Luxury Leaders Are Eyeing China After 00

Core reading guide:

1. China's luxury demand is growing steadily. Young people have become the absolute core.

2. centralization of traffic VS to focus on social networking platform, who represents the future of luxury online channels?

3. the beauty and luxury market is active, but should luxury brands prefer beauty?

This year's luxury market not only continues to grow, but also seems to be in the best possible year.

In the Bloomberg billionaire index as of July 18th, Bernard Arnault, chairman and chief executive of LVMH group, the world's largest luxury group and parent company of Louis Vuitton, has significantly increased its wealth by 39 billion US dollars this year, squeezing Bill Gate second in the net assets of $107 billion 600 million.

What's interesting is that this is the largest increase in the list of rich people so far, and is the only one in the luxury industry who ranks among TOP10.

This is mainly due to the brilliant performance of LVMH in the first quarter of fiscal year 2019. The LVMH group's sales grew by 16% to 12 billion 500 million euros during the period, reaching a five year high. In the past 2018 fiscal year, group sales rose 10% to 46 billion 800 million euros, and profits rose 21% over the same period, and the first breakthrough was 10 billion euros.

The contribution made by the Chinese market plays a decisive role. LVMH group said at the first quarter earnings conference that Chinese consumers have been offering double-digit sales growth for Louis Vuitton for many years.

Coincidentally, for the world's second largest luxury brand CHANEL, the Asia Pacific market, including China, has been upgraded to the largest market with strong demand. In 2018, CHANEL sales in the Asia Pacific region increased by 19.9% over the previous year, about two times the overall sales growth. In contrast, the European and American markets grew by 8% and 7% respectively during the period.

Strong demand in China's luxury market provides a basic support for the growth of leading brands. According to McKinsey's "China luxury report 2019" released by the third party advisory body, China contributed more than half of the global luxury market in the period ~2018 2012, and this proportion will continue to rise to 65% by 2025. It is no exaggeration to say that the Chinese get the luxury goods.

　 -1-Z generation rises, young consumers become luxury customers.

In terms of luxury consumption, the rise of China's younger generation is faster than most people think.

According to McKinsey data, the younger generation represented by the post-80s and post-90s accounted for 43% and 28% of the total number of luxury goods buyers, respectively, contributing 56% and 23% of the total consumption of luxury goods in China respectively. In terms of per capita spending, Post-80% luxury consumers spend 41 thousand yuan on luxury goods every year, and 25 thousand luxury goods consumers after 90. Visible purchasing power and predictable growth prospects of income give ample justification for luxury brands.

Bain global partners Bruno analysis, the global luxury market is entering healthy growth "new normal". In his view, the strong demand for luxury goods by Chinese consumers, the continuous rise of the electricity supplier channels, and the growing influence of the younger generation of consumer groups are the main factors contributing to this trend.

The rise of luxury consumption among young people appears to be comprehensive and thorough. In a recent industry report, Bain said that the global luxury market is expected to grow steadily in 2019. Bain did not forget to emphasize that under the new normal surface, China's Z generation will become one of the new features that may change or even subvert the luxury industry in the future.

The Z generation is a general term for a group of people, also known as the Internet generation and the Internet generation. It usually refers to the young group after 95 ~10, and mainly after 00. They grew up in the era of Internet in China. They are keen on expressing themselves in social media. They are generally more accepting of new things, showing a different consumption concept with mature European and American luxury goods markets.

With the influx of young generation represented by Z generation, the demand for diversified development of luxury brands has increased. According to a recent report released by Boston Consulting Group and Italy luxury industry association Altagamma, nearly 20% of luxury goods buyers claimed that they would choose customized services when purchasing luxury goods. The report also stressed that young people are more willing to wait for personalized customization services or pay higher fees.

Despite the appeal of famous brands, the younger generation is more challenging than ever before because of its unprecedented access to information and active internet channels.

Italy luxury brand Moncler (Union Klein) chairman and CEO Remo Ruffini has said that luxury circles attract more people's attention, more of them are young people. Remo Ruffini said that adaptability is crucial to the success of luxury brands in a rapidly changing fashion market environment.

　　 -2- online channel growth is considerable, but brand attitude is different.

The diversification needs of channels are most significant. Especially when the channel expansion of traditional luxury goods line is slowing down and even the shops are coming, luxury brands' demand for online channels is growing rapidly. Bain predicts that the market share of luxury online channels will rise significantly, from 10% of all luxuries now to 25% in 2025.

Some luxury brands have begun to try. In July 5th this year, the official flagship store of CHANEL beauty makeup officially entered Tmall, launching a pre-sale campaign for a full range of perfumery and beauty products. Up to now, the number of shop fans has risen to nearly 320 thousand. On the same day, Armani beauty makeup mall combined with WeChat small program launched a small brand cosmetic program supporting AR dynamic test makeup, which is also the first WeChat applet supporting AR effect.

