Even though the novel coronavirus pandemic has hammered the global luxury market, the luxury market in China has been “unstoppable” so far this year.
Despite the pandemic, there would be a 48 per cent growth in the Chinese luxury market this year to about 346 billion yuan ($52.9 billion), according to a report released Wednesday by Alibaba’s TMall shopping platform and the consultancy Bain.
The report claimed that this growth sill almost double the market share of China in the global luxury market from about 11 per cent last year tp almost 20 per cent.
“Mainland China is the only major luxury market to grow in 2020,” Bruno Lannes, a partner with Bain’s consumer products and retail practices, said s. “China’s luxury market is now bigger than ever.
But for luxury goods producers, it’s not all good news. The growth in the Chinese luxury market has primarily been driven by those Chinese consumers who would otherwise spend big on purchasing luxury products when they go for vacations abroad. According to Bain and Alibaba, there has been a slump of 35 per cent in the overall spending by Chinese consumers on luxury products.
“Mainland China’s portion of Chinese global luxury purchases this year reached a peak,” the report said. “[But] the growth in mainland China does not compensate for the Chinese consumption lost overseas.”
According to the report, there will a slowdown of almost 23 per cent in 2020 for the global luxury market because of travel restrictions and shopping in many places because of the pandemic.
The Chinese economy was able to stage a fast recovery from the pandemic hit because it had rapidly suppressed early coronavirus outbreaks. Consumers of luxury products in China had started to purchase expensive handbags, shoes and jewelry by April this year which was a ray of hope for retailers because their sale in other markets had tanked.
Sales in China of luxury products were also boosted by travel restrictions. “Revenge spending” or a release of pent-up demand as people came out after weeks of lockdowns was identified as another factor behind the surge in sale of luxury products. This trend helped in notching up a fast growth in sales this spring for a number of companies such as Tiffany and Burberry.
Incentives form the government was another factor. According to the Chinese state media, coupons to help encourage people to shop, were distributed by Chinese authorities earlier this year. Bain and Alibaba report said that it also played a part in boosting luxury consumption.
In an October earnings call, the “great strength of the demand coming from mainland China” was pointed out by LVMH, the biggest luxury group of the world.
“From a demand viewpoint, we have no particular worry, and we are very pleased with the response,” said Chief Financial Officer Jean-Jacques Guiony. “But for the time being, there are serious constraints as to [customers’] ability to shop outside China, and this is obviously a weight on the growth for coming quarters.”
(Adapted from CNN.com)