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Interface News Reporter | Chen Qirui

Interface News Editor | Xu Yue

Recently, French luxury brand Balenciaga started to renovate its new store in Urumqi Meimei Shopping Center. This is its first store in Xinjiang.

High-end designer brandsAlexander WangIt also posted an announcement on Zhilian Recruitment that it may also open a store in Meimei Shopping Center, which will also be its first store in Xinjiang.

Second-tier luxury brands and high-end designer brands are the main force of expansion in the industry, especially in markets outside the first-tier markets.2023Years to date,Alexander WangNew cities include Hangzhou, Ningbo, Wuhan, Zhengzhou and Changsha. Other high-end designer brands that are also expanding rapidly includeVivienne WestwoodandIsabel MarantThe former opened stores in Chengdu, Hefei, Wuhan and Tianjin.

Luxury brands are more cautious in their expansion, with fewer new stores, but they are also more down-to-earth.LOEWEandEtroAll of them opened their first stores.BalmainFurthermore, in addition to Hefei, it also opened to Nanchang, andBottega VenetaChoose to open a store in MixC, Nanning, Guangxi.

In contrast, the strategies of leading luxury brands are mainly focused on maintaining existing markets, especially in first-tier cities. Chanel renovated two stores in Shanghai Henglong Plaza and IFC. After the renovation, the stores were expanded from single-story to four-story and three-story. Hermès expanded its BeijingSKPstores in Beijing, while Louis Vuitton and Dior haveSKPOpened inVICsalon.

Even when opening new stores, top luxury brands mostly follow the operators they have been working with for many years and expand into new first-tier cities. Chanel and Louis Vuitton both opened stores in Nanjing IFC, and the latter also opened stores in the recently opened Wuhan IFC.SKPIn Haikou MixC, Louis Vuitton chose to withdraw after a year of blockade.

This is a microcosm of the strategic differences between leading brands and non-leading brands in the current market environment.

The trend that can be seen with the naked eye is that the brand diversity in high-end shopping malls in first-tier cities is decreasing. When Louis Vuitton, Dior and Chanel all opened multi-storey stores in Shanghai Henglong Plaza, other smaller brands can only go to the underground floor. As more and more luxury brands enter the North District of Sanlitun Taikoo Li, such asThom BrowneHigh-end designer brands can only choose to leave.

From Chanel to Louis Vuitton, top luxury brands have been intensively raising prices in the past few years.CFThe handbags are priced close to10Million yuan, Louis Vuitton is positioned as“Heritage Bags”ofCapucinesThe series no longer displays prices on the official website. In the past, the primary reason why top luxury brands were cautious in expanding in non-first-tier markets was because they were worried about insufficient consumer power, and the current price system has undoubtedly deepened these concerns.

For the top luxury brands, sinking expansion is a strategy under the trend of overseas consumption returning during the epidemic, but now many middle-class groups have returned to overseas markets such as Japan for consumption. In this case, continuing to open stores may bring sales growth in the short term, but due to the decline in consumer stickiness, it may drag down profits in the long run.

As top luxury brands usually have many categories, in addition to regular ready-to-wear, handbags and shoes, the sales of higher-priced jewelry and watches can to some extent make up for the impact of the slowdown in new store expansion, and these two types of products are often extremely dependent on high-net-worth individuals. This makes top luxury brands further tied to first-tier cities.

One detail worth mentioning is that, also because of the large number of product categories, leading brands are usually more willing to rent larger multi-storey flagship stores. Regardless of how many shopping malls there are in non-first-tier cities that can meet the hardware needs of these brands, flagship stores, as image representatives, obviously have to be opened in first-tier cities first.

Second-tier luxury brands and high-end designer brands also want to tap into the high-net-worth population in first-tier cities. The problems they face are that brand recognition and penetration are not high enough, there are not enough high-net-worth customers, and the first-tier middle class who still have spending power are beginning to prefer top brands, rather than buying second-tier brands for aesthetics and trends as in the past.

Moreover, many second-tier brands have the common problem of relying on entry-level models. When the entire market is cold, these brands are also hit the hardest. It is difficult for them to stick to the price system and dig deep into the existing customer base like the top brands. Price cuts and discounts are one way to deal with the cold industry, and another is to open stores in more markets with potential demand for entry-level models.

Cities such as Urumqi and Hefei are slower than first-tier cities in sensing the luxury trend.LOEWEandAlexander WangThese brands, which have long been established in first-tier cities but are smaller in scale, provide a sense of freshness for consumers outside the first-tier cities, although how long this sense of freshness can last is another question.

In addition to Louis Vuitton and Gucci, other leading brands are outside the first-tier——Especially outside the new frontier——The number of stores opened is not that large.“Five blue bloods”、“Four small luxuries”The common brand class division on Xiaohongshu does not apply to these markets. Fewer brands lead to less intense competition. Brands that enter the first floor of local high-end shopping malls are often categorized as“Luxury brand”。

It can also be predicted that in the future, the retail space occupied by top luxury brands in core high-end shopping malls such as Shanghai Henglong Plaza will continue to increase; and some second-tier and designer brands will also be able to find a good location in high-end shopping malls in the sinking market in the absence of top brands.

But whether it is the top or second-tier brands, the cooling of the luxury goods industry has become an obvious trend. Expanding existing stores and opening new stores are both costly measures. Once the performance and revenue do not meet expectations, the existing strategic divisions may be unified into a unified expansion suspension and store opening suspension.