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2026.10.08 | TB | Consumer | China Luxury & Beauty: LV & Dior

原标题：China’s Luxury Retail & Beauty Market – Louis Vuitton & Dior – Senior Executive at Lane Crawford Joyce Group Ltd

#consumer #china

Third Bridge · 2026-10-08

Client-led • 23 Sep 2026

Companies: MC FR, RMS FR, 6181 HK, CDI FR, BRBY GB, KER FR

Expert Senior Executive at Lane Crawford Joyce Group Ltd

Agenda

Introduction

Client [00:01:01]: In your current role, which brand categories do you sell directly and which ones do you have visibility into through the parent company?

Expert [00:02:03]: For our company system, we basically do categories under women, men, shoes, bags, beauty and home. Even brands like with a sneaker offering also tend to do better. Loewe sneakers, they have a collaboration with On Running. This category also tends to do better than the other ones. Even New Balance, Salomon and also another very fast-growing brand and doing very well. Also another good category that we do have fine jewellery. Fine jewellery also tend to do quite well these days.

Questions

00:07:20] We have been monitoring LVMH because it was interesting. I know the luxury space has been very weak. I want to know if this will continue. Are they simply spending less on luxury? Are they still spending, but in other parts, or maybe they are spending more on LV? Are they spending on other brands, maybe new brands that have come and taken share away from these traditional houses?

Expert [00:08:14]: I'm sure about the Molly Tea incident. That incident. Also the way they actually handled it was, we vastly agree in the industry that it was not being handled very properly, because since the incident happened in early July, basically, LVMH Group, the only strategy adopted was to keep quiet. Basically, the way they deal with it was just, be quiet about it and they basically dropped all the marketing since for the whole month of July, there was no marketing. They didn't update any of their Xiaohongshu account, Weibo account, all of the accounts stopped updating until 26 July when the Xiamen Court actually issued a statement regarding another case that the netizens were stirring up, that some of netizens were claiming that LVMH was suing another business in Xiamen starting the end of July.

Then the court later issued a statement saying that, "Oh, that was not true. This case was actually about LVMH suing a business, because they were selling fake LV bags there and some of the businesses there." Only by then, that this incident, that online circulation of all these [absurd] things about Louis Vuitton stopped, because it was basically a signal from the Chinese government that, "Okay, now we are all good, the viral negative comments about this company can stop." That's when we see platforms like Xiaohongshu, Weibo stepping in to help clean up some of these negative comments related to the incident. The damage was already [done.] I can tell you because it all started in late June, early July. For the whole month, all these negative posts have been circulating. I don't know if you know about what these posts are because back in July, I've been already telling people they were not good. They were not just purely about this incident.

00:11:19] Could you expand on the details of some items that have been searched? Why would this spiral to check like that?

Expert [00:11:19]: I think, I can share with you. Number one, I think the worst comment so far was starting in the middle of July, some people use AI to, how do I say, to do some quick posts about Louis Vuitton and they associate the brand with lavatory like LV. What happens in China, if you have to visit some public parks, some of the local public parks, especially, they use the same logo that LV was suing Molly Tea about a cross logo, which looks a cross. If you go into those lower-tier cities into these parks, you see walls being built with this pattern. Some netizens basically took these pictures. Then they used AI and then they transformed these pictures into LV bags. You see pictures of people carrying, cleaners like janitors carrying Louis Vuitton bag outside the lavatory to clean the toilet because it's LV stands for lavatory.

It's really bad. I think, because they kept quiet, basically, the way that Louis Vuitton dealt with it was they just kept completely quiet for the whole month. That's why they let whatever netizens, they just do whatever they do online, and there was no control over whatsoever, because they choose to just stay quiet.

It doesn't matter what netizens do, they didn't step in, they didn't issue a statement, they didn't apologise, didn't really take actions against, for example, these posts, and they just let them circulate as far as they can until really the end of July. On 26 July, they were supposed to have one of the biggest events for this quarter. Last year, when we talked, it was the launch of the Louis, which was actually highly successful. It was the most successful marketing campaign of the year, last year. This year, so far, we have no big event for Q3. This show, the autumn is supposed to be early autumn runway show that happened in Shanghai in a very prestige location. This year, this was supposed to be this show. They actually have already sent invitations to all the top spokesperson like Ouyang Nana, Jackson Wang, Wang, all these top LV spokespeople.

Of course, this show happened over 26-28 July became a private closed-door event, nobody attended. It's become a closed-door event. Only some tier 3, tier 2, celebrities attended, 2-3 of them attended only, not very well known. All the top ones did not appear. Then at the same time, other brands have launched some, we call competitive campaigns against Louis Vuitton using this event. During that period, we also see Gucci. It must be from the PR or some teams that help Gucci. All of a sudden, we also see a lot of posts from name calling Gucci respecter of Chinese culture, of China culture.

We saw them launching some posts. Then they cite basically an event that happened a long time ago. For example, how the brand Gucci, back then the chairman like François Pinault, who own the biggest owner of Kering Group and the chairman back in 2013, because he's also a big shareholder of Christie's auction house. Back then, I think some people basically brought to him two Qing dynasty bronze zodiac heads for auction at Christie house. Then what he did was he basically bought these two dynasty bronze zodiacs so that they won't go into public auction. Later on, he donated these two bronze zodiacs back to the Chinese government. These bronze heads were looted during that history that happened 100-plus years ago. Then all of a sudden, many people use the post and citing, "Oh, is it Kering Group, Gucci, always respect Chinese culture. We don't do these kinds of things." Adding oil to the fire in a way also.

00:17:53] How lasting is this? Our new view is that these issues will wash over the next year or so. There might be a very bad few months. Do you see more structural damage that has happened due to this?

Expert [00:18:13]: Yes, because I think what happened was the timing of this incident was also very unfortunate. First, it happened in July, and already this summer, July, we have a very bad summer. I've been telling people since July also, we get a lot of thunderstorms. A lot of my business trips to Mainland China got changed or cancelled because of that because of very bad storms and weather, which is not normal because normally, the month of July, August, most of Mainland China, Hong Kong, we get mostly sunny days. Occasionally, we get typhoons, but it's just occasional, but this year, I can tell you the whole month of July, Hong Kong, the southern part of us, even Shanghai, we get rains most of the days of the month of July. Then right after, in August, the storms started to move north. It's crazy. First of all, I remember right after this Molly Tea when it started to get into control, starting early August, there was a storm that starts to hit Beijing and the northeastern part of China.

