“Has Luxury Peaked In The Mainland?” (South China Morning Post)
As China’s slowing luxury sector continues to dominate the industry news cycle, the list of possible causes continues to grow, extending beyond the macroeconomic picture and the government's anti-extravagance campaign. Chinese luxury shoppers tend to be younger than their counterparts in the West and willing to spend more of their disposable income on luxury goods, but, as a result, they are also maturing quickly and increasingly shifting away from big brands, logos and other obvious symbols of spending. Additionally, luxury brands operating in China are coming under increased pressure from local competitors, “accessible” luxury brands and overseas sales to Chinese tourists.
Neiman Marcus is having difficulties committing to a China strategy. Less than a year ago, the retailer invested $28 million to increase its stake in Glamour Sales, a local luxury e-tailer that has powered its China website since December, to 44 percent. Then, last week, the retailer abruptly revised its operating manual, closing a local distribution centre in favour of US-based fulfilment. In total, China-based staff will be downsized by half and the remaining team will focus on customer care and local marketing. For Chinese consumers, slower deliveries may be offset by wider product assortment from leading American labels. There is widespread speculation that Neiman is aiming to circumvent Chinese bureaucratic red tape, but details remain few. A simpler explanation could be that growth of overhead costs simply outpaced the website’s local traction.
Of late, industry watchers have been making liberal use of the terms “logo-fatigue” and “niche brands” — the first in the context of why the Chinese luxury sector has slowed and the second to suggest who may benefit at the cost of established, 'big luxury' brands. China growth of Louis Vuitton, long considered the archetype of logo-driven luxury, has nearly ground to a halt. As a result, the LVMH-owned brand has limited retail expansion in the region and is aggressively introducing more subtly branded designs, including logo-free “China exclusive” versions of its Alma handbag. At Kering (formerly PPR), the rapid growth of stealth luxury brand Bottega Veneta is compensating for slumping sales of overexposed Gucci. But LVMH may hold a wildcard with Céline, which continues to gain favour among Chinese women whose tastes are fast maturing.
“Armani Sees No Slowdown, Even In China” (Reuters)
The Italian fashion group’s total turnover for 2012 rose to 7.4 billion euros, fuelled by exceptionally strong demand in China. While sales rose above 10 percent in all markets, China posted a 39 percent gain. In the past year, Armani has expanded heavily in the country, with the launch of a local e-commerce platform and stores in tier 2 through 4 markets. An additional 80 to 100 Mainland China stores are projected over the next three years. Unlike European peers who have expanded their brand portfolios through acquisitions, the company shows little interest in non-Armani brands. Rather, Mr Armani is content to concentrate on his namesake empire, crediting his China success to his brand’s “non-ostentatious elegance.”
Strong demand from China and Hong Kong drove above-expectations profitability for Burberry Group Plc. Last week, the company reported pre-tax profit of 427.8 million pounds ($652.9 million) in the year ended 31 March. In China, where the brand is represented across 35 cities, revenue grew 20 percent and contributed 14 percent of the company’s non-licensed total. Going forward, the emphasis will shift to clustering retail in key cities, continuing to drive digital fronts and further engaging travelling Chinese consumers through initiatives like Mandarin-speaking staff.