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MBA in Luxury Management – Chinese Market Slowdown & Other Trends

Chinese Luxury Market SlowdownWhen we wrote the Top MBA in Luxury Management in 2012, we took the estimates of Bain & Co , and PWC, and summarized the markets that would see a surge in luxury brand adoption. China was the leader, and the luxury experience industry was customizing their services for the Chinese tourists. Two years reversed the trends. In 2011, the estimates were that the industry would grow at 30% per annum. In reality, the growth fell to 7% in 2012 and 2% in 2013. Although Chinese Govt’s anti-corruption drive were held responsible, Chinese economy was showing signs of fatigue. Consumers tend to cut down on luxury and dining out when they see their disposable income as a temporary splurging opportunity.

In 2011, MBA and Masters Programs offering specialization in Luxury, sensing the trends in China, were proactive when they included learning opportunities in China. When a market that is responsible for half the revenue is hit by a slowdown, the recruiting rates are likely to go down. Strategies are developed and expansion plans postponed. Kering and LVMH have both reported sales slowdown in China and put on hold their plans for scaling up. The influence of Chinese Govt. on spending pattern is phenomenal.  An anti-corruption drive has created apathy toward all things non-essential.  

MBA programs ranking for Luxury Management specializations are mostly in Europe with the exception of NYU Stern. Schools can customize their learning trips and focus back on Europe and American markets, but the reality is that Luxury is no longer synonymous with Brand name. Schools that have promoted their programs based on their partnership with leading brands like Gucci, L’Oréal, Louis Vuitton and Bulgari would be forced to consider the evolving nature of the market. Consumers are no longer excited by big brands. As the disposable income increased in emerging markets, so did the purchase of products from lesser-known brands. Luxury still means exclusivity and when a larger section of the market is purchasing from the same big brand, exclusiveness of the shopping experience is diminished.

Although marketing and sales of luxury brands should take precedence in MBA curriculum, a shift in consumer purchasing habit from luxury stores to online should also be reflected in the course structure. Sales in E-commerce are a different beast. The customization of the online shopping experience once thought as a prerogative of web designers and online strategists will find their way into the responsibilities of Luxury Goods marketers. MBA programs that integrate e-commerce and online sales strategy into the luxury management curriculum are on the right track.

Schools that are focusing back on Europe are also at greater risk. A drastic shift in consumer sentiments in Europe, and a stagnant economy in US would risk the collapse of the Luxury market. Even in European Luxury stores, Chinese retail tourists played a substantial role in sustaining the industry.  Fluctuation of currency in Asian markets is another cause for concern. A higher inflation has a direct impact on the spending patterns of the customer. The devaluation of Yen has badly hit japan, one of the mature luxury markets. In 2012-13, the currency fell by over 23% and it had a direct impact on the profits for leading brands. Despite LVMH increasing their prices by 12%, their profits inched up only by 0.4% from net profit of 3.42 billion euros in 2012 to 3.44 billion euros in 2013.

It is not all doom and gloom as Chinese markets continues to be a major contributor in the luxury market. Since the real GDP growth in China is estimated to cool off at 4% by 2030, a career spanning 16 years in an industry can fetch handsome return. For those MBA aspirants who are looking to maximize the learning value in Luxury markets, a curriculum that integrates Luxury Marketing, E-commerce and Hospitality Management would be an ideal intersection to focus. Schools offering China focused luxury management programs are still valuable as the number of household with $150,000 and above income is estimated to increase from 3,84,000 to 10.3 million by 2030. Estimates have turned out to be wrong, and we suggest that all the numbers be converted to a conservative estimate through a 30-50% devaluation from the number provided by leading consulting companies.

Reference

Chinese Luxury Market Report 2014 - EIU

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