the foundations for steady, sustainable growth, and are highly confident about the full year.”
Kering’s headline brand Gucci achieved a sales increase of 17 per cent, while Yves Saint Laurent sales soared 33.9 per cent, both gaining market share from rivals. Sales were up sharply across all product categories and regions, excluding Japan, where market conditions were lacklustre for the sector as a whole. Gucci sales in directly operated stores rose by 19 per cent. Sales from Gucci’s e-commerce website increased by more than 50 per cent during the quarter.
Overall, Kering’s luxury activities generated €2.115 billion in revenue during the period, the 11.3 per cent same-store growth its fastest quarterly figure in three years.
But at Bottega Veneta, third-quarter sales were again impacted by slower tourism, particularly in the mature markets of Western Europe and Japan. Revenue was down 10.9 per cent on a comparable basis.
Here, Hong Kong’s luxury retail decline impacted on the brand, the company said, without divulging figures: “While sales in directly operated stores were lower in the quarter, they delivered a slight improvement compared to the second-quarter trend thanks to resilient sales to local customers in Europe and growth across all main markets in Asia Pacific, with the exception of Hong Kong.”
Puma’s leap
Puma’s 10.8 per cent same-store sales leap was the result of the brand building on innovative products and renewed appeal, Kering said. Shoes performed particularly well, posting 17 per cent growth, fuelled by the success of new models such as Ignite, Fierce and Fenty. Revenue from apparel was up a solid 10 per cent.
“With the exception of Japan, Puma achieved double-digit growth across all geographic regions, enjoying strong performances in Europe and the Americas, and sustained expansion in Mainland China.”
Kering has an ensemble of luxury fashion, leather goods, jewellery and watch brands: Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, Balenciaga, Brioni, Christopher Kane, McQ, Stella McCartney, Tomas Maier, Boucheron, Dodo, Girard-Perregaux, Pomellato, Qeelin and Ulysse Nardin.
Kering also has the sports & lifestyle brands Puma, Volcom and Cobra. The group generated revenues of more than €11.5 billion in 2015 and had more than 38,000 employees at year end.
Parisian fashion house BA&SH has partnered with Hong Kong retail and brand management company ImagineX Group to strengthen its presence in Asia.
BA&SH has hopes of accelerating its expansion in Hong Kong, Macau, Singapore, Taiwan and China. The label opened its first Asian store at Hong Kong’s IFC Mall in September 2014 and with ImagineX now plans 30 more openings in the region, including a second Hong Kong outlet early next year.
“Hong Kong customers have taken to our style and our collections,” say designers Barbara Boccara and Sharon Krief. “We are very happy to share our vision of fashion and femininity.”
Associate general directors Dan Arrouas and Pierre-Arnaud Grenade say the new partnership marks an important and supplementary stage in the company’s development strategy following its establishment in the Middle East and the US.
They say the ImagineX Group’s expertise in fashion retail and marketing will help BA&SH expand rapidly and contribute to its globalisation.
ImagineX Group president Alice Wong says the label’s Parisian flair, combined with its unique positioning and price point, make it appealing to Asian customers.
Childhood friends, Boccara and Krief established BA&SH in 2003 to offer contemporary fashion in the affordable luxury sector. With 91 stores last year, the brand aims to reach 130 stores this year.
Founded in 1992, ImagineX Group introduced luxury brands such as Cartier, Gucci, Prada and Salvatore Ferragamo to China more than 20 years ago. It represents more than 18 international brands including DKNY, Marc Jacobs and Paul Smith. The portfolio also includes such lifestyle and beauty brands as Apivita, Aveda and Natura Bisse.
Paris-based affordable luxury fashion chain Sandro Asia, along with sister brand Maje and Claudie Pierlot, recorded 51 per cent year-on-year growth in Asia Pacific in the first six months of the year.
Sandro opened its largest Asia flagship store in the heart of Causeway Bay in August, and plans to double the size of its year-old store in Tsim Sha Tsui’s Harbour City.
This store quickly became the most lucrative of Sandro’s 410 retail outlets worldwide in terms of sales per square metre. In contrast, total tenant sales at Harbour City fell 14.7 per cent to HK$13.3 billion (US$1.7 billion) in the first half, according to financial filings by its parent company Wharf Holdings.
