LV Brand Began To Close Stores In China

Since the end of last year, LV And began to perform the closing of stores in China. Although LVMH Group announced that it would slow down its expansion in mainland China and Hong Kong and close unreasonable stores, nearly 20% of LV stores in China would be closed before the middle of this year. However, according to the analysis of insiders, the direct cause of LV's large-scale store closure in China is the continuous decline of its performance.

Evacuate the second and third tier cities

Since the end of last year, LV brand And began to close stores in China. According to the reporter's investigation, LV has successively closed 7 brand stores in Guangzhou, Harbin, Urumqi, Shanghai, Taiyuan, Tianjin and Suzhou in a year.

It is understood that last November, LV closed its store in Guangzhou Libai Plaza, which is the first store of LV in Guangzhou. After 12 years of operation, the store finally closed. So far, LV has only one flagship store in Taikoo Hui in Guangzhou. Not long before the store in Guangzhou Libai Plaza was closed, L

They also closed two stores in Harbin and Urumqi.

According to statistics, as of 2015, LV has nearly 50 stores in China, and there is only one store in Guangzhou and Shenzhen, except 7 stores in Beijing and 4 stores in Shanghai.

LV explained more about the closure of stores in China because of the expiration of the lease and the closure of poorly operated stores. However, in the opinion of the insiders, the reason why LV will quickly close its stores in China after 2015 is more to pay for its rapid expansion.

According to the latest financial report of LVMH, the Group announced that it would slow down its expansion in mainland China and Hong Kong and close unreasonable stores. Among them, China's LV stores were closed by nearly 20% before the middle of this year, and there may be only one LV store in other cities except Beijing, Shanghai and Hangzhou.

In this regard, people close to the LV brand said that the decision of LV to close 20% of its stores in China before the middle of 2016 had been made as early as last year, and the company planned to close one store in China every month on average. Last year, LV evaluated 8 stores in second tier cities in China. Emmanuel, a consulting firm In an interview, partner Hemmerle also said that 20% of LV stores in China would be closed before the middle of 2016. At this rate, on average, one store would be closed every month.

According to relevant data, LV's performance declined sharply in 2013, which also made the brand stop expanding in second and third tier cities in China, and launched the strategy of integrating stores in the Chinese market to replace the fast sinking channel opening strategy, which mainly includes closing stores in second and third tier cities in Hong Kong and mainland China, Expand the stores in the first tier cities or transfer the stores in the first tier cities to the core business district.

In this regard, Zhou Ting, president of the Wealth Quality Research Institute, believes that about three years ago, luxury goods The market development trend has shown a downward trend, in sharp contrast to the high-speed growth in 2010-2012. At that time, rapid expansion and increasing market share were the dominant strategies; Now, with the change of the overall environment, it is not surprising to readjust the strategy.

In fact, LV is not the only luxury magnate suffering setbacks. It is reported that Hugo Boss closed 7 stores in 2014; Ferragamo and Zegna closed 6; Burberry In 2015, 10 stores were closed, and about 5 stores were planned to be closed in fiscal 2016. Also facing the crisis is the American brand Coach. Previously, the company announced in a high profile that it planned to spend about 570 million dollars in the 2015-2017 fiscal year to relocate its stores.

　　 Performance is declining LV self rescue

According to the Annual Report on Chinese Luxury issued by Bain, a consulting company, the Chinese luxury market fell for the first time in eight years in 2014, down 1% from 2013, with sales falling to 115 billion yuan.

Since 2013, China's luxury market has gradually entered a downward phase. LV, as one of the first brands to enter the Chinese market, has also entered a period of weak performance in China with the overall environment of the Chinese luxury market.

Data shows that as of the end of June 2015, the first half of the fiscal year, the Asia Pacific region can be described as overcast and rainy. In the first half of the year, LVMH Group's revenue in this market (excluding Japan) showed an organic decline of 5%, with a decline of 6% and 5% respectively in the first quarter and the second quarter. The operating profit margin of the fashion and leather goods department plummeted by 160 basis points to 28% in the first half of 2015. Due to the continued weakness of the Chinese mainland market and the continued deterioration of the Hong Kong and Macao markets, the share of the Asia Pacific market (excluding Japan) dominated by the Greater China region in this sector further shrank to 29% from 31% in the same period last year and 30% in 2014. In the first half of the year, the fashion and leather goods department had a net increase of 16 new stores, far less than 56 in the second half of last year.

Last year's performance was a mess, and this year's performance is even worse. The latest performance report of LVMH Group shows that the overall sales revenue of the Group in the third quarter was 9138 million euros. Although the fashion and leather goods department dominated by the LV brand achieved a revenue of 3106 million euros, the actual revenue growth of the department in the first three quarters plummeted to 1% from 16% in the same period last year, the worst performance in eight years, resulting in the actual revenue growth of LVMH Group falling to 4% from 18% in the same period last year.

In addition to the continuous decline in performance, consumption outflow is also one of the reasons why luxury brands choose to close stores in China. The Nielsen China Outbound Travel Monitoring Report shows that nearly half of Chinese tourists will choose to buy luxury goods when traveling abroad.

It is worth mentioning that although domestic consumers are keen on overseas shopping, LV seems to be no longer on the consumer's purchase list. A recent annual survey shows that only 10.7% of the 1277 overseas tourists surveyed bought LV on their latest trip, down 15.5% from 2014. At the same time, among high-income tourists, the brand attraction of LV is declining more obviously. Only 12.9% of high-income people (with an annual family income of more than 350000 yuan) bought LV on their last trip, while this index reached 24.3% last year.

Need to be rearranged

According to Amazon's statistics, from January to September last year, the overseas orders of Chinese consumers in Amazon America increased nearly 10 times year on year. In the past two years, the phenomenon of consumption outflow has become prominent, and offline physical stores of luxury brands are also facing greater performance pressure.

It is undeniable that the poor sales of luxury brands in China today have put a lot of pressure on the stores opened in the past, and many stores have even become showrooms.

The Wealth Quality Research Institute pointed out in the research report on luxury distribution e-commerce channels that since last year, 95% of luxury brands will choose to close stores strategically. This behavior is proactive, which is the premise for brands to seek new distribution. In the future, O2O business will become the mainstream.

In this regard, Zhou Ting said that, as we all know, with the rising cost of manpower, rent and other costs, too many stores will undoubtedly occupy too much operating costs. With the arrival of store closing tide, international luxury brands will undoubtedly choose more suitable sales strategies. Now, the closing of LV stores is to reorganize the stores in China, and it can also be considered that the brand is repositioning the Chinese market. Although luxury goods in China have not done much in e-commerce channels, this is a trend that no brand can avoid.

A few days ago, it was reported that the LV e-commerce platform would be launched soon, but the specific time and mode of listing were not announced. The reporter interviewed the Shanghai headquarters of LVMH Group on the strategy of closing stores and e-commerce platform, but as of the press release, the LV Brand Public Relations Department had not given any reply.

Industry experts believe that the large-scale closure of LV stores is also to pay for the rapid expansion of previous brands in China, which is the usual means of increasing income and reducing expenditure for luxury goods, and may improve the financial statements in the short term. However, closing stores in second and third tier cities so quickly will cause long-term damage to the brand and local market consumption.

Zhou Ting said that this is the pain luxury goods must experience in China. Only by going through this stage and re arranging online and offline, can we meet the needs of domestic consumers. At the same time, Zhou Ting also predicted that LV would adjust commodity prices after the completion of the layout of stores in China. The price adjustment is aimed at the global market. Its purpose is to complete the global price integration. Only after the price integration can the e-commerce channel layout be carried out.