Armani Latest Luxury Brand to Embrace Online Shopping... 01/12/10

Online is revolutionising retail, and it’s not just for mass-market brands. The MO Down has had much to say on this topic, last week we spoke at length about the relative reluctance of luxury brands to embrace this new domain, and the potential ramifications for sales. Slowly but surely, brands are hopping on the online bandwagon. This week’s medal goes to Armani.

Armani has developed a two-birds-with-one-stone strategy, launching a new online store targeted specifically for China. It’s one of the first luxury initiatives of its kind in China, and we are impressed. Chinese online shopping increased 117 per cent last year, and we don’t need to reiterate the increasing significance of the Chinese market to the luxury industry. Armani is the first fashion house to offer a ‘flagship shopping experience’ online, and to do so in China… This will almost certainly be a success. From a strategic and marketing perspective, it is a very interesting time to be in luxury. We are noticing all kinds of attempts at engaging consumers, and it is exciting to realise that the future of brand loyalty may well be won and lost online.

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Cartier Opens Hong Kong Flagship as Fine Jewellery Looks to Asia... 29/11/10

Cartier plans to double the number of its boutiques in the next two to three years, particularly in China, where the luxury industry is experiencing enormous growth at the moment. The MO Down reported last week that Tiffany & Co. is opening stores faster than ever, and it seems that Cartier is following suit. The opening of its Hong Kong flagship last week demonstrates the brand’s strategic response to the expected growth of the watch and fine jewellery industry in Asia over the next five years. China’s increased appetite for jewels and luxury goods presents an exciting and unrivalled opportunity to capitalise on continuing rapid economic growth and bringing brands to a newly affluent urban population. Making up 31 per cent of the global market, we are fascinated by the different strategies brands are employing to make themselves known in this new market. Many luxury brands are new to Chinese consumers, and brand loyalty is basically non-existent. We predict some elaborate efforts to win hearts and minds, and can’t wait to sit back and watch the show.

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Tiffany & Co.’s Profits Soar Coming Into the Holiday Season 26/11/10

Tiffany’s holiday season is set to be jolly, following Dow Jones reports of a 27 per cent increase in third quarter profit on Wednesday. Consumer confidence is back on the rise, international expansions, timed nicely with the end of the GFC and the return of prosperity, make music to Tiffany’s earrings.

The MO Down has commented on Tiffany’s recent growth, as well as an increase in the global demand for diamonds. Yes, you guessed it, expansion into China has been a major contributing factor to their recent boom. Tiffany has swiftly responded to Chinese demand for jewels and luxury goods, investing confidently in between 25 and 30 stores, set to open in the next three years (14 this financial year!). Looking at third quarter figures, this may even be a conservative investment. Tiffany & Co. is experiencing enormous popularity in China at the moment, and there seems to be a bit of a chicken or egg scenario. Which came first, their presence, or their popularity?

It's great to see Tiffany's figures shining as bright as its jewels. Further proof that luxury spending is recovering from economic downturn, and we look forward to watching other brands follow suit.

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DVF, Moschino and Escada Among New Luxury Boutiques Opened in China! 25/11/10

It seems to be new store galore in China at the moment, with new Chinese openings including DVF, Moschino, Escada and Porsche design. Diane Von Furstenberg’s opening of her first Beijing boutique (which contains two diamond-shaped rooms, we told you the Chinese are all about diamonds!), coincides with the opening of the first DVF Sydney boutique. The MO Down was in attendance at last night’s opening at the new Westfield Sydney, and what a spectacular occasion it was.

Across town in China, Shanghai saw the opening of a concept store for the German luxury brand Escada. Incorporating crystal chandeliers, vases and sculpture, the store appeals to the rising popularity of luxury brands in China. Moschino have taken a different, more flamboyant approach, and incorporated four themed mini art exhibitions into its Beijing opening.

The fastest growing luxury market in the world, China is set to see the best luxury brands have to offer in the upcoming months. As brands battle with one another to assert themselves in a highly competitive market, with malleable and embryonic brand loyalty, we predict some fine Chinese displays from the world’s finest.

