Changes in the world's third largest luxury goods market

While some top international luxury brands are building bigger, flashier stores in China to fuel growth, others are focusing their marketing efforts online, according to caixin.com.

Louis Vuitton store in Chengdu, Sichuan, China. Photo: LOUIS VUITTON

According to a report released by the Yaok Institute consultancy on January 18, luxury spending in mainland China in 2022 fell 15% compared to the same period in 2021, heavily affected by weak consumer confidence and restrictions to prevent the spread of the Covid-19 pandemic.

Last year, luxury spending rose 11%, but that was still significantly lower than the 37% increase in 2021. However, brands still have reasons to bet big on China and the super-rich.

Mainland China is the third largest market for personal luxury goods sales globally, with a 15% market share in 2022, behind the Americas at 32% and Europe at 27%. This figure is expected to rise to 26% by 2030, making China the world's largest luxury goods market, according to a Bain & Company report.

Against this backdrop, new buildings designed and built for Louis Vuitton, Dior and Hermès have sprung up in Taikoo Li Sanlitun – Beijing’s famous retail fashion landmark in the heart of Chaoyang District.

According to Mr. Zhu Jianhui, Europe's largest luxury retailers such as Chanel and Burberry have also stepped up efforts to upgrade existing retail stores - focusing on improving VIP rooms to enhance the shopping experience for super-rich customers...

Meanwhile, some affordable brands are accelerating their forays into smaller cities to seek new growth, including Coach, an American fashion brand that has 241 retail and discount stores in mainland China, more than 60 of which are located in third- and fourth-tier cities such as Xingtai in Hebei province, Anshan in Liaoning province and Liaocheng in Shandong province.

Other brands in the same segment as Coach are also making efforts to expand their online presence. In January 2023, Michael Kors joined the Douyin platform (China's TikTok) and started selling products via livestreaming. Shortly after, Versace launched its youth-oriented sub-brand Versace Jeans Couture into the livestreaming space. On Alibaba Group Holding Inc.'s Tmall Luxury Pavilion, more than 200 luxury brands had set up official accounts as of September 2022.

For low-end luxury shoppers, luxury items are not something they need to buy often and their purchasing motivations are diverse, said Zhu Jianhui, head of retail research at real estate services provider JLL China. For example, when incomes are low, luxury spending will be cut first and they will easily replace high-end goods with cheaper alternatives.

MINH CHAU

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