It's [unusual] because can you imagine typhoon hitting Beijing, mainly Shanghai, yes, or definitely Guangdong, but not to Beijing and a whole and that typhoon go around the northeast part of China. It circulates around that territory and stays there for a week, which was very strange. It caused a huge disruption. All the planes were stopped, no school, no work, more malls are closed. It's a little bit unfortunate also right after that they were starting to do changes and clean up the things like that, this happened. That was also the Qixi Festival this year when it started. Louis Vuitton, because of this incident, they actually have created some local campaigns, so the Qixi happened on 19 August, in August. The Louis Vuitton actually did create some local marketing materials for the Qixi, but I think because of this event, they decided, how do I say, not to launch any of these.

They basically made this very low-key, and they reused basically some of the European old marketing materials. It was made years ago, those things, those short videos and animations and they basically just post them on Xiaohongshu like that. They also missed out a lot basically on the Qixi Festival, which is another big, how do I say, a spending festival in China. Also what happened was some of the bestsellers, that we have been seeing the Neverfull, PM size, those used to be usually mostly out of stock, most of the days, but because of this incident, also it became still available. Up to today, they are still vastly available. Those bags, usually we go the CarryAll PM, the CarryAll BB, the Neverfull, usually, they are the ones that fetch also the best prices in the secondary market and the prices of Louis Vuitton bags have come down a lot since the incident. Some of these popular models, LV models in the secondary hand market, they used to fetch up to 90% or 95%, even a pristine condition one in the secondary hand market.

Today, it has dropped by 30% like that. At the worst time, it has dropped by 50%. Now maybe like you mentioned, yes, I think it has improved a little bit because maybe I think if you use the secondary market prices as a proxy, usually it's a very good proxy, it has improved. From maybe minus-50% to minus-30%, the price, but it's still a 30% drop because we are compared before the incident, say, in June, it's still 30% down. Louis Vuitton, the brand has tried to do many more things. Like I mentioned, since late July, they have asked, some of the top media platforms have already started to help them clean up the negative post. What happens was that all these posts, how do they appear? They used to appear all inside Louis Vuitton's account. If you go into Louis Vuitton Xiaohongshu account, if you click into any of the post, say, back in July, you see all these posts. In all the marketing posts that they do right below in the comment section, you just see hundreds and hundreds of these negative comments, that's also where the LV lavatory poster, all these things you can see.

I can tell you, back in July, the platforms like Xiaohongshu, Weibo, none of these platforms helped delete or hide any of these posts, because actually, as the administrators of these platform, they have the right to do that, but they didn't do it because another thing was because back even in July, this incident also escalated when it went into the mid of July, it also escalated because I don't know if you realise China Daily, Beijing Daily and Global Times. The commentaries section of all these three, of course, you know these three state media, very famous. They are all state-owned or partly state-owned media outlets. Basically, all these three Chinese media outlets and their commentary section, so one by a very famous commentator, Jinto [sic], he posted about this incident. Of course, the tone was negative on Louis Vuitton.

Basically, all three, these commentaries were saying, "Louis Vuitton should have shown more respect to China." That's why the whole of July, because I'm sure Louis Vuitton has contacted Weibo, has contacted Xiaohongshu to ask them to remove some of these very negative, very untrue comments, lavatory bags, really in the west, probably these users would be sued or something, but no, they just kept circulating because also, I think the Chinese authorities also have made a stand that they agree that this time, it's not right, just not right, that Louis Vuitton has started all these cases, because it was just not Molly Tea. It's been realised, if we found out that actually they have raised hundreds of these cases over the years over different Chinese businesses.

Also because the target that they were suing actually is the court of China. It's the intellectual property rights court, in Beijing in China, that they were suing against because they basically the point is that they were suing them for not protecting their IP. I think that's also why that makes this incident a little bit also more difficult. Back then, yes, a lot of people when we're discussing back in July, we also compare this incident a lot to the most comparable latest one would be the Arc'teryx one that happened, I'm sure you still remember, last October. The most comparable would be, I see right before the Golden Week last year, late September, that's when Arc'teryx did this fireworks marketing campaign. I forgot, (inaudibe), this mountainside, and then which damaged the nature.

Arc'teryx fireworks, yes. Back then, however, actually these things that happened in the Tibet province. What happened was this incident actually got settled very quickly. Back then, a lot of people also asked, "How much damage would this do to Arc'teryx?" Namely, I think the parent group is Amer Sports. Back then, we all think maybe at most 2-3 quarters would be the impact. I think Anta, the group behind, I think they did a very good job because right after this incident happened, actually just within a few days, after this also incident went viral on social media, just a few days after, I think 3-4 days after, the brand apologises. They actually issued a statement, and then they actually make a public apology. Later on, they also reach out to all the local governments right in Tibet and then they actually paid a big fine, big amount of fine and also they are committed to a huge amount of fund over the years to help clean up and to help amend the damage being done. The two incidents, actually, I think the severity is similar. For example, negative post that were captured, it was in similar quantities, actually, I can share with you. The number of negative post and also the negative damage, but I think the difference was the damage control was done very fast, a few days.

00:28:28] It's quite different, because LVMH is defending their brand. The state courts ordered Molly Tea to pay for that. It's very hard for LVMH to do any damage control by apologising to defend their brand. That is one bit trickier in my view. What do you think?

Expert [00:28:53]: Yes, I think so. How do I say, I think maybe it's not apologising, but maybe it's by doing some act, having some, I don't know, action. For example, they could have pulled out this case, for example. Instead of insisting on this case, maybe they can do off-the-court settlement with Molly Tea, but instead of that, they keep pushing through the case. Actually, the case is still happening. I think that was why this thing never finished. Actually back then because during July, actually, in the industry, we also talk a lot about how LVMH should deal with this. Among all the PR experts, for example, our company, we have our own PR agency. We also talk about this incident. Most of the PR agencies in China actually suggested Louis Vuitton to just pull this case out of the court and have an off-court settlement with Molly Tea, because it doesn't mean that LV did something wrong. Actually, Molly Tea still pay a fine.