In 2018, a series of luxury brands such as Valentino, Burberry and Bottega Veneta entered Tmall and opened their Tmall official flagship store. But GUCCI seems to want to maintain a wait-and-see attitude toward China's e-commerce platform. Up to now, GUCCI has not opened an official flagship store in Tmall, Jingdong and other e-commerce channels.

Marco Bizzarri, chief executive of GUCCI, said at a conference in Shanghai last year that everyone is eager to reach a large customer base on China's Internet platform. On the other hand, GUCCI must ensure that it is luxurious, luxurious and exquisite. One background of Bizzarri's remarks is that he is concerned about the spread of counterfeit goods on China's online channels.

However, as early as 2017, GUCCI opened an official online shopping mall on WeChat's small program to explore social centralization of cash flow and brand differentiated marketing. One is the centralization of traffic, the other is the centralization of social networks.

In contrast, the location of offline channels is much clearer. In the past, the direct channel of luxury line was centralization, and all the high-end shopping malls and shopping centers in the city were located. The best location was on the first floor, and the commercial real estate was often the absolute commercial center of the city. First, it was easy to create regional traffic positions, and it also screened the audiences through the commercial real estate and gathered the target groups.

But in addition to sales, it is also to meet the brand service appeal. Luxury goods themselves are narrower and more service experience. Even a new visitor who first visits, they can enjoy "one to one" personalized service through physical stores, which is extremely difficult to achieve online.

The transformation of luxury goods channels is not easy. The entire Chinese commodity circulation channel is fragmented. The premise of further opening up the luxury brand in China is that it will probably destroy the original circulation link, because most luxury goods are more dependent on top level agents. For luxury brands, this is obviously a very tricky business. But cosmetic products may be an exception.

　 Should -3- luxury favor beauty?

It is easy to see that cosmetic products are increasingly becoming new choices for brands such as Dior, CHANEL, YSL, GUCCI and Hermes. In fact, cosmetic products are also an important medium for luxury goods and young luxury enthusiasts.

In May this year, GUCCI North American official website launched three series and 58 Color Lipstick products, but at present there is no plan to sell in the Chinese market. GUCCI said that other cosmetic products such as eye and face could also be launched in the future.

Coincidentally, in March of this year, Hermes announced that it would launch the first beauty series in 2020. Axel Dumas, chief executive of Hermes, has told French media that in the long run, the three major cosmetic products will go hand in hand, which will greatly enrich Hermes's distribution channel. According to Axel Dumas, this is in line with the Hermes group's strategy of regionalization. The reason is that the European market has a preference for perfume, the American market has a preference for make-up, and the Asian market has a preference for skin care products.

CHANEL performance is more prominent. Its performance data show that in 2018, CHANEL sales rose 10.5% to $11 billion 100 million, and operating profit increased 8% to 3 billion US dollars over the same period last year. Among them, the cosmetics business accounted for 1/3 of CHANEL's total sales, and the sales of perfume and cosmetics products increased by 50%.

In fact, beauty products are also "stepping stones" to attract young luxury goods enthusiasts by brands.

According to the results of the "2019 high-end cosmetic consumer white paper" launched by the joint research and experience design department of Tencent Tencent Department of intelligent retail cooperation, nearly 1/3 of 14~55 year old female netizens are paying for high-end cosmetics. And from the perspective of user groups, the younger trend is obvious, and the proportion of students is 18%. Covering the crowd is also more extensive, all income groups have high-end high-end consumer behavior, and the monthly income of 8000 yuan and the following accounted for the highest.

According to Tmall's 2019 Yan value economic report, as of the end of 2018, Tmall cosmetic consumers had exceeded 300 million, of which 95 were more than 50 million consumers. Among them, the younger trend is more and more obvious. After 00, consumption is more high-end and covers more beauty makeup products.

However, despite the large scale of young luxury consumers, this group is relatively limited in their luxury consumption capacity because they are in or just completed the transition from student to workplace role. Even some young consumers mainly come from their parents.

Nevertheless, beauty and luxury goods still attract large user groups at its "entry-level" prices, and gradually become luxury brands. Coupled with China's increasingly mature e-commerce channel network, it also helps luxury goods enter the low line market that may not have entered before.

However, behind the booming consumer scene, more and more popular brands and KOL have joined the battle for beauty users. This makes beauty cosmetics inevitably go to the two way: one is mass luxury goods, the other is real luxury goods. For luxury brands, in the face of huge opportunities, how to continue the uniqueness of the brand is also facing unprecedented challenges. Author: Yang Yafei