China Buys Advanced Road, Luxury Brand Chinese Boss

Luxury goods

This is a very important trend from "luxury" to "fashion".

Leather workers who have worked for 44 years, 27 years of closing time, 20 years of designers, 15 years of sewing and 35 different sizes of leather.

At the factory of Tod's, a luxury group in Italy, in the Markey area, the biggest feeling is that the ideals pursued by European luxury brands and the efficiency thinking of Chinese society in business experience are so indifferent.

When I was awarded the "model worker" medal awarded by the president of Italy and the leather skins of 77 years old who showed their different skins and their respective characteristics, I was almost sure that in the next 20, 30 years, or even their own lives, in the field of fashion, it is unlikely that China will create the top luxury brands in China.

However, at the same time, this old industry, which pays attention to historical details and cultural heritage, is undergoing tremendous changes.

These changes seem to increase the possibility of overcoming the above conclusion.

First of all, the luxury industry itself has become increasingly popular in fashion and trend.

"Luxury industry is changing from luxury to fashion. This is a very important trend."

Shenzhen Herme group Limited by Share Ltd (hereinafter referred to as "Herme", 002356) director and general manager Yu Yang pointed out.

Before joining Herme, Yu Yang is the chairman of Shanghai Europe Blue International Trading Co., Ltd.

Ou LAN has opened more than 80 agency brand stores in high-end department stores and shopping malls in Shanghai, Suzhou, Hangzhou and other places.

In 2017, Herman went to three cities and won many luxury agents and operators including eurolan. Guoxin Securities therefore called it the "A share market's only listed company based on luxury brand operation".

And Herma is not the only company that wants to be a luxury brand Chinese boss, and it's not the first one. Chinese companies, including 00656.HK and Shandong like Shandong, are getting their brands around the world in the last two years.

This is the second change that the luxury industry is experiencing from the point of view of the industry.

Even though it is not enough to disturb the entire luxury industry, the balance has gradually slanted, and Bloomberg notes that "the rapid expansion of Chinese companies like Italian holdings, such as Italian holdings, follows the consistent Merger Model of Chinese companies, and has frequently bought luxury fashion brands in the past few years."

The title of this report is even more direct: "watch out for the upcoming Chinese LVMH group."

So, in the short term, China will not be able to build the top luxury brands in China, but a shortcut is clearly in sight: buying and buying.

Chinese consumers are not only the biggest customers in the luxury goods industry, but also a large number of luxury brands in the future.

The huge Chinese buyers have pushed up the valuation of luxury brands, but whether they can graft their international brands through China's consumption power, and thus successfully raise the income and profits of the acquired brands, and get a good return, is a problem.

Enterprise relay consumption upgrading

There seems to be no need for more examples of Chinese consumers buying luxury goods.

Not long ago, LVMH, the world's largest luxury group, released a bright 2018 quarterly report and pointed out very clearly that "13% of the revenue growth in the first quarter came mainly from the Chinese market."

According to Bain consulting, in 2017, the total sales of personal luxury goods in China reached 20 billion euros (about 142 billion yuan), an increase of 20% over the same period last year, and the growth rate is far ahead in the major regions of the world.

From another perspective, Chinese consumers contributed 32% of the world's luxury consumption in 2017, becoming the world's main growth point.

Every time the Chinese consumers have gathered, they have become the support of luxury brand sales growth, profit increase and stock price rising. Not only that, their pocketbook has even begun to influence the design, marketing plan and financing decision of luxury brands.

As early as 2010, Lu Keqin, President of OMEGA Greater China (Kevin Rollenhagen), pointed out that in order to comply with the preference of Chinese consumers for diamonds, OMEGA added more diamonds in its basic series.

Chinese buyers have become the third pole to stir up the world's luxury goods market, which is no longer a novelty.

By 2018, Claudio Castiglioni, President of Tod's, was outspoken. "Brand has specific strategies for Chinese market, and will study the preferences of Chinese consumers based on store data, so as to cater to the aesthetic of Chinese consumers."