Maybe it's still on the part, but what happens is reduce that angle that because a lot of the posts that were being circulated was also because about Louis Vuitton was suing the Chinese authority, the Chinese intellectual property rights court. That's also why People's Daily, China Daily, these commentaries came up to write all these posts, commentaries in the top front page of the newspaper, that was published, because it was the authority that was being sued. Some netizens also talked this and was like, "Oh, it feels like we are being sued," because it's almost Louis Vuitton is against the Chinese people. It's like, "Oh, this brand is suing our government." Back then, a lot of the PR companies actually made the suggestion, but you know what happened. It's so interesting, what Louis Vuitton is doing this week in China. They are hiring a PR team in China. They actually do not really have a local PR team.

They do have a very strong local legal team now that we know of it, very strong local PR team, legal team that's looking around how to sue whenever they get a chance, they sue, fake bag selling, sue, fake logo, symbol logos, sue. Actually, from this incident, it came to people realisation that if you think about it, LVMH, such a big business in China, they actually don't really have a local PR team. When this incident happened, what happened was they have a very big delay in information. Also when everyone talking about it in July, even some of the local agencies were making suggestions. The team in China, they're legal, the legal team. The headquarters asked them, "What should we do now?" The legal team say, "We should keep suing." Of course, because it's a legal team, they're not the PR team. You know what they're doing this week, so this week, the CEO came to China, the LV CEO, to understand why, because of the huge drop in sales. It's been 2-3 months after the incident, when the incident first started, it's almost three months.

00:32:45] How would you describe the luxury brands' performance before the Molly Tea incident? Who was doing better? Were they recovering? There was talk that luxury goods would recover this year. That seems to be pushed back now. What are your thoughts?

Expert [00:33:08]: I also have shared with people in June, one of the big tipping points that has been causing this change. Yes, I think the whole luxury sector in China, if we have a call last year, it's been showing a recovery since the H2 of last year, since July. Actually, most brands, even the ones in the down more of downward trough, namely Louis Vuitton, Dior, so for Louis Vuitton, they have come back to positive since our chat, last year because of the success of the Louis, it has actually came back to positive. Then it's been a positive, positive all these months. If you compare MoM or QoQ, it's been positive until July, until this Molly Tea incident, you can call it black swan incident, whatever, that was being very mishandled, I have to say. Until this incident, but actually, I think another thing also attributed to this really big turn in direction because in July, unfortunately, similar to last year, this July, we see a very big change for Louis Vuitton.

Dior also started to come into a fall starting in July, which is strange if you think about it because the incident actually only affected Louis Vuitton. Why would Dior also come to a turn? A lot of people were asking how can this Molly Tea incident spread to other brands? It was not just Molly Tea because I've been sharing people in June, if you look at my transcript back in June, I've been telling people another big thing that was happening in China that was this because we have a lot of VIC customers. They have been with us for many years, for years, so we talked a lot. We always get a very first-hand information from them from these top spenders in luxury. Most of them are VIPs, VVIPs of Hermès, of Louis Vuitton, not Gucci anymore, but most of these luxury brands. Their daughters were the VIPs of Dior, of Miu Miu. Since June, what happened was there was this capital control, being implemented.

In Hong Kong, it first started as there was a lot of equity accounts being closed and with unknown sources and also whatever money that people bring in from Mainland China because it's a practice that they do, our clients do that a lot. They bring cash with them here to Hong Kong, and then they deposit that money into the bank accounts, maybe for uses of to pay off the mortgages that the properties that they buy in Hong Kong or overseas or to pay for the tuition, maybe their daughters, their sons are studying abroad in the UK boarding school or US college. They pay for the tuition. It's a very common practice, but starting in June, something has started to change. I think when they try to deposit the money into the banks, the banks ask for the source of the money. I think they need to ask for a note, for example, issued from a bank in China that this money was authorised that they need to trace basically a source of their money.

A lot of them came to us and say, "Oh, I could not deposit this money into the bank account today." Then also some of the equity accounts also we heard also were closed, just frozen because the sources of the funds were unknown. In order to unfreeze accounts, we need go back to Mainland, find some authorities, namely the banks to help them issue a note saying that this money was clean and all that. This cross-border control already sparked some, how do I say, alert the ultra-high-net-worths, because the one people who do this thing, who bring money cross-border, have offshore accounts in Hong Kong, in Singapore, Switzerland, they are the ultra-high-net-worths or at least the upper, upper-middle-class people who have this extra cash money to do that. It already sends some alerts across, but I'll be sharing in June, because this was not the first time that this happened.

This thing has happened before in China and Hong Kong, because this policy was always written in black and white that Mainland Chinese can only bring I think only maybe up to 120,000 or I don't remember the exact number. I think they have decreased this number gradually. It's always black and white, that each Chinese citizen can only bring so much RMB out of China every year. It's always black and white, but the thing is nobody actually really implemented this policy in full. Even the banks in Hong Kong, "Oh, if you already have an account with HSBC Hong Kong, you bring in like HKD 200,000," which they have to exchange from RMB in some of the local currency exchanges. They will take it in. They will take it in a heavy deposit the money right away. No question asked, but since then, they are different, things have changed, some of the accounts got checked.

I can share with you, this has happened before, and somehow, this incident also died down after 2-3 months because no further actions were taken. Then banks took money again. This has happened always maybe once a year that or once every two years, it happened. It has happened before. Even back in June, we didn't think it would create such a big thing until what, last month. I'm sure last month, you also know, actually already late July, some of our VIP customers have already heard news that of the global taxation, that China will do. This time it's worse because this is the first time ever that they heard of this policy, unlike the capital control that they know about, and it is on black and white paper, to be honest. This global taxation was new, was the first for them. Also, if you're aware, just around two weeks ago, 10 days ago, the Chinese government announced a deal with the Swiss government. I don't know if you saw this news.