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All Eyes On Burberry... 18/11/10

Burberry has announced its unaudited results for the six months ended 30 September 2010 and things are looking good. Showing strong operating and financial performance, revenue is up 21 per cent, with profit before tax up nearly 50 per cent and comparable sales growth of 9 per cent. Nice. 20 new mainline stores opened, unsurprisingly focused in Asia Pacific, and the Americas. Emerging market sales were up 46 per cent, and we are assuming China is largely to thank for this. Representatives from Burberry have attributed the success to ‘continued focus on the brand, ongoing investment in digital, IT and retail infrastructure (especially in China).’ Good to see they have things in check.

In other good news for Burberry, CEO Angela Ahrendts has collected two Walpole awards– in the British luxury brand and online category. Check mate! It seems Burberry can do no wrong at the moment. Their clearly defined and executed strategies are wooing the world on a business to consumer and business to industry basis. Adding to the excitement is the imminent mega store Burberry flagship opening in the 1st half of 2011 in Sydney’s CBD. So much more Burberry to check out– no pun intended.

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Bulgari Profit Down But Future Looking Bright 17/11/10

Despite revenue rising, Bulgari’s profit is down, and it has been moved from ‘neutral’ to ‘underweight’ by JPMorgan Chase & Co. Bulgari SpA (BUL IM) dropped 4.8 per cent to 7.10 euros, over the weekend- the largest drop in 8 months. Bulgari is the world’s third largest jeweller, and we find this drop surprising, given the recent overall recovery of the luxury industry. Rivals like Tiffany & Co. are experiencing enormous growth as of late, riding on China’s growth as a luxury market. The popularity of diamonds with Chinese brides has been a contributing factor.

Bulgari’s third quarter income was 16.6 million euros ($23.23 million AUD), falling short of the average 19.8 million euro average analyst estimate in a Bloomberg survey. Geographically, Bulgari’s sales were varied geographically. Sales rose by 11 per cent in Europe and dropped 7 per cent in the USA. Sales fell 1 per cent in Japan, increased 15 per cent across Asia as a whole and fell 2 per cent in the Middle East. Sales rose 24 per cent in greater China, which is not surprising.

Despite financial inconsistencies, Bulgari shows promise to pick its stock-self back up again, with new product launches, and exciting campaigns. The new Julianne Moore campaign certainly got us very excited. Fingers crossed for a successful Christmas season!

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Study Determines Most Popular Luxury Brands in China 15/11/10

China is the world’s fastest growing luxury market. Here at the MO Down, we have certainly noticed that Chinese consumers are increasingly gravitating towards luxury brands, and luxury brands are in turn clambering to stand out and make themselves known. The habits of wealthy individuals in the Chinese market are still largely unbiased, brands are new and unfamiliar, and customer loyalty has not had time to develop. Something of a blank canvass, it's every marketer’s dream, right?

We were very interested to learn which brands seem to be getting it right. According to a survey conducted by luxury goods consultancy FDKG and Dr Lu Xiao of Fudan University, Louis Vuitton, Dunhill and Gucci are the three most popular luxury brands in China. The study canvassed the opinion of 800 wealthy Chinese, based on their spending habits. The survey claims to give the “most comprehensive understanding of the spending behaviour and aspirations of China’s ever-growing super-rich’, and is of serious relevance to the luxury brands seeking to engage with this highly lucrative market.

In a sense, many brands are starting from scratch when entering China, especially if they are unable to rest on the laurels of reputation. Marketing that works in Europe or America, could very likely be totally irrelevant in China. Common characteristics among respondents have endless marketing potential. One statistic we found of interest indicated that 90.9% of wealthy Chinese regularly give money to charity– see our article on social responsibility and how brands might use this as part of a marketing strategy. We are interested to see how brands approach this new market, and how strategies are adapted and replaced.

