Pombo recently cited news sources that the LVMH group plans to relocate more flag-down branded regional headquarters to Shanghai. In the future, the Group will focus more on new front cities, including all.
Change is not a recipe, but has lasted for nearly 10 years.
As early as 2012, LVMH under LVMH announced an adjustment to the management structure of the Asia-Pacific market. The former brand Asia-Pacific headquarters is located in Hong Kong and manages the entire Asian market. After adjustment, however, the South-East Asia market is managed by the office in Singapore, while the markets in the interior, Macao and Taiwan are taken over by the Shanghai office. The management of the Hong Kong office has been reduced to Hong Kong.
The epidemic has made changes faster.
The LVMH group usually does not separately disclose China’s market performance in the financial statements, but rather is subsumed into the Asian market for statistics. However, according to the source, the recovery rate in Hong Kong was slower than in other parts of the market. The objective of the LVMH group, driven by the trend of overseas consumption back over the past three years, is to double the total amount of consumer purchases of luxury goods, including before the outbreak.
According to financial accounts, LVMH’s income grew by 17 per cent to €21.35 billion in the first quarter of 2023, of which time-loading and pimping sector income grew by between 18 and €10,728 million, and in the water and cosmetics sectors, as well as in the mask and jewellery sectors, by 11 per cent. Further recovery from international tourism has resulted in a 30 per cent increase in income in the retail sector of refined products, including DFS duty-free shops.
By region, French market sales grew at the highest rate of 36 per cent, thanks mainly to the price advantage of large tourists travelling to Paris and the exchange rate movements in the euro. The Asian market, with the exception of Japan, grew by 14 per cent in the quarterly period, accounting for 36 per cent of total income and was the first largest market for the LVMH group.
At the conference of analysts following the financial statements, the LVMH group indicated that Chinese tourists’ offshore consumption increased faster than local consumption, but that, in terms of overall consumption, the total local consumption remained four to five times as much as offshore consumption. In turn, through a series of initiatives, there has been a reduction in the prices of domestic and European market products.
This convinces the LVMH group that more consumers will be willing to buy luxury goods. The same is true of reality. In Hong Kong, as exchange rates have changed over the past three years, unless hard luxury goods, such as jewellery, are purchased, the difference in basic bags and shoes has been reduced.
For example, in the case of Lidweden, the gross NEVERFULL bag was sold at a price of $152 million and Hong Kong at a price of $168 million, at a cost of approximately $145 million, at a cost of approximately $700. The most recent difference in DDAUPHINE’s bag in the name of the Intermediate Federation is approximately 956 yuan, while the difference in the TWIST bag in the name of the yellow tin is approximately 1144 yuan.
The Hong Kong luxury sector remains important, with brands, including the Aimae and Didio, renovating flagship shops in the near future.
However, many brands show a contraction in the number of door shops. This may mean that luxury brands will in the future be more focused in Hong Kong on the digging of local high net value groups, providing the best quality of services through the opening of large flagship shops, and that in the past they have been closed down for more visitors.
A survey conducted by McKinsey in February 2023 showed that 85 per cent of consumers in the Great Bay region who had intended to visit the port for the next 12 months were expected to consume an average of $364 million, of which approximately $178 million would be used for the purchase of luxury goods, but between 10 and 15 per cent indicated that future purchases of luxury goods, cosmetics and health goods would be reduced in Hong Kong.
In the interior market, luxury brands not only add to the total number of door shops, but also open more large flagship shops in new front cities, such as Prices and Nanjing. The brands are intended to reach consumers at different levels, as well as to retain consumers by providing bidding services in the core cities of the region.
The past practice in Hong Kong has now been followed in the interior but has become more radical. This also explains why luxury goods groups need to move more senior to the interior. If the core team is based in Hong Kong for a long time, it is often difficult to manage remotely and not enough to understand the winds of the cities of the interior.
In addition, as the talent ladder of the Chinese company, which is still luxury goods at the time of foreign investment, is perfected, it will be the dominant mode for local people to manage local markets. Hong Kong was the first station for luxury brands to enter China’s market and for inland tourists to buy luxury goods. It is clear, however, that luxury brands are now declining in terms of both talent and markets.