It just came like 10 days ago, something like 99.8% of the Swiss imports into China will be exempted from tax. Can you imagine? All the Swiss luxury watches, Rolex, IWC, Panerai going into Mainland China will be tax-free. What happens here? The interesting thing is, you want to know what the VICs told us. None of them are happy. If you think about it, they should be very happy about this news, "Wow, our real tax." They don't need to go to Hong Kong or fly to Switzerland to buy these expensive watches. If some of them are still buying. Actually, most of them are not buying anymore. Anyhow, but if you look closely at this news because, from now onward, I'm telling you, none of this is official. I think the tax-free thing was official. It was on the news, something. If you look closely at it, from what I'm talking about now from now on with you, it's not official, because it's just what some of our VIPs were telling us.

They were telling us, but if you look closely at this news, in return, the Swiss government did not say what they offer to the Chinese government, because if you think about it, this should be a trade deal. What is a trade deal? It should be an exchange. If 99.8% of the Swiss imports coming to China are tax-free, what is the Swiss government offering to China? We all know China doesn't really export that much things into Switzerland, what do we export? Pork, I don't know.

All the VIPs were panicking, because they were like, "Oh, what would the Swiss government offer Chinese government in return of this amazing trade deal," because nothing was mentioned, was in return. A lot of them speculated or we were thinking, "Oh, it would be yes," some of the bank account information offshore. We all know where most of these accounts park, the largest amount, yes. I can basically tell you they were just in shock.

00:41:51] Are they shocked and cutting their expenses so they don't raise any suspicion? Is there something more fundamental they are worried about, so that now they have to watch their spending? What's the reason behind the shock and reduction in spending?

Expert [00:42:14]: This incident was shocking enough to them because for the top-of-the-pyramid Chinese, most of them have big accounts offshore, namely we all know where, and then of course, this tax policy, to be honest, there was not a date being announced as in when it will be executed, which also sent more worries to the Chinese because it doesn't look like a very normal trade deal. Also, it's been communicated, discussed that this will be launched in phases. To the Chinese, it almost sounds like, "Oh, with so many information," it's almost the information got passed on in phases. In phases, so it means the way it affected them. I can share with you, but to be honest, yes, so we have seen some of them, they are being more careful these days. Of course, because with the less capital movement, it means of course, it's not necessary to buy another LV bag. It's a nice-to-have, very obviously, the LV bag is nice to have. Even Hermès, the Birkins and Kellys now are becoming nice to have.

I've been sharing with people also last month, one of the top hashtags for Hermès on social media or Xiaohongshu was, "Do not ask for bags." Actually, it's already a red flag, because you know why the hashtag becomes do not ask for bags, as in many of the Hermès VIPs, they were sharing also on social media among themselves, because nowadays, it was only, I would say, 80-90% of Hermès sales were from the VICs only, all the aspirational customers have pretty much dropped out. Why they share this? It was because since last month, actually, it's been a little bit earlier. Already, we have been seeing this actually since July. As the sales associates have been a lot more proactive in offering the VICs bags. Even though back in June, another big news is that they have communicated to the VICs that the pre-spend ratio to get leather goods to get handbags will be increased for Hermès starting this quarter, starting the month of July, it will increase.

What it means is you have to spend more on the non-leather goods in order to get the quota bags in order to get your hands on the quota bag. This has been communicated to VICs, which was fine, which was fine back then because it was not a lot. It was maybe around 10-15%, and then starting in July, after this announcement, communication with the VICs, it was all done implicitly, WeChat or through talking. It was not official, also none of this official, because it was never made official this one. Then starting in July, the VICs realised that the sales associates have become more proactive in offering them bags, even quota bags. Then in August, that's why we get this hashtag. It was because what happened. For many of the VICs, normally, they will have to wait for weeks or months in order to get their hands [on the bags.]

Client [00:48:08]: What were the VIC telling you?

Expert [00:48:11]: Hermès, yes. Already, I've been hearing people in last month, hashtag have become, "Do not ask for bag," it's because what happens is the VIC got approached by SAs a lot. Normally, it's the VICs that need to ask for the bags. They should be like, "Oh, when can I get my next Birkin, my next Kelly?" Usually, it will be asked by the clients, not the sales associate. Since actually early this year, the things have been changing and especially so starting in July. Then the SAs will proactively ask the clients, "Oh, would you like maybe this Birkin or this Kelly, I can reserve for you, maybe you can come in next week or something." Then somehow this got evolved into the incident. Notice this thing got evolved into the situation where some of the VICs are telling us like normally, if they want a bag want a Birkin or Kelly in a specific specification. For example, Birkin 25, in black, in gold hardware like that Sellier. Very specific ones, if they seek for it, normally, they will have to wait for months. Before when we talked about a few years ago, they're going to have to wait for up to 12 months, 18 months to get a pretty specific bag. Then if not, of course, the wait time has greatly diminished since then right now.

Right now, normally still months, talking about months or even weeks. Now it has become shortened to days so that's why the hashtag become, "Do not ask for bags" because some of the VIPs were saying that if you ask your bags now, the SAs would tell you, "Oh, I have it actually, I have it in stock. I have it in Shenzhen stock. Why don't I transfer the bag over and you will be here in a few days? Maybe why don't you come in two days and three days and come get bag." Actually, this makes the VIPs a little bit shocked and not ready. You know why? It's because the VIPs understand that if they go into the store three days later to get this bag, they're going to have to spend on the non-leather goods item. Most of them, they have not reached their pre-spend ratio. It's an understanding that they have with the SAs for years. For example, as they tell them the bag, your bag will be in here in two days, in three days. Why don't you come in three days? Actually, the VIP has not started spending on the non-leather goods items yet to accumulate on that amount. The pre-spend ratio, for example, for this Birkin now, for example, is maybe around 1x of that of the bag.

It means this person, when she goes in two days or three days later, she will be prepared that, this Birkin is selling at around RMB 100,000. If she has to spend 100% on the non-leather goods item, it means she knows she do the calculation. She knows it. She's been in this game for years. She knows she will have to put in RMB 200,000 three days later in this Hermès store in order to walk out with the Birkin bag. That's why the VIPs have been circulating among themselves or the tai-tais in order to (inaudible) were like, "Do not ask for bags." Because if you ask for it, it will come much earlier, much sooner than you expect. It was not what the practice a few years back. Like the sooner you ask the better. It was not like that. Now it's not even ask for it later, it's like do not ask for it.

