Missing “landmarks”: Armani Zegna withdraws from China Trade, luxury brands think about changes offline

Photo source: Visual China

Blue Whale News, March 5 (Reporter Wang Hanyi)The afterglow of the setting sun shines obliquely through the glass curtain wall of Huamao Plaza, and the once-shining Armani single-family flagship store seems to have lost its halo at this moment.

Huamao Plaza closed Armani shop Photo by Blue Whale journalist Wang Hanyi

On the facade of the building, the iconic LOGO on the upper half of the building has disappeared, leaving only horizontal strips, like unfinished scars.

Move your gaze to the lower half of the floor. The originally transparent floor-to-ceiling window is also covered by a layer of matte cloth, making the items in the room blurred.

As we approached, we could vaguely see the exposed metal brackets inside through the crack of the door, glowing faintly in the dusk; several model hangers that had not been removed were lying alone in the corner.

Turning around, there were still pedestrians rushing past on the steps of the outer square, but most of the time, there were scattered people squatting here. It was small, empty, and shaded. It had become a favorite smoking area for SKP office workers.

When the neon lights of the SKP Mall 30 meters away gradually lit up, the building that had once witnessed fashion shows and celebrities gathered in the past was unreservedly cut into fragments intertwined with light and dark.

Photo by Wang Hanyi, a journalist from Blue Whale in the center of Huamao’s single-building square

upward

Recently, the three luxury menswear flagship stores of Zegna in Beijing Huamao Shopping Center, Giorgio Armani and Emporio Armani, owned by Armani, have closed their stores one after another, ending their 17-year operating history.

These three single-family stores were once landmarks in the core area of the CBD. When they opened in 2008, they were regarded as a landmark event for luxury brands to expand in China.

According to historical information released by the China Trade Center, on September 12, 2008, the Armani China Trade Center concept store opened grandly. This Armani concept store located in the central square of the China Trade Center is the only independent large-scale flagship store in the world after Milan and Tokyo.

The store also operates two series of brands, Giorgio Armani and Emporio Armani, and all products are updated simultaneously with the world.

The store is located in the center of the 45-degree axis of the Huamao business district, surrounded by high-end landmarks such as Beijing SKP, the Ritz-Carlton Hotel, JW Marriott Hotel and the Huamao Office Building.

With this excellent geographical location, Armani concept store occupies a unique commercial advantage. In 2011, Armani’s sales in China increased by 45%, and 28 new specialty stores were opened. At that time, China’s luxury consumer market was full of vitality for Giorgio Armani.

In the past ten years, luxury brands have expanded aggressively in China. In 2015, Armani Group alone had 2983 stores worldwide. During this period, brands quickly increased market coverage through large-scale store stores, starting from core business districts in first-tier cities, such as Beijing SKP and Shanghai Hang Lung Plaza, and gradually sinking to second-and third-tier cities.

However, affected by unfavorable factors such as the slowdown of China’s economy and the decline in the number of tourists, the luxury goods industry has experienced cold and store closures have followed. In 2024, LVMH Group’s revenue fell 2% year-on-year to 84.7 billion euros, and full-year organic revenue in the Asia-Pacific market excluding Japan fell 11%.

Kering Group’s revenue fell 12% year-on-year to 17.194 billion euros, and revenue in Asia-Pacific markets excluding Japan fell by 23%. Since 2023, Gucci has closed 6 stores in the China market, and the expansion of new stores has slowed down significantly.

“In the past 20 years, almost all (luxury) brands have been overexposed in the China market.& rdquo;Tom Ford International Chairman Domenico De Sole said in a recent interview with Italian media MF Fashion.

steering

Faced with changes in the market environment, the profitability of luxury brands ‘stores in China has been severely tested, and it has become no longer cost-effective to maintain a large number of stores with mediocre performance. In this context, brands have begun to turn, and closing stores has become an inevitable choice for brands to stop losses in a timely manner.

The “2023 Luxury Goods Channel Concentration Report” of the Wanted Research Institute mentioned that 60% of sales in China’s luxury goods market in 2023 will come from Top 20 shopping malls. Brands are closing inefficient stores and concentrating resources to serve high-net-worth customers.

