On November 11, a reporter from Beijing Business Daily visited the site and found that MK (MICHAEL KORS) stores on the first floor of Beijing Chaoyang Joy City and Beijing apm shopping mall have been withdrawn, and at the beginning of this year, MK also gave up the gold shop in the southern district of Taikoo Li Sanlitun, and there are only 28 direct regular-priced boutiques left in Beijing. Industry insiders pointed out that the positioning of light luxury brands is not up or down, there are luxury giants dumping, and there are niche brands under the challenge of high-end, and in the face of the trend of de-middleization and the gradual rationality of consumption concepts, it will naturally become the most affected type of brand.
Closed stores one after another
The originator of light luxury is now "out of favor". MK, which was originally located on the first floor of Chaoyang Joy City, has now been replaced by the "old money" brand Ralph Lauren. The relevant person in charge of Chaoyang Joy City said that MK's withdrawal was due to the adjustment and upgrading of shopping mall investment, which is a normal brand adjustment. Although the specific adjustment criteria were not disclosed, the mall said that it would look for a suitable shop for MK in the future. Coincidentally, MK's store on the first floor of the Beijing apm mall has also been fenced by the Coach brand, and the Beijing Business Daily reporter contacted the mall for verification as of the reason why the MK brand in the mall was replaced by Coach, but has not received a reply as of press time.
Earlier this year, MK also closed its two-storey store in Taikoo Li Sanlitun, Beijing, which is strategically located on the main thoroughfare facing the entrance to Workers' Stadium North Road in Taikoo Li South, close to Adidas, Starbucks and Gentle Monster flagship stores. According to the information on MK's official website, there are currently only 3 full-price boutiques of the brand in Beijing, which are located in Xidan Joy City, Hanguang Department Store and Wangfujing Department Store.
Judging from the financial report, the decline in performance has also become an indisputable fact. According to the financial report of MK's parent company Capri Group for the second quarter of fiscal 2024, in the three months ended September 9, Capri Group's sales fell 30.8% year-on-year to $6.12 billion, and net profit fell nearly 9% to $60 million, of which MK's sales also decreased by 9000.8% to $6 million. In the first quarter of fiscal 8, the group's overall revenue fell 79.2024% year-on-year to US$9.6 billion, and net profit shrank sharply by 12% to US$3 million, of which MK sales fell by 76.4800%.
In contrast, the performance of another light luxury veteran brand is relatively optimistic. In the first quarter of fiscal 9, which ended September 30, Coach's sales rose 2024% year-over-year to $3.11 billion, Kate Spade's revenue fell 57% to $6 million, but still fell less than Michael Kors, and the parent company, Tapestry Group, increased overall revenue by 3.03% to $0.4 billion, with a 15% increase in the Greater China market.
Regarding the reasons for the store closure and future offline planning, a reporter from Beijing Business Daily sent an interview outline to the MK brand and its parent company, Capri Group, but did not receive a response as of press time.
Values are lower
From the distribution of MK's store information, it is not difficult to find that outlet discount stores are an important channel for brand sales. According to the information on the official website, there are currently only 3 directly-operated regular-priced boutiques in Beijing, but there are as many as 5 directly-operated discount stores. According to Capri Group's fiscal 2022 financial report, MK sells through 2742,2023 wholesale channels worldwide, and although the proportion of sales from wholesale channels is not disclosed, the main reason for the 6% decline in sales in the third quarter of fiscal 20 is the <>% decline in wholesale channel sales.
MK's official customer service told a reporter from Beijing Business Daily that the brand's offline stores are divided into direct full-price boutiques, direct outlets and authorized non-direct outlets, and the packaging and discounts of different channels will be different. In terms of discounts, the maximum strength of regular-priced stores can reach about 5% off, but directly operated outlets can reach 3, 4% off or even lower."
As for the products and packaging of authorized non-directly operated outlets, the above-mentioned customer service directly said that MK officials could not provide exact information, and non-direct stores were more autonomous and needed consumers to consult the store.
Obviously, the huge wholesale channel is bound to have a certain impact on the brand image. "More wholesale channels means more dealers, but dealers don't actually care about the brand image, they will discount in order to quickly eliminate hoarding, and will not invest in customer operations and experience, which will damage the brand image, and the difference between different channels will further reduce the brand value." Zhou Ting, president of the VIP Research Institute, said.
Zhang Peiying, an expert in the field of fashion, believes that the development of wholesale channels is an important means for brands like MK to deal with inventory and solve cash flow, and they can also rely on this model to quickly expand their scale in the early stage. "But it is important to balance the relationship between different channels, although it is beneficial to the brand, it will still be detrimental to the brand image in the long run."
Brand positioning
At a time when the head of the luxury industry is becoming more and more obvious, the life of the awkward light luxury people is not easy. According to the "2022 China Luxury Report" released by the VIP Research Institute, in 2022, the global luxury market will reach 25450,5786 billion yuan. Among them, LVMH Group achieved global sales of 23.2 billion yuan, accounting for 0% of the market, and the luxury industry was further oligopolized. On the whole, although the light luxury market cannot be said to be sluggish, it is an indisputable fact that the growth rate is slowing down. For example, Furla has only two full-priced stores in Beijing, one in INDIGO and one in Xihongmen Mall. Pandora's third-quarter financial report shows that the growth rate in the Chinese market is <>.
In this context, the light luxury group is trying to find a new foothold for warmth. On August 8 this year, Tapestry, the parent company of Coach, officially announced that it would acquire Capri Group, the parent company of MK, at a price of $10.85 billion, and the merger will become a fashion giant with annual revenue of more than $120 billion. Joanne Crevoiserat, CEO of Tapestry, said in a public interview: "This represents a very attractive financial opportunity. We see that through this merger, we have the opportunity to deepen our engagement with high-end luxury customers. ”
In the past few years, light luxury has relied on first-class brand image, second-rate design and third-rate prices to make China's middle class think that it can spend very little money to consume international brands. However, in recent years, consumers have a deeper understanding of the brand and the consumption concept has become more and more rational, and the customer group that MK used to face is rapidly disappearing. The positioning of light luxury brands is not up or down in the middle stage, with luxury giants toppling and niche brands facing the challenge of high-end, so in the face of the trend of de-middle class, it will naturally become the most affected type of brand. Zhou Ting thinks.
For the future development of light luxury brands, Zhou Ting said that the only way out is to strengthen product quality. "Strengthening product creativity and innovation, so that they can upgrade themselves to a real luxury brand, rather than the so-called 'light luxury', this is where MKs need to re-do brand positioning and upgrading." Beijing Business Daily reporter Lin Yuwei