In view of the fact that Chinese consumers have gone all the way to luxury goods around the world, the international brand once took the "listing in Hongkong" as a fashionable choice, and calculated to further expand the visibility and influence of the brand in the Greater China region, so as to better take Hongkong as a springboard to dig deeper into China.

Consumption potential.

Almost at the same time, Chinese enterprises began to practise "bringing ism" to attack overseas buy off the shelf luxury brands. In May 2011, Fosun bought 84 million 500 thousand stake in the 9.5% stake of Folli Follie, a luxury jewellery brand, and then bought a 10% stake in Club Med, a French Resort Group.

In early 2012, Shandong heavy industries, the actual controller of Weichai Power (00033802338.HK), announced the acquisition of a 75% stake in Ferretti Group, a heavily indebted yacht carrier in Italy. Ferretti's Riva and Ferretti two brands rank among the eight largest yachts in the world.

Coupled with the earlier launch of Li & Fung, Hongkong, which bought the UK's declining brand and packaged it and re launched the market, Chinese enterprises concentrated on the two years' operation after the financial crisis, fully deducting the "China save the world economy - Luxury Edition".

Collection of "madman"

Considering the long road of European luxury goods, compared with the road of self cultivation, "bringing ism" is obviously a more convenient and faster way. With the increasing enthusiasm of Chinese consumers' luxury, more and more Chinese enterprises have shown great interest in becoming LOGO's owners and operators.

Moreover, frequent "appearances" have made Chinese enterprises complete the original accumulation of "brush face" in the European fashion circle.

Guo Guangchang, chairman of Fosun, once revealed on CCTV program that after investing in Club Med, many European investors took the initiative to discuss cooperation and investment, because they had mixed faces.

Prior to that, Fosun also tried to buy Italy luxury brand Prada and French down brand Moncler, but its capital structure, lack of understanding of the trading system and lack of experience dealing with European brands constituted a stumbling block for successful bidding.

After accumulating a certain amount of experience, this time, Chinese enterprises are aiming at high-end clothing.

Just in the past two years, Bally, Wolford, Mr & Mrs Italy, Karl Lagerfeld, or those brands with reputation outside or relatively small, have seen the figure of Chinese capital.

Among them are Jingdong giants such as JD.NSDQ, equity investment funds such as Hongyi capital and seven wolves (002029), the traditional costumes.

At the turn of spring and summer in 2017, Jingdong invested $397 million in the world's leading fashion boutique shopping platform Farfetch and became one of its largest shareholders. At the same time, Liu Qiangdong joined the board of directors of Farfetch. At this point, Farfetch's valuation has increased by more than 3 times than that of the seven wolves invested 8 months ago.

In August, the seven wolves went to the next city to get the 80.1% stake of Chanel designer, Karl Lagerfeld, with the price of 320 million yuan.

In October, Hongyi capital signed an agreement with Italy Magnolia holding company to acquire a 30% stake in Italy's high-end Parker coat brand Mr & Mrs Italy.

Up to February 9, 2018, nearly a year after the sale of the autobiography, Switzerland's 100 year luxury brand Bally came to Shandong, and the Chinese enterprise's determination and action to follow the example of the international luxury giant to form their own brand matrix has already been put in front of the whole world.

In addition to Japan Trade Inc's Itochu trading company, the rest of the enterprises on the list of Bally bidders also include Fosun international, seven wolves, Herme group, plus the Shandong Ruyi, which finally won the brand with a purchase price of 700 million US dollars. The neat Chinese Legion has made Bally one of the most competitive luxury brands in recent years. Although these enterprises have their original intentions and tactics when buying brands, they all aim at China's rapidly growing luxury consumption market.

Before joining in bidding for Bally, Shandong Ruyi, Fosun international and Shenzhen ho Mei Mei have built up their respective spheres of influence through different ways of buying and selling.

