Thanks to the recovery of the North American and European markets, as well as the stable Asia-Pacific market, the three luxury goods groups Hermes, LVMH and Kering performed well in the first quarter of this year.
In the first quarter as of the end of March, Hermes' revenue rose 33% year-on-year to 2.765 billion euros, LVMH group sales increased by 23% year-on-year, and Kering Group's sales reached 4.96 billion euros, a year-on-year increase of 21%.
However, under the bright growth, concerns are obvious. First, the impact of the epidemic on the Chinese market has become the focus.
Recently, Italian luxury goods group Salvatore Ferragamo announced the performance data of the first quarter. In the first quarter as of the end of March, its sales rose 21% year-on-year to 289 million euros, higher than analysts' average expectations. Among them, sales in the European market increased by 45% year-on-year, and sales in the North American market increased by 39.8% year-on-year. Due to the rebound of the new crown epidemic, especially the impact of the new wave of epidemic prevention measures in China, sales in the Asia-Pacific region decreased by 2% year-on-year at constant exchange rates. In 2021, sales in the Chinese market accounted for 30% of Ferragamo's total sales.
According to estimates by Barclays Bank, 50% of luxury stores in major luxury consumer cities in China are currently closed or have reduced customer traffic, which will affect the performance of the major markets in the luxury industry in the second quarter of this year. Analysts predict that Ferragamo's sales in the Chinese market may drop by 30% to 50% in the first and second quarters.
Duplaix, the chief financial officer of Kering Group, also said recently that nearly one-third of the group's store network is currently located in cities affected by epidemic restrictions. However, so far, major brands believe that the new crown epidemic in China is temporary, and China is still a very reliable and important market.
According to "Fashion Business Daily" citing sources, with the improvement of the epidemic situation, many express delivery companies in Shanghai have resumed operation. The Shanghai warehouses of Louis Vuitton and Dior have resumed work in early May. The goods that had been stopped due to the epidemic situation began to be distributed in recent days. However, closed-loop management is still implemented, and the logistics time of goods will be longer than in the past. In the first-quarter earnings report of this year, LVMH said that in view of the continued impact of the epidemic and other factors, the group remained "vigilant and confident" in the future.
"Fashion Business Daily" reported that when luxury brands are facing three major challenges, in addition to the increased uncertainty of the epidemic, changes in consumer demand and extreme brand marketing may threaten luxury sales.
After experiencing various inconveniences caused by the epidemic, people now tend to spend more of their disposable income on experiential consumption, which may have an impact on some luxury brands. Previous travel restrictions have significantly boosted luxury consumption. In the first quarter of this year, Ticketmaster live concert ticket sales were up 45% from 2019, according to Live Nation. The Transportation Security Administration said U.S. air travel is now almost back to pre-pandemic levels.
The way people buy luxury goods is also changing. Consumers are increasingly hungry for new things, but today’s over-marketing by brands has a side effect, making luxury more “ubiquitous” than ever. This is particularly detrimental to exclusivity-based luxury consumption, which can cause user fatigue.
For example, while the average consumer may not be able to afford a $10,000 Chanel jacket, she can now easily use an image of that jacket as a screen saver for her phone, and the jacket doesn't feel so special. Ana Andjelic, author of "The Business of Aspiration," believes that could even reduce consumers' desire to buy the brand's lower-priced line.
W. David Marx believes that "luxury goods are necessarily status symbols, and status symbols only work when there is a clear connection with the elite group," W. David Marx's new book "Identity and Culture" will be published soon. He believes that when brand marketing becomes too common, consumers of luxury goods will have doubts, "whether their buying behavior has flowed to the masses"
There are also people who disagree. Some experts believe the market is fragmented enough that different groups of consumers can buy the same brand and not feel close to each other. Top brands can ensure their distribution, pricing and exposure are properly configured to target all types of consumers.
“When you’re browsing Instagram, you see that wallet everywhere, but when you’re walking down the street, you don’t see it every day.” The old-school gameplay needs to change. Deloitte managing director Karla Martin believes that as more people have greater access to luxury goods, seemingly solid strategies are no longer as effective as they once were.