Sandro now has eight outlets in Hong Kong, and plans to add another two or three more by the end of next year.
Branding its products as “accessible luxuries”, Sandro’s CEO Jean-Philippe Hecquet says the segment became “very powerful” when people started to look inside their wallets.
Hecquet, who previously worked for luxury group LVMH, says upper-middle-class consumers still want to enjoy their life even with less money. “They still want to buy luxury products, for sure.”
Sandro’s launched in Hong Kong in 2012, and Hecquet admits it may have missed the “golden age” when mainland shoppers would queue up outside Chanel, Gucci and Louis Vuitton outlets. But he says that while business is slowing for the traditional luxury brands, “we still see very decent traffic”.
He believes the emerging young upper-middle class in Asia will be the future powerhouse for luxury goods, and the right time to expand is now. Hong Kong’s retail downturn has freed up more prime retail space and rents are going down. “We have been waiting for a long time to be able to open a flagship,” says Hecquet.
He says the average age of Sandro’s customers in Hong Kong is between 25 and 30 years, and mainland visitors contribute to a significant portion of sales.
Hong Kong may no longer be the darling of European luxury brands after the combined effect of a slower local economy and fewer mainland shoppers as a result of Beijing’s anti-corruption crack down, but the city is still magnet for less expensive luxury brands and mid-priced retailers.
Retail sales have seen an 18 month-long nosedive, with August figures (the latest available) down 10.5 per cent year on year to HK$33.9 billion.
The decline, largely due to a drop in the number of mainland Chinese tourists, has forced landlords to reduce retail rents to avoid vacancies.
“This has created a lot of opportunities for retail players to emerge and innovate,” Joanne Lee, associate director of research and advisory of Colliers International said.
Some less expensive luxury brands and mid-priced retailers still have confidence in the Hong Kong retail market, taking the opportunity to move in on prime locations as high end luxury brands close up shop, according to property consultants.
French brand Sandro is an example. It finds Hong Kong is still a highly lucrative market compared with the rest of the world – even in bad economic times.
In August the Paris-based fashion chain opened its largest Asia flagship store in the heart of Causeway Bay, considered one of the world’s most prime shopping districts. It also plans to double the size of its store in Tsim Sha Tsui’s Harbour City, one of the most prestigious malls for mainland visitors.
Branding its products as “accessible luxuries”, Sandro’s chief executive Jean-Philippe Hecquet said the segment became “very powerful” when people started to look inside their wallets.
The luxury retail industry veteran, who previously worked for world’s biggest luxury group LVMH for over a decade, said that upper-middle class consumers still want to enjoy their life even with less money. “They still want to buy luxury products for sure.”
Sandro, along with sister brand Maje and Claudie Pierlot, recorded a 51 per cent year on year growth in Asia Pacific in the first six months of the year.
Encouraged by the strong performance, Sandro opened three new stores in prime shopping districts in Hong Kong, and plans to add two or three more by the end of next year. It currently operates eight outlets in Hong Kong.
The Harbour City store, which opened a year ago, quickly become the most lucrative store among its 410 retail outlets worldwide in terms of sales per square metre.
In contrast, total tenant sales at Harbour City fell 14.7 per cent to HK$13.3 billion in the first half, according to financial filings by its parent company Wharf Holding.
“The economy is about cycles. Everything happen for a reason. You just need to hang in there,” Hecquet said.
Unlike traditional luxury brands such as Gucci, Louis Vuitton and Burberry, which had previously aggressively expanded in the city to cater for the huge influx of mainland shoppers, Sandro has only recently ramped up its pace in terms of adding stores. Its first store in Hong Kong was not opened until 2012.
Hecquet admits Sandro may have missed the “golden age” when rich mainland shoppers queued up outside Chanel, Gucci and Louis Vuitton outlets, snapping up expensive leather bags emblazoned with big logos.
“For [traditional luxury brands], the traffic is going down, but for us, we still see very decent traffic,” he said.
But he noted that the emerging young upper-middle class in Asia would be the future powerhouse for luxury goods, and the right time to expand is now. The current retail downturn in Hong Kong has also freed up more prime retail locations and rents were going down. “We have been waiting for a long time to be able to open a flagship,” he said.
Hecquet said the average age of its customers in Hong Kong was from 25 to 30 years old, and mainland visitors contributed to a significant portion of sales.