In bidding for Bally, according to foreign media reports, Shandong Ruyi is the last to enter the game, but it is clear that the final result is not directly related to the sooner or later.

In fact, when the news of Bally was released, Shandong Ruyi has been squeezed into the top 20 of DDT's global luxury 100 list by relying on successive acquisitions.

Among them, the most famous war was not in 2016, but the French fashion group SMCP, which had 1 billion 300 million yuan to have light luxury brands Sandro, Maje and Claudie Perlot, was returned to the bag.

Although Shandong has been designing the fashion and luxury sector since 2010, it has not been until SMCP, Shandong's favorite name has moved to ordinary consumers.

With the successful landing of SMCP on the pan European stock exchange in October 2017, "Ruyi" has four listed companies in the fashion industry: Shandong, Paris Ruyi woolen clothing group Limited by Share Ltd (Ruyi group, 002193), 00891.HK, Japan Renown (3606.T) and SMCP SMCP (SMCP.PA).

Counting Bally, this is the second time that Fosun has crashed into Shandong in the past, and the last time it was bidding for SMCP in 2016.

But after that defeat, Fosun has successively captured the British coloured gemstone maker Gemfields, "underwear Hermes" La Perla, the top ready-made brand Lanvin and Austria underwear brand Wolford.

It is no exaggeration to say that the fame of Fuxing, a real estate and pharmaceutical listed company, has been piled up by a pile of real gold and silver. In particular, nearly half of the price hike took place from the Italian club.

Compared with Shandong Ruyi and Fosun international, Shenzhen hermen in 2017 was far from famous in the industry.

However, before Shandong entered the Bally competition, many news sources shared that he was the most potential bidder.

In his interview with new wealth, Yu Yang also admitted: "we had done homework before bidding. If we can successfully acquire Bally, change its store strategy and marketing in China, there will be very large market increments."

As the younger generation in the fashion and luxury industry, Herme is the one with the most intense pformation. Herman's predecessor was Shenzhen Hao Ning da. After the ceiling of the main business of the meter industry, the company acquired the diamond jewelry industry in Latin America every September 2014, and officially changed its name to Shenzhen herme group Limited by Share Ltd in May 2016.

The advanced way of Chinese version LVMH

The same as the "takeover madman", Shandong Ruyi, Fosun international and Shenzhen ho Mei's unique style.

As a typical representative of Chinese manufacture, Shandong Ruyi is a maker of luxury and top quality fabrics, and has been a manufacturer of luxury brands such as Armani (Armani). It has been producing high-end and top quality fabrics. It has been a manufacturer of luxury brands such as Armani (Armani). From its acquisition path, the layout of the layout is more important in the upstream of the industrial chain, and then significantly increased investment in the brand. The current purchase target runs through the entire industrial chain, involving upstream raw materials, manufacturing enterprises and brand clothing.

Qiu Yafu, chairman of the board of directors, said at the 45th anniversary celebration of Ruyi science and technology, "Ruyi has invested 36 billion yuan in the world".

This figure has not yet included the latest two acquisitions, including Bally.

Compared with Shandong's Ruyi's takeover in the industrial chain, the diversity of Fosun's acquisition target is mainly reflected in its category. From early entertainment to today's focus on fashion industry, although the two cases of SMCP and Bally have been defeated by the old rival Shandong, but from December 2017 to March 2018, in 4 short months, it was known as "China Berkshire" Fosun even received three brands, strength and determination can be seen.

In 2015, Fosun also set up a special fashion company. Its main function is to manage post investment related fashion projects.

However, Guo Guangchang, founder and chairman, has said that he will not interfere with the daily management of the acquiring company.

Unlike the two senior brands, Herme has chosen a completely different way: starting from the channel end. This is because "China's retail market is large, but high-end consumer goods are different from those of Europe and the United States. The department stores in Europe and the United States are also retail businesses. They manage their own products. They control their goods and manage their own businesses. Most of them are the nature of the rental counters. In a sense, agents are the real retailers in China.

