Cartridge net profit plummeting in the third quarter Analysis of luxury Industry Development

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(COACH), the US light luxury brand, recently reported third-quarter results, showing net profit plummeting 53.8%. Meanwhile, sales in the Chinese market rose by just 8%, well below the 25% growth rate in China in the previous fiscal year as a whole. As a light luxury fashion brand, Cartridge was once popular, but as the market continues to grow such light luxury brands, and pay more attention to young audiences and fashion, Cartridge’s status has been shaken.

China’s poor luxury market has also had a certain impact on the decline of the Chinese industry. Influenced by the state anti-corruption, high luxury prices and few products, Chinese luxury consumption has shifted from domestic to overseas. The forecast report on demand and investment in China’s luxury goods industry for 2015-2020, provided by the Institute of prospective Industries, shows that Chinese people spent a total of US $106 billion on the global luxury market in 2014. It accounts for 46% of global luxury consumption. Of these, 76 per cent of consumption took place in foreign markets, far exceeding domestic consumption of luxury goods. This makes the domestic luxury brand interests damaged, faced with futile embarrassment.

As a result, luxury giant Chanel announced it was lowering prices for its products in China, threatening lower-priced brands such as Cartridge. However, in fact, with the market of luxury goods in the doldrums, raising prices can no longer improve the image of the brand and increase the sales volume of products, so as to realize the same price in the world to safeguard the interests of the Chinese market. Expanding new markets and meeting the needs of a new generation of consumers will be key to the success of the luxury goods industry.

The same global price helps to maintain sales in China, breaking the embarrassment of seeing no sales at the current time. In addition, the same global price is conducive to the fight against illegal buying and counterfeiting, allowing consumers to spend rationally.

There are two main new markets for luxury goods in China, one is e-commerce. As luxury goods manufacturers achieve the same price globally, the profit of daigou website will be difficult to eliminate after the price difference is narrowed, vertical ecommerce website or brand authorized ecommerce website will ushered in huge development opportunities. The other is the channel sinking to the third and fourth tier cities, taking advantage of e-commerce to develop all parts of China can buy luxury goods, but luxury offline experience stores still need to be built, online and offline cooperation, will promote further prosperity and development of the market.

To meet the needs of a new generation of consumers will require a younger, more personalized and fashionable luxury product style, but also require luxury manufacturers to develop a special sub-brand for this group of people, focusing on attracting a new generation of consumers.

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