Why Chinese Consumers Are Turning Away from LVMH, Gucci

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00:00Let's talk about luxury, why not, right?

00:02You know, some of these foreign brands like LVMH, might have to move over, right?

00:08Things are changing in the whole $49 billion luxury market.

00:11We're spending on foreign premium brands that have actually started stalling in the mainland.

00:17And really the rise of these sort of local premium brands, right?

00:21Have you ever heard of the likes of, well, Laupu Gold, we talk about that quite a bit here.

00:25Songmont, Mao Ge Ping.

00:27I actually had to look it up a little bit, too, some of these brands.

00:31Let's bring in Shirley Zhao, our conglomerates in Consumer Reports.

00:33I guess David has no idea what we're talking about.

00:35Hang on.

00:36You haven't been to the latest renovation at the English household.

00:40Oh, Mao Ge Ping.

00:41All over.

00:42All over your face.

00:43All over.

00:43If you think the Oval Office is draped and bling, you should come to my living room.

00:48It's all Laupu.

00:49Yeah, there we go.

00:50Anyway, Shirley.

00:51Let's bring in, Shirley.

00:52Tell the rise in these Chinese premium brands.

00:54Why do you think they've grown so rapidly?

00:57So the rapid rise of these Chinese homegrown premium brands coincides with China's economic

01:04slowdown.

01:05So, you know, amid a slumping property prices and very high youth unemployment rate, a lot

01:12of Chinese consumers are now becoming more cautious and selective when it comes to shopping,

01:18especially luxury shopping.

01:20So they are now looking for, you know, personal connection on personal wellness and experience,

01:27and they are seeking connection on the sort of cultural level with the stuff that they

01:33buy.

01:34And Chinese premium brands have done much better in providing this experiential and cultural

01:41element in their brand storytelling.

01:44And that's attracted a lot of Chinese consumers.

01:47And also these Chinese premium brands on the pricing level, they're not as expensive as

01:55luxury, a lot of Western luxury brands.

01:57But they're still having this premium price tag.

02:01And, you know, for a lot of Chinese consumers, they see these Chinese brands as a sort of cheaper

02:08alternative to Western luxury brands.

02:11But still, they provide good quality products.

02:15Yeah.

02:15So not as luxury.

02:16I mean, just looking at the price point.

02:18So what challenges, if they nail the messaging and sort of the identity part of it, what challenges

02:24remain here?

02:26So a big part of their success is that they started off at a relatively low base.

02:32So it's relatively easy for you to grow to 20 or 30 starting from 10.

02:38But if you want to grow further, there are a lot of uncertainties.

02:44So whether this kind of rapid growth is sustainable, it remains to be seen.

02:49And also, you know, China's economy remains weak.

02:51And for luxury brands to really grow, it needs a growth economy.

02:56And it needs an expanding population and income for the middle class.

03:01And these elements are lacking in China nowadays.

03:04So all these uncertainties have become challenges for homegrown Chinese luxury brands.

03:10I love your story that mentioned about Bernard Arnault when he last went to China.

03:14He's the chairman of LVMH.

03:16Come on.

03:18It wasn't like he was looking at his own brands.

03:20He went shopping in Chinese brands, according to your reporting.

03:23I thought it was quite telling.

03:24What's sort of the message, I think, does this rise of local premium brands?

03:29What's the message to some of these big foreign brands out there now and how to really survive

03:32or at least compete in China?

03:34Right.

03:34So a lot of Western luxury brands are nowadays really stressing storytelling

03:39and providing experiential shopping for Chinese consumers.

03:43They have captured this change in consumer shopping behavior in China.

03:47So, for example, LVMH is right now building a lot of, you know, multi-story mega stores featuring

03:56not just retail elements, but as well as, you know, exhibition, food and drinks.

04:01There's that big ship, right?

04:03In Shanghai.

04:03Yes.

04:03In Shanghai.

04:03Yes.

04:03The Louie.

04:05Yeah, the Louie.

04:05In Shanghai.

04:06Yes.

04:06And a lot of other Western luxury brands are doing this right now.

04:10So in the past, you know, you can see them having small street front stores.

04:15And that did very well and a lot of people queued up outside.

04:19But nowadays, it's like stores occupying an entire building and providing a lot more just

04:26than the retail element.

04:28And these are what the luxury brands are doing in China right now.

04:32And they are hoping by doing these, they can build this personal connection with Chinese

04:38consumers.

04:38Not just shops, but buildings, Dave.

04:40They got to, yeah.

04:41You got to do it.

04:42You got to spend a lot of time in there, right?

04:44It's not just the champagne.

04:45It used to be just, I'm going in so I can have the glass of champagne.

04:49No.

04:49Right?

04:50It's everything else.

04:50It's a whole experience.

04:51All right.

04:52Shirley, it was a great story.

04:53Thank you so much.

04:53Try it sometime.

04:53Our conglomerate and consumer reporter.

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