00:52:07] It's a bit confusing because you're saying Hermès is doing badly because now they have made their supply available. Isn't it very counter-intuitive?

Expert [00:52:19]: It's not. In China, Hermès really the big support of their sales is really the leather goods. Most of the people actually buy Hermès because they want their hands on the quota bag. To be honest, a lot of you ask me, "Oh, what about the craftsmanship, the history of Hermès in China, I can tell you, even over all these years, the tai-tais don't care." All they care is they want a Birkin. They want a Kelly. They don't care about this craftsmanship story, whatever marketing you do. They don't really care. They just want their bags. In China, how do I say, the appeal to get their hands on this has already been decreasing. I think I've been sharing with you last year, for example, the secondary market prices of the Birkins and Kellys have been a constant downward trend. Even this year, as we come this year, the downward trend has continued. At the same time, the Hermès has increased prices by 8-10% earlier this year in January for all the stocks in China. Like I mentioned, starting in late June, July, they started communicating that they will increase their pre-spend ratio, is because of why, because they were under sales pressure. Number one is the bags were not as appealing as before.

Then, of course, which means that some of the people, some of the tai-tais, even VIPs, maybe instead of wanting 3-4 quota bags every year, maybe they just want two. They just want to get 1-2 from the stores. The other ones, maybe they will just get from the daigous because it's also cheaper now to get there or in the secondary market because also it's much cheaper now to get there. The stores are under pressure, the DTC, so the sales associates are under sales pressure because for Hermès sales, they do not get any commission from selling leather goods. I can tell you zero. I don't know in the rest of the world, but in China, it's unknown to many people. They do not get any commission from selling bags, from selling leather goods. They only get commission from the non-leather goods. Also, that's where their KPIs, the sales performance were tied to. It's not how many bags they sell.

00:54:48] Are any of your VIPs spending on other brands? Where are they spending, if not on Hermès?

Expert [00:54:59]: They are spending out. Does it mean all the ultra-high net worth have stopped spending in luxury? The answer is no. Because other brands, so I can share with you namely Cartier has been having a huge growth this quarter. We're going to expect Cartier to have over growth in China this quarter. I don't know if you know about this Wang Hong effect for Cartier. Basically, Cartier started to sell out in July like that because Ms Wang Hong. She won this mathematician prize in China and she's been wearing all the Clash de Cartier collection when she was attending the prize ceremony and everything. The Clash de Cartier collection basically was completely sold out during the months that follow. What happened was this collection has continued to sell out. Also the importance of this time is we have noticed the people buying Cartier, a lot of them were first-time customers.

A lot of them were first-time customers. It means there were customers that we used to buy more like other brands like Tiffany, like Bulgari because if you look at the design of the Clash de Cartier collection, it looks very different from the traditional classic bestsellers from Cartier. Cartier's traditional bestsellers are the Tank watches. The jewellery of course, the bestsellers is the Love collection and the new also Love Unlimited collection, that they launched last year during Golden Week. If you look at the design, the Clash de Cartier looks a lot more modern and contemporary. It's polished, round edges, very different from the classic looking, Juste un Clou collection, the Love Unlimited collection, very different looking. What happened was this time when we were tracking on Tmall, a lot of the these first-time customers actually went on to Tmall immediately after they saw the news of Wang Hong wearing this collection. Later also Wang Hong went on to do a media interview with a local newspaper, and she was also wearing that collection. That's why also it added to another wave of the heat of the product. What we track on Tmall, what Tmall also shared with us is this time around, the people buying a lot of them were first-time Cartier customers. They never bought Cartier before.

Maybe they bought some Tiffany, they bought Bulgari, they bought some other brands, but the first time. For Cartier, it's very good news because this it's hard to get first-time customers we all know for luxury. For the price point also for Clash de Cartier, they tend to be also on the higher end, like 50,000 [sic] for necklace, like 30,000, so not on the cheap end also of the things. Up till today, the collection is still doing well. We heard many of the offline stores, they're still a waiting list for the items. Also just 2-3 days ago, Van Cleef also launched a new product. Not a new line, but a new colour for one of the bestsellers for the Alhambra collection. Then they launched a new colour, the pink colour just a few days ago. Also, this can also trend a little bit viral, a little bit online. A lot of people were reposting about this pink. It's a very cute pink. It hasn't started selling yet, but it has created a bit of a noise. It has pushed the necklace up on to one of the top 10 most talked-about items in social media these days. Yes, it's the pink and a lot of the VIPs have already contacted the sales to place a pre-order that for this pink version of this Alhambra necklace.

Also Van Cleef are doing well. I can share with you. Van Cleef also is doing well. If you ask me, it's some brands are still doing well, like Chanel has slowed down a little bit this quarter also, but it has slowed down a little bit also. In general, it's just the whole handbag and I can share with you the whole bags, the handbag trends are just shrinking.

00:59:35] The luxury sector is doing pretty okay. Cartier is doing much better because of what you have mentioned. What about the China-based counterparts like Laopu Gold? Are they also equally as strong? Is there a story there?

Expert [00:59:59]: I think Laopu Gold, because of the recent drop in gold prices, I think it went up a little bit and then it came down again. VICs were telling us. It has to do with the gold prices for Laopu Gold because the Laopu Gold sell at a fixed price. On the other hand, other gold places like Chow Tai Fook, Chow Sang Sang, they sell the gold accessories at flexible prices. According to gold prices, which means now Laopu products are much more expensive. If you look at the grams, how many grams this necklace is, it's the same amount of grams, then Laopu products, in terms of prices, it's much more expensive per gram, in terms of the price. Even though Laopu Gold has done quite a number of promotions actually last month, up to 20-30% off. In a lot of the malls, they have participated in the mall festivals and then they have offered also some more additional VIP accounts for the products, so they have tried to also narrow the price gap. Still, people are saying, the worst time of it, if you just take the RMB per gram, the gold prices. Laopu Gold is 50-60% more expensive, the worst. With this promotion and something now, it's narrowed down to maybe 20% like that.