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Is Japan Losing its Taste For Luxury? 09/11/10

With all the luxury industry’s hype about the up and coming Chinese market, India’s growing appetite, and Russia’s billionaires, there is one market that just ain’t what it used to be: Japan. Awfully quiet in the recent revival, it’s bizarre to see the Japanese are slowing down their consumption. As the undisputed leading market for luxury goods in the 80s, 90s and early 2000s, what can possibly change so abruptly? Deflation. Many luxury brands had their Faberge eggs in the Japanese basket and until very recently, had good reason to do so. It was standard practice in Tokyo to spend (equivalent) $2000 AUD on a handbag, or $200 on a tie. But times are changing, and a lack of consumer confidence has made ‘affordable’ all the rage. If in doubt regarding this statement, note the popularity of the first Japanese Hooters.

For the last few years, even prior to the GFC, luxury brands reported global growth across all markets with the exception of Japan. For the last two years, the US and the UK have been alongside Japan in regards to negative growth. Today, most key luxury brands seem to be reporting that the US, UK and European markets are picking up– and they are leaving Japan in their wake. Thankfully for luxury brands, Chinese neighbours can’t seem to get enough.

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Tiffany & Co. to Establish Presence in China 03/11/10

Yesterday we talked about the price of diamonds rising with increased demand, and that this is largely attributed to the growing market for luxury goods in China. Chinese brides are developing quite the appetite for diamonds, it would seem.

Tiffany & Co. are firmly entrenched in the engagement market, so it makes sense to see its strong and confident expansion into China. According to company representatives, Tiffany is planning to open a number of new stores in China in the near future, driven by robust sales growth in the market. Apparently, within the next three years, there will be between 25 and 30 Tiffany & Co. stores in China– including, 14 this financial year. There are currently 12 Chinese Tiffany & Co. stores, but with a 27 per cent increase in the fourth quarter compared to the same time last year, there is certainly an appetite for more.

It is also of particular interest to us that the 2011 jewels and diamonds collections were unveiled in Beijing on October 22. This is the first time Tiffany & Co. have ever launched a new range outside of the US, but we won’t be surprised if it’s not the last.
We’ve said it before, China is rapidly becoming the world’s largest market for luxury brands. We expect to see many more brands paying much closer attention to this market, in an attempt to attract the attention of as many customers as possible.

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Economics 101: Increased Demand Means Prices Will Rise... 02/11/10

We’ve recently spent a lot of time talking about China as an emerging luxury market. We haven’t been able to say enough, really. The increased consumption of luxury goods in China is having a real and important impact across many products and services in the luxury industry. Demand has suddenly spiked, and we are wondering if this increase will mean what economics guarantees it will mean: prices will rise.

Demand by Chinese and Indian brides for diamonds has helped to lift the global price of diamonds by 44 per cent. Wasn’t it Sade’s song… It’s A Diamond Life? We think this is very apt. The increase in diamond prices in addition to the increase in gold prices globally is really upping the total retail price if you want some chic ‘bling’ in your life, regardless of where in the world you’re purchasing. While we are still excited that global luxury brands are spreading their wings and doing very well, we had not thought this all the way through. We recently speculated that a new level of super-elite luxury might start to emerge as the luxury market increases in size… could diamonds and gold soon fall into this category? Time will tell…

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A New Level of Luxury? 19/10/10

Like we keep saying, the luxury industry is experiencing solid recovery in light of recent economic turmoil. With the constant and voracious appetite consumers are showing for certain luxury brands, many brands are answering demand with supply, as well as simultaneously adopting a push strategy into new and emerging markets. Luxury brands sales have increased dramatically in China this year, up to 30 per cent so far. The US, still recovering from the GFC saw its luxury industry grow 12 per cent. Shares in the biggest luxury goods companies, think LVMH and Richemont, have risen sharply this year.

It’s a dilemma the luxury industry has always faced: you want to be popular, but you want to be exclusive and sought after. How do you maximise sales without loosing your cachet? We believe an opportunity exists for a select few ‘ultra-luxe’ brands that currently operate in the most exclusive of niches. These brands are bespoke and artisanal in their entire approach to business, and may prove to appeal to tastes a tier higher than the broader luxury market. There is perhaps soon to be a new ‘ultra-luxe’ consumer group that will be seeking something rarer than other brands can give. This will be a golden age for the Goyard’s and Delvaux’s of the world.