Property consultants said the impact of mainland tourists will continue to diminish as retailers focus their efforts on locals and millennial shoppers.
“[Retailers will be] very much focusing on the local spending power, instead of relying on tourists,” said Daniel Shih, director of research and advisory at Colliers International.
Multi-label Italian luxury fashion retailer Antonia has opened its first store in Asia, at The Parisian Macao in Macau.
Designed by architect Vincenzo de Cotiis, the 3000 sqm store features such brands as Gucci, Rick Owens, Sacai, Saint Laurent, Valentino and Versace.
The store is run in partnership with Modern Avenue, formerly the Canudilo Group. Ten other stores are planned for greater China.
International tourists, particularly from Asia, have been a major driver of strong revenue growth in Australian luxury retailing over the past five years.
The latest Luxury Retailing in Australia report from business data company IbisWorld predicts that across the sector, which covers the sales of such goods as Swiss watches and designer handbags and clothing, revenue will reach AU$1.8 billion next year, an 11 per cent annual growth rate. For the ensuing five years, growth is anticipated to continue at the rate of 8.2 per cent a year to reach more than $2.7 billion.
IbisWorld anticipates that about 30 per cent of industry revenue can be attributed to inbound tourists, especially from increasingly sophisticated markets in Asia.
Its reports says these tourists have traditionally been drawn to heritage luxury labels and flagship stores, mainly because of the perceived prestige of brands like Chanel, Gucci and Louis Vuitton across Asia, particularly China.
A gradual depreciation of the Australian dollar since mid-2013 has helped drive growth in inbound tourism, boosting demand for luxury goods.
Chinese actress/singer Chris Lee is Gucci Asia’s new ambassador for timepieces and jewellery.
The fashion giant says Lee was chosen for her personal style, which is in “absolute harmony” with Gucci creative director Alessandro Michele’s philosophy of self-expression.
“I have been captivated by Michele’s collections since he became creative director as they are original and joyful,” says Lee.
For her first official photoshoot, the celebrity wore items from Gucci’s fine timepieces and jewellery collections. For watches, she modelled the GG2570, named in homage to Michele’s lucky number (25) and Gucci’s hallmark decade, the ’70s. She also wore the G-Timeless automatic, which features decorative bees, a heart and stars on the dial.
For jewellery, Lee promoted pieces from the Icon Fine Jewellery Collection, including rings, bangles and a matching pendant chain necklace in 18-karat pink gold and white enamel. In an update, small flower and leaf motifs have been added to Icon’s engraved “G” motif.
Gucci says the campaign launches across Asia this month.
Luxury travel retailer DFS Group Cambodia has marked the opening of its first store, T Galleria by DFS, Angkor, with a gala event for more than 300 guests.
In the resort town and provincial capital of Siem Reap, near the ancient temple of Angkor Wat, T Galleria by DFS, Angkor is the largest duty-free luxury department store in Cambodia. It offers travelers an integrated retail, hospitality and leisure experience with 170 brands across 86,000 sqft (7989 sqm).
The opening celebration began with a ribbon-cutting ceremony, after which traditional Cambodian Apsara hostesses led guests through the two-storey store for traditional cultural performances and demonstrations by Cambodian craftsmen.
From DFS Group were chairman/CEO Philippe Schaus and co-founder Robert Miller, while special guests included Cambodia’s Senior Minister of Economy and Finance Aun Pornmoniroth and Minister of Tourism Thong Khon.
The store features a curated collection of Cambodian artisanal products designed and produced by more than 30 Cambodian artist workshops. At the event, Angkor Artwork, a Siem Reap design studio, demonstrated the art of lacquer work, while Golden Silk, one of the last fully integrated silk producers in the world, wove silk spun from Cambodian silk worms.
Traditional Khmer motifs and carvings feature throughout the store, including a nearly 20m art installation suspended above the vaulted atrium.
T Galleria by DFS Angkor also ranges more than 130 international brands including watches and jewellery from Bulgari, Cartier and Tiffany & Co and fashion from Bottega Veneta, Burberry, Fendi, Gucci and Saint Laurent. There are also more than 30 beauty and fragrance brands such as Cle de Peau Beaute, Dior, Estee Lauder and Giorgio Armani.
