What happened
The luxury industry is seeing its first major boost in sales since China’s reopening after years of lockdown and economic uncertainty. Luxury spending in China is outpacing the country’s overall retail sales and economic growth, according to The New York Times. In March, sales of gold, silver and fine jewelry increased by 37.4 percent year on year — the strongest March performance for jewelry sales on record, according to figures from China’s National Bureau of Statistics.
The Jing Take
While it has only been a few months since China reopened its borders, all eyes are on the nation as Chinese consumers begin to resume “normal” spending patterns. China’s GDP rose by 4.5 percent in the first quarter of 2023, up from 2.9 percent the year before — its largest jump in recent years, thanks to a boost in retail and property sales, according to reports.
Luxury brands are taking note, as many scramble to enhance their presence, campaigns and consumer-facing experiences in the nation.
In April, it was announced that French luxury conglomerate LVMH, which owns Dior, Tiffany, Sephora and other brands, plans to open its first Louis Vuitton flagship store in Hainan — one of China’s rising domestic tourism and duty-free shopping hubs. The two-story store is opening amid talk of Louis Vuitton raising its prices by 20 percent this year.
The brand more recently unveiled its first furniture and homewares store in Shanghai in November 2022. Despite the nation’s continued lockdowns at the time, Louis Vuitton’s bet on launching its first appointment-only furniture showroom in China appears to have paid off.
Parent company LVMH recently surpassed 500 billion in market value after reporting a 17 percent rise in total sales in the first quarter compared with the year before. Its fashion and leather goods division also experienced an 18 percent jump in sales due to spending by Chinese consumers.
Meanwhile, other brands including Brunello Cucinelli and Hermès saw sales rise by 56 percent and 23 percent, respectively, over the first quarter as retail consumption in China bounces back.
Globally, China was responsible for 41 percent of new luxury store openings in 2022, according to Savill’s latest Global Luxury Retail Outlook. In comparison, Europe drove 23 percent of global luxury store openings, while the Middle East doubled its growth to account for 6 percent.
It’s evident Chinese consumption remains a crucial driver for the global luxury market’s rebound in 2023.
“We expect China to be the luxury industry’s key growth engine this year, especially given a slight deceleration in other core markets like the U.S. and Korea… Much of the initial spend driving the rebound is, for now, less to do with the middle class of China and more to do with rich people spending more,” a Morgan Stanley analyst stated in the aforementioned Times report.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.