How Does The Luxury Brand Dig Deeper Into The Chinese Market?

After China experienced a low price exchange market, it is adjusting its own thinking.

In the first half of June, the US luxury brand Michael Kors announced its acquisition of Mike goldsmith (Hongkong) Limited for $500 million in cash, which is the exclusive licensor of Michael Kors in China and other parts of Asia.

In fact, this is not the only brand to recover the right to operate in Greater China recently. In the first half of this year, Vitoria's secret and TommyHilfiger made the same move.

Experienced "to China"

With the expectation of excessive consumption, to the "discount competition" and then to the right to recoup the management right now, more and more sober luxury brands began to think rationally, and how to dig the gold market in depth.

Michael Kors chief executive JohnD.Idol said that in the past few years, the Greater China market has been developing strongly. Now it is the ideal time for the company to integrate the region into its business and make full use of its huge growth potential.

Coincidentally, Yang Baoyan, President of COACH Greater China, remains optimistic about the long-term prospects of the Chinese market.

"The Chinese market will maintain a long-term growth driving force, originally planned to open 15 stores in China in fiscal year 2016, but we have already completed this amount."

However, the development of light luxury brands in the Chinese market is still facing many pressures. The cost pressure of rapid expansion, brand innovation and positioning breakthrough are all tested.

Discount channels shrink

A few days ago, COACH, Michael Kors and Kate Spade three big extravagant giants reported their earnings.

COACH released the first quarter fiscal year 2016 fiscal year report shows that the company's performance improved significantly, net sales of $1 billion 30 million (about 6 billion 540 million yuan), compared with the same period last year's 929 million U.S. dollars increased by 11%.

Another brand KateSpade also has a better turning point.

In the first quarter of April 2, 2016, KateSpade finally ended its losses, net profit of $11 million 600 thousand, and total revenue increased to $274 million, an increase of 7.5%.

Turning loss into profit, KateSpade

Strategic adjustment and the reduction of online discount play a key role.

The growth of adverse market layout benefits from the rise of the middle class in China.

Ma Yun, chairman of Alibaba's board of directors, has publicly stated that China will accumulate 500 million middle class in the next 10 to 20 years.

This group of users will increase the demand for high quality and less luxurious goods.

Since 2013, it is hard to see the luxury market selling hot scenes in China.

Light luxury brands attract more and more users' attention with their moderate pricing and fashionable design.

But then these light luxury brands found that Chinese consumers were more keen on buying from outlets at outlets overseas.

These discount stores are priced at only 10% to 30% of the retail price.

For example, because of the hot sales, COACH increased the number of discount stores significantly, from 76 in fiscal year 2003 to 193 in fiscal 2013.

However, these stores did not bring more profits to COACH.

In 2014, COACH suffered negative growth for the first time in the past ten years.

To this end, COACH had to announce the closure of 70 poorly performing stores in North America.

The light luxury brands that are becoming more and more familiar with the Chinese market now decide to cut off the vicious competition caused by price war.

The sales mode with discount appeal is changing to the direction of "concept store" sales.

COACH official data revealed that as of March 26, 2016, it had 161 stores in mainland China, including more than 40 modern luxury retail concept stores.

By the end of June 2016, COACH expects that the proportion of new retail outlets will increase to nearly 40%, and the proportion of outlets will also be reduced.

KateSpade has recently withdrawn from the popularity of the United States "family promotion", while reducing the discount of physical stores.

Light luxury brands no longer aim at sales or inventory pressure, but at low prices attract users to buy.

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Product differentiation strategy

In order to maintain competitiveness, COACH, Michael Kors and Kate Spade have made a lot of efforts in designing, trying to find a balance between parity and profit.

Over the past two years, small luxury models have always been popular in fashion magazines. On the domestic e-commerce platform, the three small luxury goods prices between 2000-4000 yuan also occupy the forefront of the category of luggage sales all the year round.

On the one hand, the small package has been popular with fashion designers.

On the other hand, the price of the small package is very close to the people, and the ordinary office workers buy it effortlessly.

More importantly, the brand has successfully opened the market of the three or four tier cities through entry-level products, and no longer rely solely on the first tier cities.

This trend will become the mainstream in the future.

Brands attract new customers through more entry-level products, and avoid off-season outdated discounts that damage brand image.

Kate Spade is also working hard to develop new product lines, including swimsuits, children's wear, and upcoming sports series and pajamas coming out in 2016.

MichaelKors has also extended its experience of successful promotion of social media in the US headquarters in China, and used digital marketing and bold innovation to capture the market of handbags accessories for young people in China.

"Light luxury relative luxury brand has relatively high cost performance, and is also very popular with consumers in the electronic business platform.

On the Tmall platform, the price of these brands is around 2000-4000 yuan, indicating that the degree of consumer recognition is relatively high.

"Tmall apparel channel related personnel told the twenty-first Century economic news reporter.

In his view, apart from its own design and price positioning, the key to light luxury brand lies in its ability to convey ideas and storytelling to consumers.

"In the past few years, consumers will still be very concerned about the price when buying, or even tend to choose the discount of outlets.

But now this state is changing, and the middle class group in China is expanding. In the case of price approaching, style and design become a more important choice.

In addition to traditional retail outlets, luxury brands are also getting more and more popular with e-commerce channels and social platforms, such as Tmall, micro-blog, WeChat and so on, and interact with consumers increasingly frequently.

Reducing a large number of blind promotions has become the first step in the recovery of light luxury brands.

However, in the eyes of the industry, these lightweight luxury brands still need to consider how to control the pace of expansion, renovation and upgrading of stores and product design innovation.

The consumer's attention is always changing. The Chinese market has great potential, but it is hot and cool. It is easy to be guided by fashion and trend, and with a large number of brands, it is necessary to keep the freshness and attractiveness for a long time.