A Giorgio Armani salesperson told Blue Whale News that Armani withdrew the store because the company did not renew its contract with Huamao and opened a new store in Guomao. The original three stores in Beijing have now been consolidated into two. rdquo;

Take Zegna as an example. Its revenue in Greater China will fall by 13.2% year-on-year in 2024, but the brand still regards China as the last market to rebrand, trying to improve efficiency by streamlining channels.

A staff member of the China Trade Center revealed to Blue Whale News that long before Zegna chose to close the store, the store’s traffic was already visible to the naked eye. rdquo;

Therefore, can the closures of the three major brands reflect that China’s luxury goods channels have shifted from scale expansion to efficiency priority?

Dr. Zhou Ting, an expert in the luxury goods industry and president of the Wanderer Research Institute, said in an interview with Blue Whale News that the luxury goods market has changed from an incremental market to a stock market. In the past, consumption growth was achieved by relying on the increase in consumption upgrades of mass consumers, but it has become a result of relying on the increase necessary for high-end consumers to achieve growth. The method of acquiring new customers in new markets through store expansion is outdated. Precise reach, efficiency first, and experience first are the core keywords of luxury retail at present. rdquo;

For example, in recent years, Armani plans to renovate stores to display multiple series of products in the same space; Zegna has tried to introduce the Milan Oasi Zegna Ecological Project into store design to enhance the scene experience.

purification

In addition to turning to more precise channels, in the strategic adjustment of the luxury goods market, the brand has also further consolidated its high-end image positioning and market competitiveness by purifying its customer base.

For example, since July 2 last year, LV prices across the board have increased by 5% to 7%. Previously, LVMH Group pointed out at its performance conference that LV’s limited price increase was mainly aimed at leather products in order to narrow the price gap in different markets around the world. However, a brief observation will reveal that LV, which has been adjusted ten times in three years, has the latest four price adjustments targeted the China market.

Luxury brands use price increases to screen core customer groups and eliminate price-sensitive consumers, thereby consolidating high-net-worth customer groups and maintaining brand scarcity. Similarly, the strategic adjustments of Armani and Zegna also have the same effect.

Armani has launched a third-line strategy since 2017“”, retaining only Giorgio Armani, Emporio Armani and A.| X Armani’s three main lines will close redundant sub-brands and stores.

Zegna reshaped its brand image by consolidating product lines and strengthening high-end customization and ultra-luxury businesses, such as acquiring the Tom Ford fashion line.

Although Armani did not renew the contract with Huamao this time, Dr. Zhou Ting pointed out that single-family flagship stores are not outdated and will even become a future trend. ldquo; One city, one store and one network is the most important store strategy for luxury brands in the future. The stores here are large store experience stores, and more are exclusive stores. The operation of a single-family physical store has extremely strict requirements on the size, scale and brand level of the brand. rdquo;

“Because of this, we often see the top 100 international brands in the world, especially the cutting-edge first-line luxury brands, taking the lead in realizing the business model of a single store based on their strong strength and huge business scale. rdquo;

However, the selection criteria of luxury brands for shopping malls have changed a lot. ldquo; The core criteria for brand selection of stores include urban population and consumption potential, whether there is a brand environment for leading brands to open stores, convenient and centrally located geographical location, complete and professional supporting services, rental and business policies, etc. Now, we have to add whether there is enough VIP activities and service space, whether it is in line with the consumption tastes of high-end customers and the brand tone of luxury brands, whether it is close to the core residential areas of high-net-worth customers, etc. rdquo; Dr. Zhou Ting added.

Judging from the overall market trend, more second-tier brands with relatively small brand sizes, high-trend brands and designer brands often choose other more efficient and lower-cost models as their mainstream operating methods. Therefore, single-family stores are more of the exclusive choices of first-line brands and large groups.

What impact does the closure of Armani’s single-family store this time have on China Trade’s rental income and business planning? Are there plans to introduce new brands to fill the gap? The China Trade Center officially issued an announcement saying that China Trade has officially launched the China Trade Landmark Revitalization Plan and will be replaced by new faces familiar to the public in the near future.

It is worth noting that the Huamao store closure incident is not an isolated phenomenon, but a microcosm of the shift from barbaric growth to refined operations in China’s luxury goods market.

When channel efficiency replaces scale as a core indicator, brands need to find a new balance between site selection, product line and consumer experience.