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Luxury News in Brief 18/10/10

Just bringing you some quick news updates from over the weekend. Many instances of positive figure-reporting coming from the luxury industry recently, and we’re happy to hear it. Looks like the good times are returning.

Louis Vuitton’s figures are great for their first nine months of 2010, LVMH total sales climbing 23.6 per cent. It goes to show that its core products provide security to the brand, and also customers. Customers want something that signifies a good investment and for this, say the figures, there is nothing better than a Damier or Monogram piece from the collection.

Likewise for Burberry, the brand has experienced a 21 per cent rise in first-half revenue, largely attributed to the Chinese market, and increased coat sales in Europe. Despite a drop of over 4.1 per cent last week, Burberry shares have risen dramatically this year. Many experts have attributed this to its skilful use of digital media to increase awareness. Burberry has still to take China by storm, and looks to do so in July 2011. For more info, check out Bloomberg’s full report.

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Prada contemplating a Hong Kong IPO? We Thought So... 8/9/10

Prada has been expected to make an IPO for a while now- On September 20 we commented on the brand’s strong performance recently, and suggested on top of more rumours that now is perhaps as good an opportunity as ever. It seems we were correct. Market conditions allowing, Prada is contemplating a Hong Kong flotation for 2011, in time to take advantage of the expansion of the Chinese market- already the fastest growing, and soon to be the world’s largest market for luxury brands. This is the most likely move, but Prada have not decided just yet.

Prada have flirted with the idea of making an IPO for years, but each attempt has been thwarted- they just haven’t seemed to have great luck with timing. If they do list, it will be fourth time lucky following three failed attempts in the past ten years. Perhaps fourth time very lucky, and well worth the wait. If they can time the offer in line with Chinese growth, as well as economic recovery in the US and Europe, Prada might also be able to shake off its debt (estimated at approx $1.4 billion AUD) and emerge positively laughing. All in all, Prada is expected to be valued between 4.5-6.7 billion euros ($6.4-9.6 billion AUD).

Still, nothing is set in concrete, and the move will involve significant changes to Prada’s executive and supervisory structure. Decision-making currently lies very much in the hands of Chief Executive Patrizio Bertelli, who, with the family of Muiccia Prada, controls 95 per cent of Prada Spa’s capital. The Italian bank Intesa Sanpaolo owns the remaining 5 per cent.

We can’t wait to see what is in store for one of the world’s most iconic fashion houses, and impatiently await further revelations.

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The Age Of Philanthropy- Luxury Brands and CSR 1/10/10

A few weeks ago, we talked about Corporate Social Responsibility in China. Personal philanthropy is all the rage among the Chinese ‘nouveau riche’ at the moment, and consumers are increasingly conscious of corporate generosity- or lack thereof. But its not just China, consumers all around the world are calling for greater transparency and it may be time for high-end labels to pick up their game. Luxury brands have been surprisingly slow to respond to this attention to their actions, with a few exceptions, see Bulgari.

This week, the World Jewellery Confederation released a ‘Responsible Luxury’ report, analysing the development of CSR in the jewellery industry. Contrasting Tiffany & Co’s proactive efforts with De Beers’ notoriety for buying ‘conflict diamonds’, it has created a stir and shone some light on important social issues.

Interestingly, the luxury industry usually escapes regulation. With the exception of labour standards within individual countries, it is tricky to police the sourcing of materials from all over the world. Often consumers don’t actually think about where the materials come from. All this is changing. With increased attention to what goes on behind the scenes, it seems that consumer demand will regulate just fine. Brands such as Cartier, Tiffany, Rolex and Chopard can use their ‘Forever mark’, which guarantees their product was produced with integrity, in their marketing, and everybody wins.

Consumers don’t want luxury that has been tainted. There’s nothing glamorous about a human rights violation.