Author: Xiao Jun

As companies resume work, this long Spring Festival holiday is finally coming to an end.

Correspondingly, the impact of the epidemic on the industry has gradually begun to appear in various industries.

For the luxury giants in the earnings season, the current situation is not optimistic. Last year, due to the hazy performance of the unstable trade environment in the Asia-Pacific region, under the influence of this huge “black swan” in early 2020, not only did not abate, but it became more and more intense.

The stock price has plummeted and the giants have lowered their expectations

As early as late January, the capital market has already responded to the possible impact of the epidemic.

The share prices of a number of listed companies, including Kering Group (Kering) , Capri Holdings, LVMH, Burberry Group, have fallen sharply by more than 10 Points. Although it has rebounded from the lowest point, it has not yet fully recovered its lost ground.

At the same time, various luxury goods companies that are in the financial reporting season have also given their own judgments on the current situation.

Tapestry Inc., the parent company of brands such as Coach and Kate Spade, said that due to the impact of the epidemic, the overall revenue impact in the second half of the fiscal year is estimated to be about 200 million to 250 million US dollars. The stores are closed.

In the LVMH earnings call, the word “China” wasMentioned 18 times. LVMH Group CEO Bernard Arnault stated in the earnings call that “it is too early to predict the development of the virus” and therefore “cannot answer how much the outbreak has affected our performance.”

Bernard Arnault said: “If it disappears in two and a half months, it is not terrible, if it takes two years, it will be a completely different thing.”

In the recent third quarter financial conference call of Capri Holdings, the parent company of brands such as Michael Kors and Versace, in the third quarter of the fiscal year 2020, John Idol said that taking into account the impact on the Chinese market within the current visible range, the new The revenue forecast for one quarter is lowered by US $ 100 million. At the same time, the profit forecast for the fourth quarter of the fiscal year and the full year will be reduced accordingly. Due to the outbreak, 150 of Capri Holdings’ 225 stores in China have been closed.

Burberry, a British luxury brand, said that considering the current situation, 24 of its 64 stores in China have been closed, and the remaining stores have shortened their operating hours and have a significant decline in traffic. At the same time, Burberry’s revenue in Europe and other markets has also been affected by the decline in Chinese tourists. Considering the possibility of escalating travel restrictions in various countries in the next few weeks, this situation will probably intensify in the next few weeks.

However, there areA relatively optimistic voice appeared.

Kering Group Chairman and CEO François-Henri Pinault said in the new quarterly financial report on the 12th that the current situation does not affect Kering ’s fundamentals in the luxury industry. However, he also said in a conference call that it is difficult to estimate how much the outbreak will affect Kering ’s next fiscal quarter.

“I don’t want to make too many guesses, but based on past experience and my knowledge of the vitality and resilience of the Chinese people, I believe that once the emergency is over, business will soon return to normal. And We are already preparing for the next step. “

The latest quarterly data of Kering Group

The impact comes from many aspects

Although the inflection point has already appeared, the impact of the epidemic on the industry remains to be seen.

The impact of the current epidemic is, first of all, the stagnation of offline sales.

According to corporate announcements, most luxury goods stores have adopted the method of closing or shortening business hours in response to the requirements of epidemic prevention and control by management agencies and their shopping malls.

Even if it ’s not closed, for security reasonsAt present, there are very few consumers who have demand for luxury goods. “Vogue” mentioned in a recent report that the average daily passenger flow of a luxury brand’s Chinese flagship store in Beijing has gone from 600 to 800 people to enter the store and 90 to 120 people have made purchases, which has dropped to only 5 in a single day. Customers enter the store.

Affected are areas outside the Chinese market. For example, markets such as Europe were originally the main tourist destinations for Chinese tourists during the Spring Festival. Similarly, due to the sharp decline in the number of tourists, sales are bound to decline.

Also, investors are worried about whether the supply chain in China may be greatly affected, which will affect the brand’s shipping cycle.

Shipping data provider Alphaliner said that since January 20, docking of ships arriving or passing through China’s main ports has been reduced by 20%, and these measures aimed at controlling the spread of the new crown epidemic have already impacted the international supply chain. At the same time, travel recommendations issued by many countries have also put pressure on companies’ supply chain management in China.

In addition, industry-related exhibitions and new product releases have also been greatly affected.