The gala event also marked the official opening of the onsite restaurant, the first Crystal Jade outlet in Cambodia, serving traditional Chinese cuisine in a setting overlooking the gardens and reflecting pools outside.
The event also provided a platform to officially announce the company’s sponsorship of several non-profit organisations focussed on helping underserved populations in Cambodia. Schaus presented a donation to Kuma Cambodia, which aims to reduce poverty through providing education, healthcare and nutrition to vulnerable youngsters, English and computer courses for teenagers, and workshops and guidance for parents and guardians.
Ten Changi Airport bookstore concessions are up for tender across four terminals.
Changi Airport Group (CAG) has issued documentation seeking bids to operate books/magazine/stationery concessions spread across terminals 1 to 4 at Singapore’s airport.
Three store premises are being made available for each of the T1 (departure/transit lounge East and West, and departure/check-in-hall East), T2 (departure/transit lounge North and South, and departure/check-in-hall South) and T3 (departure/transit lounge North and South, and departure/check-in-hall North). One T4 store will be made available in departure/transit lounge North.
CAG says the concession requires that companies have “a good track record” in the business of retailing books, magazines, newspapers, postcards, pens and stationery items.
The contract is for three years, with a two-year option to extend at the discretion of CAG.
Meanwhile, concept stores Avenue Kids and Pure Gold Jewellers have launched in T2 in the public areas. It is Avenue Kids’ second full-fledged airport store following the opening of its first outlet in the T2 transit area last month.
After Alibaba had its IACC membership suspended, founder Jack Ma has cancelled his keynote address to the counterfeit-fighting group’s conference.
Ma was to have been a drawcard speaker at this week’s two-day annual spring conference of the International AntiCounterfeiting Coalition (IACC) in Orlando, Florida, an event that attracts more than 500 leaders from business, law, security and government.
His move also follows Alibaba Group and the coalition creating the IACC MarketSafe Expansion Program last week. The original program was created by Alibaba and the IACC in 2013 in recognition of the counterfeiting problem being too pervasive and complex for any single company or industry to fight alone.
Alibaba last month became the world’s first eCommerce company to join the IACC, the largest non-profit organisation dedicated to combating product counterfeiting and piracy. At least three members of the Washington-based coalition, including board member Tiffany & Co, quit the group in protest and others threatened to leave after Alibaba was admitted as a member. The IACC suspended the new category in which Alibaba had been admitted, effectively terminating its membership.
Alibaba Group president Michael Evans has stepped in to speak at the conference instead. Alibaba international corporate communications head Jennifer Kuperman repeated that the company is “firmly committed to the protection of intellectual property rights and combating counterfeits”.
On the same day Ma cancelled his conference appearance, he had lunch with US President Barack Obama at the White House, telling reporters afterward that the meeting had been “very good”.
Among the brands that quit the IACC in protest was Michael Kors, which blasted the organisation for providing “cover to our most dangerous and damaging adversary”.
Michael Kors was followed out by Gucci.
Alibaba has meanwhile hired an army of employees to weed out fake brands from its website. It has also called for comprehensive changes at the IACC so it can counter trends and new technology in counterfeiting “instead of being held captive by some members’ interests”.
It’s already happened to middle-of-the-road stores across high streets and main streets. Now the world’s biggest luxury stores are starting to shutter outlets. The culprit is the Chinese consumer, who is starting to rein in spending at home and abroad. The effect will be no less severe: expect more closures to come.
Over the past decade, Chinese consumer demand and new store openings together turbo-charged luxury sales. New store space accounted for 55% of global luxury revenue growth over the past eight years, according to analysts at Mainfirst.
As for Chinese nationals, they powered about two-thirds of luxury market’s growth over the past decade, according to Exane BNP Paribas.
Now both of these forces are running out of steam. Given the slump in Hong Kong and the slowdown in China, stores there are the main focus of attention.
MIXED BAG
Gucci and Zegna were among luxury brands to cut their store footprint in the first quarter.
Hugo Boss has already announced plans to close 20 of the 131 stores it directly owns on the mainland. It’s reviewing as many as another 20 of its least-profitable 430 stores globally.
The company is in talks with its landlords, so not all of these outlets will close but it expects to announce a sizeable number of exits later this year.
