Daily Insights

How LVMH Is Beating China’s Slowdown

By: Liz Flora | Jan 30, 2019

Chinese shoppers may be less willing to shell out over $1,000 for a new iPhone, but they’re still happy to do it for a Louis Vuitton handbag.

Allaying fears of a China luxury slowdown caused by Apple’s recent lackluster report, LVMH announced yesterday that its China growth remains strong. China sales actually accelerated for the conglomerate’s portfolio in the fourth quarter, while Louis Vuitton sales to Chinese consumers remained unchanged from Q3 to Q4.

LVMH-owned brands Louis Vuitton and Bulgari both tied for second in Gartner L2’s Digital IQ Index: Luxury China while Fendi and Dior’s digital performance earned them a “Gifted” ranking in the China market.

The average Digital IQ score for LVMH-owned luxury brands increased by 2% last year, boosted mainly by concentrated investments in its largest brands. Louis Vuitton has invested heavily in e-commerce with its China online shop launched in the summer of 2017 as well as WeChat mini program commerce.

In October, Louis Vuitton announced that its new brand ambassador was Kris Wu, who previously generated massive social engagement for Bulgari and Burberry in China. The star is known for his streetwear aesthetic and friendship with Louis Vuitton’s menswear creative director Virgil Abloh. Abloh’s inaugural collection was sold at pop-ups in eight global locations including Beijing, Shanghai, and Tokyo, with a line of over 1,000 people at the Tokyo pop-up launch including many Chinese tourists.

Louis Vuitton also used Kris Wu to promote its Volez, Voguez, Voyagez exhibition stop in Shanghai, which it supported with a WeChat mini program offering a map of the exhibition, photo filters, an audio guide to the exhibition, games, stickers, and more.

LVMH is weathering the China storm better than many other companies at the moment. Apple saw a $4.8 billion decline in revenue for Greater China in its most recent quarter and blamed China’s weakening economy. The LVMH financial report also came on the same day that around 20 companies announced profit warnings for China.

Alibaba also released its financial report yesterday, beating estimates on adjusted earnings per share with 15% growth but coming in below expectations on revenue growth. It remains in the double digits at 41%, however, and the company says Chinese consumer spending on the platform is still strong.

Even companies still seeing success remain cautious about the future both in China and globally. LVMH’s financial communications director stated on the earnings call “we need to expect that at some point there is going to be an economic crisis” in the global economy. In the face of China’s current slowdown, the market is segmenting into winners and losers, with companies showing the best digital performance poised to have a strong advantage over competitors.