By Casey Hall
Shanghai (Reuters) -Louis Vuitton on Shanghai Store is not your average luxury flagship. The 30 -meter -high store, Louis, is charged as an experience and houses an exhibition space and a cafe in the center of Nanjing Road’s shopping in Shanghai.
Louis, which has a solemn opening on Thursday, will undoubtedly attract crowds eager to publish photos on social media on their brilliant facade and photo-finished exhibits inside. But LVMH, owned by Louis Vuitton, will also hope it can stimulate sales among Chinese consumers whose costs for luxury goods have slowed.
The LVMH business strategy is aligned with a broader change among luxury goods traders from a transaction model – where a shop simply sells customers – to attract customers with “experience”, which ultimately stimulates growth.
Bets are high for luxury brands that have relying on rapid sales in China for years to nourish their global growth and ambitions, but are now facing demand in the world’s second largest economy.
The size of the Chinese market decreased by over 18% last year to about $ 350 billion ($ 48.80 billion), and sales are on the way to flat in 2025, according to consulting Bane estimates.
Zino Helmlinger, the head of the China Retail of the CRBE real estate service service provider, admits that the luxury segment in China has recently taken a “hit”, although he believes the delay is expected.
“If you look at the megastars – I mean LVMH, Kering, Richemont, Hermès – they almost tripled their profits within five years,” he said. “At one point there is some balance, there is only so much that you can grow, only so much that you can generate.”
In the first quarter, LVMH’s revenue in the region, which includes China, fell 11% on an organic basis – the Asia -Tihoetan region, with the exception of Japan, represents 30% of the group’s total sales.
Chinese consumers, heavily affected by the broader economic uncertainty and a prolonged decline in the real estate market, have tightened the cost of discretionary purchases – luxury branded bags among them.
The Shanghai -born Natalie Chen, 31, says she already owns enough “things” and has diverted a significant part of the funds she has ever used for luxury goods for travel.
“Honestly, I don’t feel that buying another bag will improve my life,” she said, although she has already visited a new restaurant discovered by Prada in Shanghai and intends to check the new Louis Vuitton coffee concept with girlfriends.
“It brings a different kind of feeling than just [shopping] In the mall, Chen, though she wasn’t sure that a ship-shaped store would make her make purchases outside the coffee and cake.
However, luxury brands feel a longer-term possibility of selling pumps.
As the appetite for personal luxury goods in China and around the world decreases, it is injured by economic pressure and price fatigue, the sales rate of “experienced goods” is increasing, according to Bane, who emphasized the jump in personalized luxury hotel and growing sales of fine dining rooms in its spring.
In 2024, for example, the common market for personal luxury goods around the world fell by 1%to 3%, even when experienced luxury costs increased by 5%, Bane said.
Luxury evolution
The new research published by the real estate adviser Savills earlier this month are this as a significant new trend in what he describes as the “developing” luxury market in China, in which people seek experience are lured with more expensive luxury brand points, from restaurants to Salonna restaurants
“All brands close stores, but those who can afford also open large flagships or hold some major events or exhibitions to maintain their visibility extremely high,” says Patrice Nordi, CEO of Shanghai -based Innovation Consultations, and essentially prepares for future success.
Brands from Balenciaga to Chanel, Louis Vuitton and Prada have closed stores in China since the second half last year. Gucci is about to close 10 stores on the market this year, Helmlinger said.
The stable Dior of Louis Vuitton opened a concept of coffee in Chendu earlier this year, and in March Prada opened a restaurant designed by Wong Kar Wai, in its Rong Zhai cultural space in Shanghai. The Tiffany and Co jeweler recently reduced a large store in the center of Shanghai, but in March he also opened a new three -storey flagship in Chendu.
Nordey says that although more people call this trend as “trying” retail, it actually speaks of something much deeper.
“I think this is a way to look at your customer, or as someone who will buy products, or as an individual who is trying to have a more fulfilling life,” he said. “If your goal is not only to feed your customer with consumer products, but more than that, you can actually resonate more strongly with them.”
While high-profile luxury closures in continental China have sparked speculation with brands that reduce the investment in a slow market, CRBE’s Helmlinger says true story is more nuclear, which shows strategic resource reconciliation, not retreating.
“You have to create this concept of a rarity, and the rarity comes with a shortage,” he said. “When you have 80 or 90 stores in one market, it doesn’t look so rare anymore, it seems to be the main one.”
($ 1 = 7.1714 Chinese Yuan Renminbi)
(Casey Hall Report in Shanghai; Additional Reporting by Mimosa Spencerediting by Shri Navaratnam)
