The following is the fourth installment of a series looking at the tactics apparel firms are using to survive.
Despite it being a weekday afternoon, shoppers crowded a huge Beijing shopping mall one day in mid-September to peruse the high-end brand shops standing side by side.
"We don't care about prices," said a young couple who bought two Chanel luxury bags for about 70,000 Chinese yuan (about 1.1 million yen), "We'll just buy one if it strikes our fancy."
As the spread of coronavirus infections has tapered off, more people are trying to find ways to vent their frustrations over the widespread restrictions on going out and other activities.
Consumption in China has typically been sustained by the wealthy, who have such assets as real estate and stocks. Nowadays, sales of high-priced condominiums and luxury vehicles and other things.
In early May, for example, the message "Chanel will raise prices tomorrow" circulated on a popular social media platform in China, leading to long lines in front of Chanel shops in many places around the country. As photos of these lines were disseminated, an even greater number of people flocked to the shops.
--V-shaped recovery likely
Moet Hennessy Louis Vuitton SE (LVMH) of France, the world's largest luxury brand group, saw net profit in its consolidated financial statement for the six-month term that ended in June drop by 84% from the corresponding period of the previous year to 522 million euros (about 64 billion yen). Suspended operations of LVMH stores in France and other countries are blamed for the poor business performance.
Then on Sept. 9, LMVH announced its decision to retract the agreement it concluded last year to acquire Tiffany & Co., a U.S. major maker of jewels and ornaments, for 16.2 billion dollars (about 1.7 trillion yen). This apparently indicated LMVH's reassessment of the purchase price being too high, given that Tiffany suffered a deficit in its midterm net profit.
There is also a view that the deterioration in the business results of luxury brand shops is temporary. According to an estimate by the global consultancy firm Roland Berger, the world's apparel market will start recovering in 2021 and continue to expand thereafter. Growth is estimated to be high in China and other Asian countries.
Even in Japan, which foreign tourists have stopped visiting for months, consumption by high-income earners does not seem to have weakened.
President Tatsuya Yoshimoto of J. Front Retailing Co., which has Daimaru Matsuzakaya department stores under its wing, said, "We made remote direct sales of brand-name products to customers during the temporary closures of our department stores, and they sold very well."
A V-shaped recovery may not be too away.
--Time-honored labels in difficulty
Meanwhile, apparel brands targeted at middle-class consumers have continue to struggle.
J. Crew of the United States filed for bankruptcy in May this year. J. Crew's goods were familiar even in Japan at department stores and commercial facilities, with prices ranging between the 10,000 yen level to several tens of thousands of yen. Many of J. Crew's products could be purchased at lower prices than those of luxury brands.
J. Crew had tried to break with its casual image, but its strategy of shifting to high-class brands proved unsuccessful, while its customers opted for relatively lower-priced goods at online shops.
Why? One person involved in Japan's apparel industry summed it up like this: "A brand like J. Crew can't rise to be the 'face' of a shopping street or a department store. Unlike in the case of Vuitton and Chanel, J. Crew had neither the overwhelming brand power nor the ability to attract customers. It could not come up with a strategy of emphasizing good cost performance, like that of Uniqlo."
Long-established apparel firms in Japan have also been thrust into a difficult situation. Major apparel maker World Co. announced in August that it would abolish its unprofitable five brands, including ozoc and aquagirl, by March 2021, and shut down its about 360 stores. The company's stock price shot up the following day, as the market accepted the company's announcement as being proactive about structural reform.
In August, Onward Holdings Co., which has developed such brands as 23ku and J. Press, reopened a store on the Zozotown clothing online shopping site operated by Zozo, Inc. Onward had withdrawn from Zozotown in February 2019, in protest against the uniform discount service provided by Zozo for paid subscribers. Even after its temporarily closed stores resumed operations, the recovery of customer traffic was very sluggish, thus enhancing the weight of online shopping.
The novel coronavirus outbreak has changed people's sense of values and lifestyles significantly. But figuring out how to grasp the new consumer trends in a way that will lead to reforms has proved elusive so far.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