Prada won’t say where its selective store cuts might fall, but as it expanded aggressively in Asia, it’s a good bet that some will be there.
And last week, Richemont, maker of Cartier jewelry and Jaeger-LeCoultre watches, said it was also reviewing its retail network in Hong Kong and Macau.This could include closures, moving to cheaper premises or lease renegotiations. Indeed, seeking rent reductions is an alternative to outright closure. Bloomberg Intelligence’s Patrick Wong ays rent reductions of as much as 50% says rent reductions of as much as 50% are possible in some locations in Hong Kong. But demand remains strong for space in premium malls, limiting the scope for discounts.
In mainland China, tenants have the most bargaining power in new malls, particularly in second-tier cities , hit by a slump in demand and plentiful new supply, Wong notes.
While the most attention might be on China, globally, brands are focusing on making their existing stores work harder. Rather than planning large scale openings, existing outlets are being refurbished.
The luxury groups are right to halt their dizzying expansion, and start to cut back. As they do, there could be opportunities for more niche upmarket brands to expand. Kering’s Saint Laurent, LVMH’s Givenchy Fendi and Celine, and Swatch’s Harry Winston could all open stores at more attractive rents.
Pandora, the affordable luxury chain, is one retailer that is still growing its store base, including in China. And here’s another trend that mirrors what is happening on high streets and main streets. As mid-market brands retrench, discount players move in. Pandora is hardly the same as Primark (its jewelry can cost 60 ($87) rather than 6 at its less upscale cousin). But the Danish jeweller offers cheaper, more accessible luxury.
That’s still a winning formula in China, whether it is LVMH’s cosmetics and fragrance brands -or Pandora’s charms.
Alibaba is tightening the rules for traders selling luxury goods on its popular online platform Taobao.
It’s one of several measures in the ramping up of the Alibaba fake fight, which is being conducted in conjunction with Washington, DC-based International AntiCounterfeiting Coalition (IACC).
From May 20, vendors selling luxury products on taobao will have to upload an invoice or authorisation letter from the luxury brands, for examination by Taobao, as proof it has the rights to sell the products. Otherwise the goods will be removed from the website and Alibaba says payments received for such goods can be frozen.
“To create a healthy shopping environment with a high level of integrity and to protect the legal interests of consumers and brand owners, Taobao is gearing up to regulate sales of luxury brands’ products,” the company said in a letter to traders on May 4.
The letter coincides with reports that Chinese government agencies plan to clean up the eCommerce market, targeting counterfeit goods and trademark violations. A campaign will run from May through November with stiff penalties for offenders caught.
Meanwhile, the IACC MarketSafe Program, an initiative started in 2013, is being opened up so that more brands and companies can participate. The MarketSafe program provides companies with an expedited process for working with Alibaba to target and take down online listings for counterfeit goods, reports Alibaba news site Alizila.
Set to debut later this year, the expanded MarketSafe program will be free of charge to IACC members and non-members, according to Alibaba and the IACC. In addition, brands will no longer be required to provide evidence to support intellectual-property infringement complaints. The changes “will enable a greater number and diversity of rights holders to benefit from a fair, simple, and effective IP enforcement platform,” Alibaba said in a statement.
Accused by some Western companies of not doing enough to keep listings for counterfeit products off its shopping websites, Alibaba has been trying to enlist greater industry support, arguing the problem is too pervasive and complex for any single company to fight on its own. The Chinese eCommerce giant has for several years been working with the IACC, which has members from a wide range of industries and includes brands such as Burberry, 21st Century Fox and Apple.
Alibaba last month became the first e-commerce company to join the IACC as an official member. Its admission to membership prompted the walkout of Michael Kors and Kering-owned Gucci.
IACC President Bob Barchiesi said the expansion of the MarketSafe program is the result of “significant contribution and commitment from both parties.”
“Collaboration across industries is key to addressing the issue of counterfeiting at a broader level, and this is one of the first steps towards the IACC’s goal of creating a holistic model for tackling online counterfeiting around the world,” Barchiesi said.
Since the MarketSafe program’s launch, nearly 5000 sellers’ storefronts have been closed and banned from Alibaba’s marketplaces, and more than 180,000 infringing product listings have been removed, even through a “limited number” of brands have been participating, according to Alibaba.