I think the gold prices has dropped also recently in the recent few days, so maybe this gap has further widened. For Laopu Gold, the promotion that they did previously, the feedback was good. There were some lines outside some VIPs like we were buying the very popular items like they tried to buy because it was 30% cheaper. Then I think for the rest of the year, we were very much tied to the gold prices, because what happens is since the success of Laopu, even brands like Chow Tai Fook, Chow Sang Sang, all these other brands have come up with products very similar to Laopu. Of course, there are also other similar brands that came out like Jemper, like all these Borland, like Kering Group actually invested in Borland. There are also many more competition like that. I think for Laopu Gold, it will be hinged upon the gold prices a lot.

01:02:23] Are you noticing that LV's revenue is still driven by very brand- and logo-heavy designs over the past 1-2 years? Is there a change there also?

Expert [01:02:42]: There was not a change because the brand has not launched anything particularly new. In terms of the products, they are still very much focused on their monograms. If you go on to the mini programme store, the official website store, they don't have a Tmall flagship. If you go to, they are still the items in the top, even the marketing campaign are still on the monogram collection. Recently, for the autumn wear, they have switched the focus of the marketing to trunks to the big luggages, luggages for travel, that's the theme of the autumn season. Still, if you look closely at the bags, they are still more like the classic monogram bags. The luggages, the thing. To be honest, and also in terms of the storefront, the design, also like it was also mostly the monograms items. Of course, they do maybe the most recent success one that was not the monogram one, was the sports capsule, they did one with some animation with some sports prints on it. To be honest, they didn't really take off that much in China. In China, I can still share with you the bestsellers are still, like I mentioned, the CarryAll PM, the Neverfull in the monogram print.

01:04:14] Does LV have the potential to be heading towards a brand problem similar to what Gucci had, especially considering the Molly Tea issue?

Expert [01:04:34]: I think for Louis Vuitton, it will be harder than, say, Arc'teryx because for Arc'teryx, it turned out that the impact actually may last for one quarter only. Actually, the second quarter after the incident, things have gone back to normal for Arc'teryx. Now if you ask people, they don't even remember this incident. If you ask any regular customer, they don't even recall an incident. I think for Louis Vuitton, I think the level of damage was higher because like I mentioned, is something else with the lavatory and all these things. Now we see also the impact on the subsequent quarter is quite big. This quarter, we already got the data for July and August, and the drop was quite drastic. From what we heard from the preliminary data that we gathered, sales for September are still down so starting in September, they have resumed some marketing already. For example, there's reopening of the Changchun flagship store, the largest flagship in that province. Then one of the top spokesperson already attended, Ouyang Nana. She's also tier 1 artist in China, so that's a very good sign that she attended the event, which means it's like back.

Also in Q4, they will open a huge store in Hong Kong at the K11 Musea, which will be The Place, they call The Place. For Louis Vuitton, they have three tiers of stores. They have the flagship and the Maison and the top level is called The Place. The Place will be a combination of a restaurant, exhibition space, a VIP lounge, of course, like a selling space. In Hong Kong, in Q4, they'll be opening up a huge called LV The Place, the top-tier store for LV in Hong Kong. We heard the plans have remained unchanged that the store opening date will still remain the same. Which comes with the store opening will come with whole big range of marketing events. What they did with the Beijing Sanlitun store opening, like last year in December. The CEO have come, all the celebrities, they invite all celebrities to attend, Gong Li actually attended, all the spokespersons, like Liu Yifei, Jackson Wang attended. It will get better as we approach Q4. For this quarter it will be bad.

01:07:30] They're going into all the lifestyle offerings for LV. They do restaurants, F&B and some beauty salons. How is that strategy working out with the VIPs? Do they appreciate it? Do they like it, or do they not care about it?

Expert [01:07:56]: Actually, it was a very good strategy that they did. The best one already was seen as Beijing Sanlitun. Actually the Beijing Sanlitun store was doing well since the opening in December because they have done a whole range of marketing events for the VIP since the opening in December. Actually, the restaurant has been doing well, the success of The Louis was a very good example. Actually, the Louis was driving a lot of sales for the flagship itself and also the store that's right next to it. We all know there's also a Louis Vuitton flagship, right next to the Louis, just five minutes' walk into the mall. That mall has constantly been double-digit growth. One of the best-selling stores for Louis Vuitton in China. Having these so-called non-retail, what they call experiential retail, I think do help and it's working in China. Most of the brands, even Cartier, most of the most successful brands, they're all investing in this area. Van Cleef, just did a huge also marketing event just few days ago, just 2-3 days ago. They are working in China.All these marketing activations and special days and festivals has become big spending drivers, incentives for people.

For brands that have done relatively well would be, for example, Burberry is one that has a very strong local marketing team. In contrast to Louis Vuitton, they've actually done a very successful also summer campaign right at the foyer of Plaza 66. Actually, the event went so popular on the second day. Sorry, Plaza 66 they have to hung (inaudible) on that they, because they give out free mobile accessories. Thousands and thousands of especially young people like gen Zs and Alphas line up in front. They basically turn the foyer of Plaza 66, the front, they have a big space, open space into a British Green Garden and then thousands of these young people line up there. Then so it created a big congestion on the Nanjing West Road, it's very narrow, the street. The police came, the authorities came and they have to cut the giveaway because of the popularity. On the third day it's off, because it's affecting everybody. People cannot go into the mall, and the people cannot cross the street. There are brands that are still doing well in China and I think if I have regular calls with you, I've been telling people also Moncler, Canada Goose will do very well this quarter, in this previous summer quarter, which turned out to be true.

Exceptionally well, because normally, Moncler, if you still remember last year, it's still minus. It's still negative and Moncler usually do in the Q2. In the case for Dior, actually, Dior has come back to positive in China, the Greater China as a whole since January. Dior has done a ton of marketing since December. They basically bought out all the top fashion magazine covers since December. Since January, they have come back to positive, especially in the Mainland China market. It's been positive, positive, positive until again, July, it came back down. I think for brands like Dior and Hermès, it was mostly really affected by, the wealth problem, like I mentioned and, the weather problem also that also hit a lot of the malls in August.

