Italian Luxury Brands are successful in China. Ferragamo, Luxottica, Prada… have succeeded in making Chinese people dream.
Despite the consumption slowdown in Europe, Italian luxury brands registered healthy growth in 2013. More than ever compelled to export since Italian luxury market is suffering from the crisis, they have shown great resilience in China, whereas French luxury brands seem to be finding it more difficult.
Italian Luxury Brands in China
Salvatore Ferragamo has just announced that sales soared in China in 2013, with a plus of 20%. Luxottica, the giant of branded glasses (Ray-Ban or Chanel), registered excellent results for the third consecutive year in emerging markets such as China or Brazil, thus allowing a record turnover of 7.3 billion euros in 2013. Prada, the only Italian brand quoted on the Hong Kong stock exchange, continues to grow strongly (+15 % en 2013, to 826 million euros). Not impacted by China’s anti-luxury legislation, Moncler down jackets sold like hot cakes in China and Japan: sales rose by 17% last year to reach 182 million euros. Tod’s down jackets rose by 21,3% in China.
High resistance to China’s market
A strong resistance to China’s market and a high sales recovery in the United States during the past two years allow almost every transalpine luxury brands to register very strong financial results.
For the fourth consecutive year, Prada’s sales exploded. Thus, the group led by Patrizio Bertelli overtook the French luxury brand Hermès in terms of sales (its turnover reached 3.85 billion euros last January, with a 9%-growth). Remo Ruffini, Moncler’s boss and artistic director, succeeded his listing on the Milan Stock Exchange in December 2013, with an increase of sales volume of 19%, to 580.6 million euros, and with an increase of net profit of 12%, to 92.1 million euros.
Bruno Cucinelli, the cashmere specialist, continues its course in the same direction. In 2013, the brand registered a double digit growth, and the same growth is expected this year.
Yoox, the new online luxury brand, also recorded a 21% jump in sales last year, to reach 456.6 million.
Tod’s is the listed group which is lagging behind most in the past few years. Despite its surge in China, its sales volume remained steady once again in 2013 (+0,5%), to 967.5 million euros, especially because Italian market, still in crisis, accounts for one third of its turnover.
Contrasted destinies
Luxury brands, often owned by heirs of founding families, attract interest and have to find funding to expand their business. This may be done by the arrival of investment fund. For instance, Blackstone has taken 20% of the shares of Versace, and Clessidra has joined Buccellati.
The Milan Stock Exchange tries to attract more Italian luxury brands, even if 17 of them are already listed. Ermenegildo Zegna, Kiton and Etro jealously safeguard their family’s identity while they often receive takeover bids.
Italian brands which have been repurchased by French luxury brands LVMH and Kering have contrasted destinies. Bernard Arnault’s group has added a joint venture with the stylist Marco de Vincenzo to its transalpine list acquired since the 2000s. After Emilio Pucci (still poorly developed) and Fendi, LVMH -the world’s luxury leader – has purchased the jeweller Bulgari for 3.7 billion euros in 2011, and then, two years later, the cashmere specialist Loro Piana, for 2 billion euros. Kering hold 5 Italian brands: Gucci, Bottega Veneta, Brioni, Sergio Rossi, Pomellato.
Gucci, similarly to Louis Vuitton (LVMH), faces difficulties in terms of collection renewal, and suffers from its massive expansion in China.
Key success factors for a luxury brand to success in China’s market
To success in China’s market, luxury brands should focus on their marketing strategy, their reputation and their brand image, because Chinese people are attracted to luxury goods to show their wealth and social position, rather than to have quality products. That is why the challenge for luxury brands is to be well-known, renowned, especially on the Internet, by using IWOM (Internet Word of Mouth).
The eReputation is the new challenge for Fashion Brands in the Changing Chinese Market.
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