“This program exemplifies the tangible and mutual success that can be achieved when brands, trade associations, governments and intermediaries work together to combat counterfeiting,” said Matthew Bassiur, VP and head of global IP enforcement at Alibaba Group, in a statement.
“Alibaba and the IACC, together with the rest of industry, have a shared interest in building a safe and trusted internet environment and marketplace for consumers, rights holders, and sellers,” he added.
Gucci and its parent company apologized Friday after drawing heavy criticism for warning some Hong Kong shops not to sell paper offerings for the deceased that resembled the fashion brand’s luxury products.
The brand and its Paris-based owner, Kering, also said in a statement that they regretted any misunderstanding caused by the letters, which were sent to six shops last month.
After meeting with the shop owners, “Kering and Gucci would like to reiterate their utmost respect with regards to the funeral context,” the statement said.
In Hong Kong and some other parts of Asia, people burn paper offerings at funerals and during grave-sweeping festivals for deceased relatives to “use” in the afterlife.
Specialty shops near funeral parlors sell a diverse array of paper offerings, including bundles of “hell money,” mansions, iPhones, cars, cigarettes and designer handbags, cans of beer and soda, mahjong tables and dogs and cats.
The letters, which were sent as part of the companies’ global intellectual property protection efforts, did not suggest legal action or compensation because they did not believe the shop owners intended to infringe on the Gucci trademark, the statement said.
Gucci operates 11 boutiques in Hong Kong and is one of the brands most coveted by shoppers, including many visiting from mainland China, where luxury goods are more expensive because of higher taxes.
China and the Chinese played a primary role in the growth of the luxury sector in the past decade. But what was once a boon for luxury goods brands is now turning around.
Chinese consumers account for the largest portion (31 percent) of global luxury spending, up from only 1 percent in 2000, according to a study by consulting firm Bain & Company. And in the past decade, thanks to China and Chinese shoppers abroad, the luxury goods market worldwide grew by 72 percent in size.
(Statista)
“The relentless expansion of the domestic economy that fueled China’s voracious appetite for the finer things in life has slowed,” Exane BNP Paribas analyst Luca Solca.
“This only compounds the chilling effect that the government’s anti-corruption campaign has had on demand for luxury fashion and fine jewelry.”
Many luxury goods brands opened up store after store to tap the Chinese market. The experts are now debating whether they are too exposed to China.
In his analysis, Solca looked at whether each brand is over- or underexposed to the Chinese market based on the number of stores they have. Accordingly, Versace is the most over-exposed brand with 22 percent of its stores based in China. Moncler, Tod’s, and Dolce&Gabbana are among the overexposed brands as well.
The only large brands underexposed to China are Hermes, Tiffany, and Michael Kors. And these brands still have some retail expansion opportunity in China, according to Solca.
(Exane BNP Paribas analysis, RE-Analytics, Business of Fashion)
Sales of luxury products in the mainland have started to slow down after Chinese regime leader Xi Jinping launched his political anti-corruption campaign in 2013. Many of the Chinese officials and their numerous cronies and associates notorious for using luxury items for bribes stopped shopping for those items.
A slowdown in the Chinese economy since mid-2015 was the second blow for luxury brands. Some brands have already started closing stores in China.
“A corollary to the drop in domestic sales is a reduction of the store footprint by most brands, with a greater focus on fewer, larger, and better-located stores” Bain & Company stated in its report on China’s luxury market in 2015.
Louis Vuitton, which is the most valuable luxury brand in the world, closed six stores and opened two new stores in China in 2015. And the company recently announced the closure of two additional stores located in Shanghai and Shanxi.
Meanwhile, Gucci closed five stores in China, Burberry closed two stores, and Prada closed four stores in 2015, according to the Bain report. Due to collapsing demand in China, brands are expected to shut more stores across the country in coming months.
Adding to the industry’s woes, publicly traded luxury goods companies announced weaker than expected results in April 2016, caused by slowing Chinese tourism in Europe. Burberry Group Plc, Prada SpA,Kering SA, and LVMH Moet Hennessy Louis Vuitton SE all reported disappointing results following terror attacks in Europe.
According to Bruno Lannes, a Bain partner based in Shanghai, luxury brands should place greater emphasis on exclusive and fashionable collections, digital platform engagement and digital content, as well as pricing, in order to remain competitive in rough times.