Now that we want to enter the business, the most important part of business is retail.

Yu Yang explains hermei's position in this way.

In the eyes of Yang, HM is entering a market that can enter and retreat. "Upstream is mainly connected to the brand, and downstream is mainly related to China's main retail channel".

In 2017, he first identified the direction of Ho Mei, who first acquired a series of luxury fashion brand operation holding companies such as Shanghai Europe blue, lofty department store, Joe fashion, rainbow Shenzhen, Ying Cai development and rainbow Zhuhai in the same year. It not only formed a huge offline store network, but also authorized nearly 40 international luxury fashion brands authorized by Armani (Hogan, Dolce, Dolce & Gabbana, Hugo Boss, MCM, etc.), and mastered a large number of international luxury brand agency resources.

Taking Armani brand as an example, Herme group has occupied more than 80% of the domestic market share after completing the above acquisition.

At the beginning of 2018, he further took the 90% stake in the luxury goods supplier's Shang pin net and its 100% stake in the parent company and Cheng Yu Xin, forming an online and offline integrated layout in the field of luxury operation.

At the same time, it also stripped the original core businesses such as jewellery and P2P to provide financial support for focusing on the core business of luxury goods.

In 2017, the net profit attributable to the parent company was 144 million yuan, an increase of 3.41% over the same period last year, and its operating income was 2 billion 410 million yuan, an increase of 13.34% over the same period last year.

Although the performance is not brilliant, but in 2018, a quarterly company's international brand operation business has achieved explosive growth, contributing to nearly 60% of all revenues.

Takeover is just the beginning.

Yu Yang did not deny that after the failure of bidding for Bally, Herme is still actively looking for the next potential acquisition brand.

In addition to funds, European luxury brands have their own culture and rules, which are in conflict with the ambition and goals of China's rapid development.

If we want to succeed in the acquisition, we must strike a balance between the two: after the completion of the acquisition, the Chinese market can not only develop at a considerable pace, but also maintain DNA in Europe while changing the market.

In many European companies, this is the most critical point for their management to accept new shareholders. "

Speaking of Herman's competitive experience, Yu Yang also stressed: "for Herme, the current acquisition of brand is not the core, and the key is the integration of the acquired target.

Of course, meeting a good target will also lead to it, but the synergy effect is the key.

Just holding the channel resources seems to lack the constraints on the brand side, while focusing on acquiring brands means less control over dealer channels, especially in China's complex retail channel environment.

At this stage, no one can say with any certainty who will be better than anyone and who will be able to achieve the Chinese version of LVMH faster.

In the longer term, buyout is just the beginning. The management mode, channel layout and overall operation after purchase are the key.

LVMH, known as the world's largest luxury group, has conducted more than 60 m & A pactions over the past 30 years, almost covering the entire category of luxury goods industry.

But the way to success is not only to pinpoint the time points, but also to use the economic cycle to control the cost, and more importantly, to adopt the operation strategy of "buying but not". On the one hand, it maintains the relative independence of the brands, and on the other hand, it can empower the various brands with the strong retail channel and market ability of the group.

This is definitely not an easy and easy way to go, especially because many brands seek to change hands because of their difficulties.

After all, similar to LVMH's revival of Celine, it needs both old experience and outstanding strength, and certain opportunities.

The Austria brand Wolford, known as the world's best silk stocking, lost 6 million 600 thousand euros in the first half of fiscal year before its return, while the old luxury brand Lanvin also experienced frequent changes, sustained losses and gloomy prospects before its launch. In 2016, it reportedly suffered a loss of up to 18 million 300 thousand euros, and also owed about 15000000 euros of staff and suppliers and 100 million euros needed to repurchase related businesses.

Regardless of brand awareness, historical heritage or product quality, Wolford and Lanvin are good investment targets. But in the face of bad financial data, how much certainty is there for Fosun to make the two players fight? From past experience, Chinese enterprises lack the experience of running luxury brands, and there is little need for too much evidence.