The four major fashion weeks for autumn and winter 2020 should last from mid-February to early March. But from the current point of view, most Chinese buyers, fashion editors, and bloggers are expected to be absent from the four major fashion weeks, which will inevitably affect the promotion plans of fashion brands in the new quarter in China. Most of the domestic design brands that might have participated in Fashion Week will probably have to cancel their corresponding release plans.

In addition, according to the official Weibo of Shanghai Fashion Week, the Shanghai Fashion Week originally scheduled to open on March 26 has also been postponed on February 10. The current time and form of the postponement is uncertain. In October of last year’s 2020 Spring Summer Fashion Week, a total of 110 official schedule fashion works were released, and the MODE exhibition intention transaction value was over 100 million, driving 135 million surrounding consumers.

Industry sources also said that Burberry’s fall / winter 2020 men’s and women’s wear series that will be released in Shanghai on April 23 may also be suspended.

For brands, whether it ’s a new product launch or a sales channel going online, it may be a way. In this regard, the technology brand has set an example: on February 13, Xiaomi completed the release of the Xiaomi Mi 10 series mobile phone live broadcast online.

Considering that it has already become a popular live streaming e-commerce company in the Chinese market, moving the conference to online might be a way-but compared to the offline conference, the overall visual effect andThe involvement of celebrities and KOLs on all sides must inevitably be discounted.

At the same time, from the situation of the past few years, the development of luxury online business has not been smooth.

Of the local players, the original product positioning of luxury goods, light luxury e-commerce, and temple library have been transformed. has also sold its Toplife package to Farfetch, and Alibaba’s luxury e-commerce platform Luxury Although Pavilion has announced early that it has nearly 100,000 high-end members with annual consumption of more than one million, it is still rare to hear the news.

For brands, online sales in the Chinese market are more part of the brand ’s overall digital strategy, such as building its own mini-programs and advertising in the circle of friends, etc., are still in a state of caution. .

At the same time, some industry players have publicly stated that they are not optimistic about online channels. LVMH’s Bernard Arnault once said: “All e-commerce companies are losing money. According to this indicator, the larger the business scale, the greater the loss, and the Group’s own luxury e-commerce business 24S is no exception.” In his view In the short term, I am afraid that online business is difficult to bring real revenue to luxury brands.

This special market situation has driven a large number of businesses in the domestic market to transition online, but it remains unknown whether luxury brands will join this rank.

The Chinese market is still a top priority

Even under such an impact, it is difficult for luxury brands to let go of the Chinese market. After all, the wallets of Chinese consumers have been the key engine for the growth of most brands in recent years.

According to data from the consulting firm McKinsey, China is the world’s second-largest luxury market after the United States. At the same time, Chinese consumers have contributed approximately one-third of global sales both domestically and overseas. About 100 billion euros. From 2012 to 2018, the Chinese market contributed nearly half of the growth of the global luxury market, and by 2025 this proportion will further increase to 65%.

You can also see the importance of growth in emerging markets with China as the core from the financial reports of major brands.

Take Kering Group, which just announced its latest quarterly earnings report on February 12, as an example. In terms of retail, China ’s mainland has grown by more than 30%; Asia Pacific, including China, contributed 22% of Gucci ’s growth in 2019. , Contributing 13% to Saint Lauren. At the same time, Saint Lauren’s 2020 expansion plan also includes increasing the penetration rate in mainland China-but the current plan will also be greatly affected.

At the same time, Chinese consumers’ consumption of luxury goods is still slowly being released.

According to McKinsey research, from 2018 to 2025, the average annual compound growth rate of middle- and upper-income family groups in China will reach 28%, meaning that the population with disposable monthly household income in the range of 17,450 to 26,180 yuan will reach 3.5. The number of people with a monthly disposable income of more than 26,180 yuan will reach 65 million by 2025, which will be three times that of today.

China ’s consumer base is getting bigger and bigger, and their quality and style requirements will continue to rise. At this point in time, we will deeply cultivate this market and cultivate user brand preferences and consumption habits. For brands, it is a very valuable long-term investment, and it will also be a long and protracted battle.

Under such market expectations, compared to turning to other emerging markets in search of growth points, luxury brands will inevitably focus on how to solve the problems facing the current Chinese market.