Why an increasing number of luxury brands fail in China?

Louis Vuitton store

The notoriety of a luxury brand does no longer suffice for the evolving consumer base in major emerging markets such as China. As they travel internationally, more and more Abroad, Chinese consumers have become familiar with Western standard of customer service which they do not always find in the local stores of the same brands. That is why, it is essential that luxury brands train their local staff by taking them to their native countries where they can experience the highest level of customer service in their flagship stores. This way, Chinese staff can also learn about the heritage of the brand as well as the manufacturing process and the specifics of the finishes.

Another important factor some luxury brands have been overlooking in China is the origin of the products. While in Western markets, luxury goods consumers have become all too familiar with products made in Asia, for Chinese luxury consumers a luxury branded product which is made in their home country is becoming a drawback, some even perceiving the products as being counterfeited. Luxury brands present in China, which have been ”affected” by the Asian origin of their products are: MIU MIU, HUGO BOSS or EMPORIO ARMANI. Recently, it has come as a surprise that a major brand such as Hugo Boss had to close three shops in China and more closures are envisages for the near future. The Asian origin of their products is also to blame for the slow expansion of American leather accessories brand COACH. This also explains the explosive expansion in China of brands such as Salvatore Ferragamo and Louis Vuitton which manufacture their products exclusively in their countries of origin.

Mention should also be made about the need for the international luxury brands to adapt to the fast changing profile of the Chinese consumers by refreshing the selection of products more often that they do in mature markets such as Western Europe or USA. One of the winning formulas in China seems to have been first implemented by Ermenegildo Zegna which supplies its store with new products three times as much as the regular seasons.

Oliver Petcu