Compared with the more junior "mixed face" and "familiar with the rules of the game", the second skills of "running and managing luxury brands" are obviously more complex and much more profound.

Compared with the operation ability, the overseas brands that choose Chinese bosses should pay more attention to the strong capital and the huge potential of the Chinese market, which is the "China Power grafting global resources" that has been advertised by Fosun.

For Bally, who has more than 50% of its revenue coming from the Chinese market, it will obviously rely more heavily on Chinese consumers. However, it remains to be seen how effective it will be.

Successful experience is not without.

In 2016, Ruyi gained control of the SMCP group, and the three brands of Sandro, Maje and Claudie Pierlot entered Tmall in succession. The official website of the Chinese version was speeded up. Sales in Asia increased by 45%, and Chinese sales accounted for 12% of the total sales of the group.

In 2017, SMCP entered the capital market as if it wanted to. In less than 1 years, it was 261 million euros in cash.

At present, the development of SMCP is gratifying.

Thinking more deeply, whether it is "revive the dead" or "speed up growth", when more and more overseas brands and Chinese bosses have the same idea of "China's power to grafted global resources", how to maintain the momentum of brand sustainable growth will be a new problem. After all, whether the old luxury goods or the relatively young luxury, the competition of the industry itself has been quite fierce, and it will also face the impact from the fashion business and fast fashion.

After purchasing the Greek luxury brand Folli Follie (FFGRP.AT), Fosun used the resources accumulated in the retail industry to help brands open their stores in the gold lot and boost sales in China. So far, there are 113 stores in China.

According to media reports, 10% of its global revenues and 15% of its profits come from China.

On the other hand, although Folli Follie's sales and profits before interest, tax, depreciation and amortization have been increasing steadily since 2013, the growth rate in recent 3 years has declined significantly (Fig. 3).

Especially in the 2017 fiscal year, its net profit has dropped 4.5% to 212 million euros.

In terms of "integration operation and synergy", he also faces the challenge of the potential brand to recover agency power.

The 2004-2010 years are the glorious years of brand agents and channel businesses. A group of enterprises such as Yao Lai, Junsi, Disheng and so on have won many brands while relying on the status of "local snake".

But during the period of training, especially when brands realize that the potential of the Chinese market is so great, they frequently choose to withdraw their agency power and grasp the control power of brands and channels.

The classic case includes Coach collecting Chinese retail business from Junsi group, Burberry buying up all the Chinese agents from Yao Lai at the cost of up to more than 100 million pounds, while Hua Dong international has trained Bally brand in Greater China for 28 years before 2008.

At the moment, apart from the brand that has been withdrawn from the agency, several major agents have almost monopolized the rest of the brand, and Herman is relying on the acquisition of Europe blue and Macao rainbow mainland business to succeed in the first group.

But the problem before us is also very realistic. How should a brand continue to reclaim agency power?

In this regard, Yu Yang is quite calm: "the brand that withdraws the agency generally comes back to the head office for the need of listing.

But there are many family businesses that do not have the intention to go public. They have long-term stable partners in China.

Of course, we will continue to enrich the brand matrix of agency and operation according to the annual business development plan.

On the one hand, strong channel resources will give agents strong competitiveness and win more brand agency rights, thus entering a virtuous circle and forming a larger scale advantage.

On the other hand, the rise of light luxury and tide brand camp has led agents to see the hope from the incremental market.

Compared with the first line brand, most of these brands do not have the ability to directly operate, and still need more help from agents to develop the market.

He will take a positive brand strategy in the future, and try to dig deeper into new luxury brands by integrating international brand channel resources. "We will introduce some brands in 2019, and we are currently negotiating with 2-3 Italian company, mainly aimed at young people's luxury and tide brand".

The winner of the millennium will win the world.

The bottom of Yang is not groundless.

As the four major elements of the consumer industry, new brands, new customers, new technologies and new formats have made some substantial changes to the "luxury" industry.

