Kering, the French luxury group, is adapting its sales approach to better cater for increasingly sophisticated Chinese customers, according to group managing director Jean-François Palus.
“We’ve changed the way we conduct our business in China and the way we address Chinese clients when they’re abroad,” said Mr Palus at the Financial Times luxury conference in Lisbon on Tuesday.
“We learnt that a very serious risk is to become complacent, to think that it’s an easy business, an easy customer base, easy to open stores with good products and then people will come in. That was true for a moment but Chinese customers have become sophisticated and highly demanding and we need to adapt.”
Chinese consumers account for more than 30 per cent of global luxury consumption, according to consultant Bain, which is forecast to increase to 35 per cent by 2020.
How much of global luxury consumption Chinese consumers account for, according to Bain, a figured set to rise to 35% by 2020
In the past, luxury houses relied on rapidly opening up stores in China to fuel growth amid rampant Asian demand for their products, but this approach has been undermined by an economic slowdown in China.
In the final quarter of last year, Chinese consumers showed signs of returning, although notably shopping more in mainland China, while tourism in Europe has slowed in part owing to recent terrorist attacks.
In China, Kering is retraining shop assistants and replacing email communication with WeChat, China’s most popular social media platform with more than 800m daily users.
Mr Palus said: “The way the Chinese treat very important clients is different — they have a very candid approach to wealth.”
He pointed to a recent visit to a Gucci store in Beijing where the store manager told him he had hired the daughter of a billionaire to work with clients in the shop “because to talk to wealthy people in China, you need to be wealthy”. He added that bad feng shui in a shop can hurt client traffic.
According to Pierre Gervois, the Founder and Publisher of the STC magazine, a luxury travel publication for High Net Worth Chinese global travelers “HNWI Chinese clearly signaled about five years ago that they wanted to purchase luxury goods outside China, to enjoy the full experience of the iconic flagship stores in London, Paris or New York”
“This new trend has not been immediately recognized by luxury conglomerates such as LVMH and Kering, that led to an inflation of store openings in China in the years 2010/2015, with little customer traffic, insufficient staff training, and in some cases damaging consequences in terms of brand image.”, Mr Gervois added.
Kering posted a 31.2 per cent rise in revenues to €3.57bn in the first three months of 2017, lifted by a 34 per cent jump in sales from luxury activities.
Among its brands, Gucci led the way, posting record revenue growth of 51.4 per cent for the three months — the latest sign of improvement under creative director Alessandro Michele. Other Kering brands such as Brioni and Bottega Veneta were doing less well than the likes of Saint Laurent.
Mr Palus said: “The market has become more difficult and the pace of growth has slowed down. In this environment you need to take market share from the competition.”
Kering was not looking at acquisitions, added Mr Palus. “We have so much on our plate with helping our existing brands tap their potential . . . we don’t have enough time to think about M&A.”
He said that Kering was also still adapting to digital platforms. “We need to open ourselves to what’s happening in other industries and other countries. Our industry needs to become less product-centric and become more customer-centric.”
Source: The Financial Times.