Louis Vuitton has recently announced the closure of three China stores, including its first outlet in Gaungzhou. According to sources close to the brand, the luxury retailer is preparing to close several more stores across the country in the coming months.
Parent company LVMH said that overall sales in Asia fell by more than 9% in its third quarter of trading, with Louis Vuitton China sales “suffering” in particular.
These closures illustrate the pressure that China’s luxury sector is facing, on the back of a slowing economy, government run anti-corruption and anti-extravagance campaign. Launched in late 2012, the three year political movement has hindered demand for all types of luxury goods in the country. Global brands such as Louis Vuitton are now viewed as commoditised and overpriced among China’s changing, sophisticated consumers.
While many luxury goods makers have expanded their sites in China over the past decade to appeal to the nouveaux rich, the store closure count is quickly picking up pace across the market.
“According to my information, 20% of Louis Vuitton’s stores in China will have disappeared by mid-next year: that is a closing rate of about one store per month,” Emmanuel Hemmerle, a leadership consultant told The FT.
While China’s economic slowdown has hindered Louis Vuitton’s worldwide success, the high-end company still opened a store in Beijing and Hangzhou earlier this year.
In a statement on Monday, Louis Vuitton said that it “will continue investing in China in the current store network in order to enhance the level of experience we wish to offer to our clients”.
According to a report by US-based analysis company The Demand Institute and its parent company The Conference Board, overly optimistic growth and consumption projections for China have misled foreign investors. Multinational and luxury brands have been misled into investing too much into the wrong Chinese cities.
“To a certain extent LV has been suffering from brand overexposure. Having so many stores in China and particularly in these lower-tier cities doesn’t make sense economically but is also not very good for the brand,” said Torsten Stocker, partner at consulting group AT Kearney.