As China emerges from its COVID-19 crisis, there are optimistic signs for the luxury sector, but observers don’t expect it to return to business as usual and some are touting an enhanced role for artificial intelligence as the category shifts online.
While luxury continues to take a pummeling elsewhere, some brands are reporting positive data from China as luxury stores begin to reopen, Caixin Global reports.
LVMH Moet Hennessy has already started to see signs of recovery in Asia with stores in China reporting an almost 50% rise in year-on-year sales, according to the company’s CFO, Jean-Jacques Guiony.
Many luxury brands have sounded a similarly cautiously optimistic view of the year ahead, even though first-quarter earnings have been badly hit by the COVID-19 crisis.
Hermes reports that its China stores have returned to sales growth; and Kering, which owns Gucci, Saint Laurent, and Balenciaga, says its stores in China, South Korea and Macau have all now reopened for business, and sales have turned positive in China. But CFO Jean-Marc Duplaix warned that the trend of catching up on purchases thwarted by quarantine measures will likely be short-term.
And an analysis by Daniel Langer, CEO of the luxury, lifestyle and consumer brand strategy firm Équité, offers a warning of serious trouble ahead for those Western brands that were losing traction even before the crisis.
“Luxury names that read like a ‘who’s who’ of brands are now experiencing a painful awakening,” Langer writes in Jing Daily. “Those that have resisted or were too slow in establishing relevant propositions for Chinese millennials and Gen Zers are now in panic mode.”
There will be no return to business as usual in China’s luxury sector, Langer says. Post-COVID-19, the key to success will be the willingness and ability to develop digital offerings. The Chinese market, in particular, requires a long-term commitment and a precise customer acquisition strategy, he argues.
Writing in the SCMP, Langer argues that AI could well be an significant, and necessary, factor in reviving the sector. He says there is now “A gap between brands that make assumptions and brands that know.”
“Artificial intelligence is a tool that brands are increasingly using to generate faster, more precise consumer insights,” Langar writes. “They need to know who their customers are, what they think, how their perception and sentiment changes over time, and what they expect.”
Meanwhile, Tmall, Alibaba’s B2C online platform, has revealed its Luxury Soho channel, which Jing Daily reports marks the Chinese e-commerce giant’s first foray into the luxury outlet business. The new initiative will operate in parallel with Alibaba’s Luxury Pavilion, a site allowing luxury brands to sell via Tmall.
“Luxury brands have a specific lifespan. Tmall, as the main platform for luxury partners’ digital operation, provides various solutions for different scenarios,” explained Weixiong Hu, vice president of Alibaba Group and general manager of Tmall’s fashion business unit.
“To maximize the life cycle of luxury products, iconic products and new launches are highlighted in Alibaba’s Luxury Pavilion, while seasonal items with mark-downs can be accessed in Luxury Soho,” he said.
Sourced from Caixin Global, Jing Daily, SCMP