Unfortunately we don't currently support Internet Explorer. Please upgrade to Microsoft Edge, Google Chrome or Safari
China’s recent rollback of its ‘zero COVID’ policies proved a boon for the shares of various luxury fashion houses that have depended down the years on the country’s more affluent consumers. But could it end up being the case that many such Chinese simply choose to do most of their luxury shopping at home for a while?
That was the question posed by a recent CNBC report, which highlighted that since early December – when Beijing began to lift its previous coronavirus restrictions – shares in LVMH had gone up by around 12%. A similar-sized gain, of 13%, was seen for shares in Cartier-owning Richemont, while for Dior, the increase over that period had exceeded 11%.
Circumstances have changed in more than a few ways since before COVID-19
As CNBC’s report noted, in the past, Chinese customers have often taken the opportunity during their visits to foreign countries to purchase luxury goods, making the most of currency and tax benefits.
But it has been suggested that with zero-COVID policies having been in force in China for years, many people in the country have become accustomed during that time to buying high-end products in China itself – and that’s a habit that experts have said could persist.
Whereas, according to analyst Jessy Zhang, more than 70% of Chinese luxury expenditure used to take place outside of China, she has estimated that going forward, domestic luxury consumption will eventually account for 70% of Chinese luxury consumers’ spending, and just 30% will occur abroad.
Given predictions that China will become the world’s biggest luxury market by 2025, such an about-turn in Chinese shoppers’ relationships with the overseas market would be significant news indeed.
As Kenneth Crow, principal at the Oliver Wyman management consulting firm, further explained in the CNBC story: “Even though domestic after-tax prices in China could be a disadvantage, the familiarity of the shopping journey, close relationships developed with local store assistants, and the wider range of brands and product offerings in Mainland China over the past years increase the attractiveness of domestic shopping.”
He went on to say it was unlikely that the share of foreign luxury shopping for Chinese customers would recover to the more than 70% level that was the case prior to the pandemic.
Factors like global luxury brands having expanded their physical presence in China since the onset of the pandemic, the increasing digitalisation of shopping processes in general for Chinese consumers, and various travel restrictions that other countries have imposed on Chinese travellers, mean it’s probably a safe bet that affluent Chinese shoppers will make a lot of ‘in-house’ purchases in 2023.
It will be fascinating to see whether this is a trend that largely holds even once the COVID-19 crisis becomes a much more distant memory for people both in and outside of China.
We can help guide your high-end brand to sustained success in the 2020s
In such a fast-changing landscape, it is crucial that your own brand is alert to those changes – and the opportunities for awareness, sales, and growth that even many bigger and much more established brands might have largely overlooked.
For help with tapping into those openings, please don’t wait any longer to contact Skywire London; we will be delighted to advise and work alongside you as your preferred strategic digital agency in London, whatever the markets around the globe in which you aspire to make an impact.
Stay informed on fashion, luxury ecommerce