At the end of March 2018, Virgil Abloh, founder and director of fashion brand Off-White, became the creative director of Louis Vuitton menswear.

In the past 3 years, its 2015 year LVMH Young Fashion Designer Award was launched to challenge the luxury brands for the first time. The dubious relationship between the tide brand and the luxury brand two has already come to light.

This is not the first LVMH to cater to young upstarts. In 2017, it also joined hands with Supreme, a non mainstream Street skateboard culture, to launch a joint series to create annual explosions.

From rebel Street brand to mainstream fashion products to a 100 year luxury brand, Supreme's counterattack is a reflection of the pformation of design capability into brand value, and an example of market gene change.

In this regard, Yu Yang's explanation is: "the rise of the global luxury market so far, a generation has passed, the direction of luxury products and DNA, there must be some changes in the current market."

More and more "Balenciaga" and "Givenchy", "BAPE" and "Off-White".

Of course, luxury.

The benchmarking brand is bound up with "tide card" and "explosive money", and the market will inevitably produce worries about its loss of uniqueness and scarcity.

However, in the face of doubt,

On the other hand, LVMH group's earnings report also confirmed that the Supreme x Louis Vuitton series launched in 2017 has not only greatly enhanced the exposure and influence of the brand in social media, but also made a great contribution to the growth of performance.

Standard fame and wealth.

Behind this is the young generation represented by the millennial generation, who tightly locked the attention of luxury brands with a solid purchase record.

TOD'S president revealed that nearly half of the brand's customers are Millennials.

Globally, according to Bain consultancy statistics, the millennial generation in 2017 has taken up 30% of luxury consumers. In 2017, the millennial generation bought 8 luxuries on average, higher than 5 in other age groups.

In China, the purchasing power of young power is much more than that of the global market.

The survey by the World Luxury Association shows that Chinese luxury consumers are 15 years younger than European luxury consumers, 25 years younger than the US.

Jingdong and seven wolves share the luxury of electricity supplier Farfetch global users average age is 36, while the average age of mainland luxury consumers is 29 years old.

As the new force of luxury consumption, they are younger, more active, more assertive and less impatient.

At the same time, as Internet aborigines, they rely more on digital technology and have a natural preference for online shopping.

Therefore, the budget input of major brands to online marketing increased from 35% in 2015 to 40-50% in 2017.

So, in the whole year of 2017, LVMH's most conservative two brands, C, line and Berluti, have launched a new official network of built in e-commerce services. The official website of Louis Vuitton has launched an electric business service for a lifetime, and the group's new e-commerce platform 24 Sevres has finally been launched.

As a result, Jingdong launched its own luxury flagship store platform TOPLIFE after the injection of Farfetch, an international luxury and luxury business platform, and Tmall launched an embedded luxury virtual App Luxury Pavilion, which has attracted 50 luxury brands on the line for six months.

The pformation of the luxury brand's attitude towards the electricity supplier, in addition to the promotion of sales volume and the consideration of online and offline, also hopes that we can get accurate consumer portraits so as to better meet their needs.

At the beginning of 2018, he bought the luxury goods supplier, which is also the same calculation. It integrates the existing brand operation resources with the user resources of tens of millions of users, and empowers each other online and offline. "With the help of Shang Ping net, it promotes the company's data analysis and product promotion capabilities, and provides online basis and technical support for the establishment of the membership system".

According to Yang's understanding, the competition of luxury electric business in China has just started. "This means great opportunities." and the bigger opportunity comes from "two characteristics of the luxury industry, the increasingly strong fashion attributes, and the dramatic changes in the retail property. New channel expansion and new formats do not exclude the development of more channels such as electricity suppliers, stores and travel."

The market is constantly changing, so long as it does not solidify, it will bring opportunities.

This opportunity belongs to

For every participant in the field, for them, there are only two key words to grasp the future: the Chinese market and the millennial generation.