In the first quarter as of the end of March, Hermes' revenue rose 33% year-on-year to 2.765 billion euros, LVMH group sales increased by 23% year-on-year, and Kering Group's sales reached 4.96 billion euros, a year-on-year increase of 21%.
However, under the bright growth, concerns are obvious. First, the impact of the epidemic on the Chinese market has become the focus.
Recently, Italian luxury goods group Salvatore Ferragamo announced the performance data of the first quarter. In the first quarter as of the end of March, its sales rose 21% year-on-year to 289 million euros, higher than analysts' average expectations. Among them, sales in the European market increased by 45% year-on-year, and sales in the North American market increased by 39.8% year-on-year. Due to the rebound of the new crown epidemic, especially the impact of the new wave of epidemic prevention measures in China, sales in the Asia-Pacific region decreased by 2% year-on-year at constant exchange rates. In 2021, sales in the Chinese market accounted for 30% of Ferragamo's total sales.According to estimates by Barclays Bank, 50% of luxury stores in major luxury consumer cities in China are currently closed or have reduced customer traffic, which will affect the performance of the major markets in the luxury industry in the second quarter of this year. Analysts predict that Ferragamo's sales in the Chinese market may drop by 30% to 50% in the first and second quarters.
Duplaix, the chief financial officer of Kering Group, also said recently that nearly one-third of the group's store network is currently located in cities affected by epidemic restrictions. However, so far, major brands believe that the new crown epidemic in China is temporary, and China is still a very reliable and important market.
According to "Fashion Business Daily" citing sources, with the improvement of the epidemic situation, many express delivery companies in Shanghai have resumed operation. The Shanghai warehouses of Louis Vuitton and Dior have resumed work in early May. The goods that had been stopped due to the epidemic situation began to be distributed in recent days. However, closed-loop management is still implemented, and the logistics time of goods will be longer than in the past. In the first-quarter earnings report of this year, LVMH said that in view of the continued impact of the epidemic and other factors, the group remained "vigilant and confident" in the future.
"Fashion Business Daily" reported that when luxury brands are facing three major challenges, in addition to the increased uncertainty of the epidemic, changes in consumer demand and extreme brand marketing may threaten luxury sales.
After experiencing various inconveniences caused by the epidemic, people now tend to spend more of their disposable income on experiential consumption, which may have an impact on some luxury brands. Previous travel restrictions have significantly boosted luxury consumption. In the first quarter of this year, Ticketmaster live concert ticket sales were up 45% from 2019, according to Live Nation. The Transportation Security Administration said U.S. air travel is now almost back to pre-pandemic levels.
The way people buy luxury goods is also changing. Consumers are increasingly hungry for new things, but today’s over-marketing by brands has a side effect, making luxury more “ubiquitous” than ever. This is particularly detrimental to exclusivity-based luxury consumption, which can cause user fatigue.
For example, while the average consumer may not be able to afford a $10,000 Chanel jacket, she can now easily use an image of that jacket as a screen saver for her phone, and the jacket doesn't feel so special. Ana Andjelic, author of "The Business of Aspiration," believes that could even reduce consumers' desire to buy the brand's lower-priced line.
W. David Marx believes that "luxury goods are necessarily status symbols, and status symbols only work when there is a clear connection with the elite group," W. David Marx's new book "Identity and Culture" will be published soon. He believes that when brand marketing becomes too common, consumers of luxury goods will have doubts, "whether their buying behavior has flowed to the masses"
There are also people who disagree. Some experts believe the market is fragmented enough that different groups of consumers can buy the same brand and not feel close to each other. Top brands can ensure their distribution, pricing and exposure are properly configured to target all types of consumers.
“When you’re browsing Instagram, you see that wallet everywhere, but when you’re walking down the street, you don’t see it every day.” The old-school gameplay needs to change. Deloitte managing director Karla Martin believes that as more people have greater access to luxury goods, seemingly solid strategies are no longer as effective as they once were.
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