I think for Dior, what's happening also is because some of the novelty and the excitement that was brought about by Jonathan Anderson was wearing off. Yes, Jonathan Anderson has brought with him many collections, as we know, much more than other brands, like 12 collections from him every year. That's crazy, with the Cruise, with the Haute Couture, spring, summer, autumn, winter. What happens is even though with all these collections, they are very consistent, they are very well presented. None of the items became very hot items and they also didn't really create a trend. That's this trend that's going on in China, led by the Cartier trend right now called the intellectual sophistication. How do I say in Chinese? This is a new trend also going on. It's called [high-intellect aesthetic]. I don't know the perfect translation in English.

Intellectual appeal, intellectual sophistication or it's not really geek chic. It's because it's not geeky. It's not about geekiness. It's about highly educated, very sophisticated lady. It's almost an extension of quiet luxury. It's a further interpretation of quiet luxury. It stems from quiet luxury, but because quiet luxury is very broad. It just means no logo, simple It's like a branch that comes out from the quiet luxury. It's further being amplified, for example, by the Wang Hong effect. That's people with intellectual with thinking who are sophisticated, that classy vibe that it gives out. This [high-intellect aesthetic] has become the new top trend in China. That's why it has benefited like what kind of brands, brands like The Row also do well in China, like Lemaire, these are very low-key label. You don't see any logos on the back, no logos. You only see the shape of it, which is very simple. Also in the handbag category, I think for Dior, that's also an issue for Dior. I don't know also if you heard about (inaudible) or Gucci.

They have crazy, they have reduced prices of their bags a lot in China. The new collection from Demna, The Mercato collection that just came in just around two weeks ago. They reduced the prices.

Client [01:15:45]: Do you expect others to follow?

Expert [01:15:46]: I think the Burberry already did that last year. In the beginning of last year, they already reduced the official selling prices in China, and they made an announcement. They made it public to others. They did an announcement that they have decreased the prices of the leather goods, which works. Didn't create any backlash, whatever. It actually really help sell the brand equity, everything was doing well for Burberry. The Qixi Festival, by the way, that just happened. They were regarded as one of the best brands with the Qixi Festival. They actually created a local marketing event and which turned out very well. It was great. It was good. They also came up with Qixi Chinese collection. They also did very well, that collection. Burberry was good. For Gucci, [there is] so much to talk about.

Client [01:16:48]: Gucci, Burberry, they have cut prices, LV, Hermès, rest has not.

Expert [01:16:52]: No prices (talking over each other).

01:16:53] How about Loewe and Celine?

Expert [01:16:59]: Loewe, no. Most of the bags from LVMH Group, we did not see any price reduction. We did not see, but what they did was for Dior, in case you're interested, what they did for was they were reducing prices in another way. I think they were launching new models, new bags at a much lower price points by reducing the size of the bags and also changing the fabric. Instead of lamb leather, it became canvas leather. Instead of a leather strap, they replace the strap with more like a metal strap, so it's cheaper. There are some data if you're interested. I think it's been officially announced also. Basically, they were controlling the selling prices of Dior bags. The amount of Dior bags that sell below, the RMB 30,000 price point, which is the luxury price point, RMB 30,000 have significantly reduced. Back in 2023, 69% of the bags were selling at above RMB 30,000. Back to 2026 this year, that percentage has greatly reduced already. The bags that are selling below RMB 30,000 have increased from 69% to 87%. I think by today, it's even more so, I can share with you more than 90% of Dior's bags now are selling below RMB 30,000.

Over 50% of them are selling below RMB 20,000. Any bags that are selling, I can tell you, above RMB 30,000 are not really selling. You can tell even Hermès are having trouble. I can share with you even Hermès is adopting a very similar strategy. If you look at the latest marketing from Hermès, they are launching this, chic looking bag. Actually, they means they are smaller looking, just small looking bag.

01:19:11] Will the LV bags also be below RMB 30,000 now?

Expert [01:19:17]: Yes, yes. They are launching much smaller bags also. If you go on to the website, the China website, they even launched a section called small leather goods bag. Can you imagine the categories. You have women's bag, men's bag, shoes, sneakers. There's one section called small leather goods bag and wallets. Everything under this section, if you click into this section, this category, you can imagine there's one category, one section, for these bags. All the bags are below all of them, almost all of them are below RMB 18,000. Most of these bags are ranging from maybe RMB 15,000-18,000 that kind of range.

01:20:06] Do you see any smaller private brands? I heard of something called Songmont. How good are they? How popular are they?

Expert [01:20:27]: About the handbag category, another big news that came from the Tmall 618 data. It's also I've been sharing with people is it's pretty [absurd] also. While the whole luxury handbag category is shrinking. I think people are spending less and less on these expensive bags, we see a huge surge in the lower end of mainly occupied by these domestic brands. Some foreign brands also, but mainly the domestic brands. There are four top domestic Chinese brands that captured a lot of attention since the 618 Tmall festival. They are Songmont, Grotto, Kunogigi, and Qiuzhen. What's going on is that actually Tmall published a report. That's why we got the data. During 618 festival, all these four brands have increased prices a lot substantially. We have been tracking, Songmont actually have increased prices compared to last year, the same time last year. On average, their bags have increased by prices by almost 40%. Also during the 618 festival, they have reduced a lot of the promotions, production. That's why the prices compared to the same period last year, it was more than 40% increased.

However, then they have increased prices another round just before the 618 festival. In the month of July, their repeated customers have continued to increase. The repeated customers actually in July have increased by 12% compared to the month of June. It means in the month of August, they have continued to increase. What it means is, a lot of people have bought the bags from Songmont during the 618 festival. Then they love it, which means they love the bag so much that in July, they come back. It means 12% more of these customers come back in the month of July to buy again Songmont. Again because they like the bag that they buy back in June. This number has been consistently on an increase. It means all the Chinese brands have been increasing prices consistently by around 10-20% every quarter now, but the repeated customers we have seen consistently increase.

01:23:11] You mentioned that Songmont has quality issues. Is that still your view, or have they massively improved on this aspect?

