Strategies That Brands Relied On In Past In China Won’t Cut It In Future
Much like larger British peer Burberry, whose recent slowdown sent shivers down the spine of the luxury sector, a profit warning posted this week by leather goods maker Mulberry has created a similar sensational buzz. Mulberry shares slid as much as 29 percent to 940 pence, the brand’s steepest decline since 1998. While Mulberry blames a four percent decline in wholesale shipments and lower-than-expected international sales, especially in China, for its recent woes, this purveyor — which has taken great pains in recent years to position itself in the luxury segment — may have to look inwards for the real reason for its recent misfortunes. This is particularly true in regards to its scapegoating of the Asia market in general and China market in particular.
Aside from its single Beijing location at China World Mall and a capitalization on the popularity of its “Alexa” bag among China’s younger bag-buying set, Mulberry, quite frankly, has shown little ambition in terms of brand promotion in China. Once a “slam dunk” for luxury brands, China is no longer the kind of place where major international brands should expect their goods to sell themselves. With high-end consumers seeking absolute value rather than the over-exposed, the Chinese market is becoming more challenging as the Chinese shopper grows more sophisticated. While a whole new generation of less brand-savvy aspirational shopper may wait in the wings in inland Chinese cities for their incomes to catch up to their product lust, plenty of shoppers in cities like Beijing and Shanghai are as up-to-date and seasoned as their peers in New York or Milan.
What this boils down to is that Mulberry’s lackluster results do not ultimately reveal a lack of interest or spending power on the part of the Chinese luxury consumer. If anything, they indicate what has become blindingly obvious in recent months: only the brands who continue to be proactive in improving local in-store experience, customer service, and product offerings, while engaging potential customers online via local social media platforms and media, will be able to survive in this changing environment. The strategies that brands relied on to win in the past simply aren’t going to cut it moving forward. As the FT’s Material World blog noted today:
Mulberry and Burberry’s drop in sales, particularly in Asia, and what it reveals about the changing habits of the consumer, does not signal the end of luxury. It signals, rather, the end of the idea that consumers are suckers who will accept that anything is “luxury” that says it is so, and the rationalisation of the market.
Brands will time and time again blame an over-generalized economic slowdown for a dip in China sales. However, recent news such as Coach’s double-digit overseas growth and strong China sales seen by brands like Hermès, Lanvin and Valentino, certainly undermine this particular blame game. While an economic lull may give pause to China’s younger, middle-class, aspirational buyers — who typically save up for months for a small high-end accessory — the country’s wealthy consumer will remain a fervent luxury shopper, but only if given a good reason — impressive customer service, tailored perks, or worthy promotions.