Expert [01:23:16]: They have massively improved since we last talked. I think this talk about quality issues have gone down a lot. That's why maybe that's also shown by numbers. The repeat customers have improved a lot, the numbers. We are seeing this continued. Actually, not only these domestic brands, these lower-tier domestic brands because the average selling prices are still very low. If you think about, it's around maybe RMB 1,000-3,000 like that, the range is still much lower than the European luxury, but of course, now they're consistently increasing prices. They are catching up, I would say, on price points like Coach, Michael Kors, they're catching up like Longchamp, they're catching up on this affordable or accessible luxury already counterparts brands. Of course, Coach, Michael Kors, these they do extremely well in China this year, even last year, as we spoke, they continue to do very well. Actually, as we speak, another big news that came up is that Michael Kors also have done so well in China. I think as we speak, this just came, so another brand that I've been telling people that they do well. Because they are not just the only brands, I can also call out some brands if you're interested. They're also doing very well in China, but they are more like the European brands. One is Polène. You can check out this. That they started on social media, and they have become quite big. Also another one is Toteme. This brand also has become increasingly popular with Chinese and the Alpha and gen Z especially. Another one is the DeMellier, these three brands started on social media with the use of influencers.

01:25:18] Who is the best one of these?

Expert [01:25:20]: For Polène and Toteme, they are slightly higher. They're higher so they are more like the Coach price range. For example, the bestseller for Polène is a model called Cyme so that is a tote bag and it's retailing at around maybe RMB 4,000-5,000 like that because most of them are still now being bought on foreign social media website and on social media like that. Similar to Coach price points. I think that's what people are saying. It might not be like the Chinese, the handbags, luxury handbags is shrinking. As in the spend on the top end of the handbags, definitely leather goods are definitely shrinking, and I've been telling people this has been happening for a while already, and I expect them to continue to be the case. For the Alphas and gen Zs, they have now moved to these items that are not logo-based, that are more, like I mentioned, the jargon. It doesn't necessarily have to have the logo.

Even Cartier will launch a bag, for the Clash bag. Because of the success of the Clash de Cartier, you can look for it. It's called the Clash bag, this is for Cartier. Also, Loro Piana The Row, the bestseller of The Row tote bag. Look at it, the Loro Piana new tote bag. Which is also quite similar to the Polène bag. These bags, they are definitely taking market share from the Louis Vuitton. That's why I think Gucci started to try to craft out a space for themselves because Gucci was, of course, still under a lot of pressure. That's why the drop in prices. I think they want to maybe capture the space that's now between Coach and between LV that this space now currently mostly Burberry. Mostly Ralph Lauren and Burberry are picking up the space. I think Gucci is moving down to pick up the space, if you draw infographics, that's what's going on. At the top end, like Hermès is struggling. It's also slowed down a little bit for Chanel.

For Chanel, at the prime of the pyramid. Goyard is still doing well at the top. Goyard relatively doing much better than the other brands like that. These are probably the top three brands. More the top end like that. Also another big news, if you're interested, one of the best-selling luxury items in China this quarter is what it's an umbrella by Loro Piana. Also try to look that up. I think it provides a lot of news perspective to people. Basically, Loro Piana launched two versions of the umbrella this summer. In June, they launched it July, and one is made up of cashmere. It's the first-ever in history, I think an umbrella made of cashmere. The other is slightly cheaper, is made out of wool. I never tried this umbrella because I didn't manage to get one myself because they were all sold out in China. They were so popular, all sold out. All our VVIPs wanted this umbrella. There's still a long waiting list for this umbrella. The cashmere one sells over RMB 12,000 in China. Can you imagine RMB 12,000 for an umbrella? It's loved by the VIPs. All our VIPs want one.

Even I want 1-2 now, but I can't afford it. I want one because everyone wants to test it out. Does this umbrella really work on the heavy rain? Can you imagine an umbrella made out of cashmere? It for the bestsellers. Also another thing to look out for is this quarter, the Lyst, I shared this with you also. It's a very good indication of what are the Lyst. It's one of a very good indication of what's hot, especially with the gen Z and Alphas, the trendsetter. There are very good indications and this quarter, it's very important because it's the first quarter ever that this list was created that the top 10, none of the items in the top-10 list was a handbag. There was no handbag in the top-10 list. Just last quarter, there were two handbags. We still get two handbags. The Chanel, the shopping bag was still hot on the list. Another top 10 bags is what, is a tote bag by Trader Joe's. These are the only two bags that made the top 10 on the list. This quarter, no, no bags. There are no bags on the top-10 list. If you think about it, it's of great importance.

In the top 10, there's no bags. It was all taken up by shoes, by jewellery by accessories, no bags. I think this thing is keep going on. I think maybe that's also why Louis Vuitton started to take another approach. This autumn, winter, they were heavily marketing like the trunks, like the travel bags, like the monogram luggages. Also Louis Vuitton is going to hotel business, as you know, restaurant business, other business because also that's also where more and more of the share of the Alpha, gen Z's wallets are going, are going to concerts also in China. They love concerts like various things. Of course, other brands that still will do continue to do well. Brunello Cucinelli, Loro Piana, they will still do well. For Brunello Cucinelli, so maybe one of the latest developments that they have invested a lot in the digital. In China, they have partnered with Tmall on some AI generation something, and it's doing well. I think for Brunello, for Loro Piana, what they're doing well, they will continue to have double-digit growth. It's probably the only brand that will have strong growth for LVMH in China. It's Loro Piana because they kept launching very innovative also products that actually speak to (inaudible). This quiet luxury trend is still very strong in China.

Also, of course, very innovative with these umbrellas, with this Needle bag. With Brunello Cucinelli also going into the winter months, they continue to be strong because also they have done a lot of local marketing. They will do their first VIP events very soon next week. I wish I will attend in Beijing for the VIP winter, autumn pre-order. These brands, they will continue to have solid double-digit growth in China. The other brands will difficult, namely LVMH and Kering also. Also Lululemon (talking over each other). Also another brand that is doing really well is Alo Yoga. Alo Yoga just opened the Tmall store two weeks ago and big news, very good and they will open the first China store at K11 next week, soon.