McKinsey, Chinese luxury spending is expected to double to $169.7 billion by 2025. E-commerce platforms cooperate with luxury brands after the novel coronavirus outbreak
Global luxury goods industry is improving and China has played a leading role in the growth of global luxury goods market. According to Deloitte, “in 2018, China spent $145.7 billion on luxury goods, accounting for a whopping 42% of the total global luxury goods market. China’s 2018 spending increased 7% over the previous year”. And now, luxury industry bouncing back from slump. The COVID-19 pandemic has hit the luxury and fashion industry hard. According to a study conducted by Boston Consulting Group, global sales in these two sectors could drop by 25% to 30% this year compared to 2019. Bulgari for example, when the pandemic was at its peak in China, closed 50% of its stores nationwide, which have now reopened.
And today, the luxury goods sector has witnessed a rebound in China and is playing an active role in boosting regional economic recovery amid challenges in post COVID-19 moment. Recently, we have seen more high-end brands accelerating their digitalization push and expanding their online presence, said industry insiders.
According to Chinese e-commerce giant JD, since the beginning of January, around 20 luxury brands have opened stores on its online marketplace, such as the world’s oldest fine leather goods house Delvaux, jewelry brand Goossens and British luxury leather brand Smythson. “The pandemic has affected many industries, and luxury is no exception. It has encouraged many luxury brands to attach greater importance to online business,” said to China Daily Kevin Jiang, president of international business at JD Fashion and Lifestyle.
Tmall Soho Pavillion
Other luxury brands are recovering from the COVID-19 pandemic. French luxury group LVMH said its top brands including Louis Vuitton saw sales on the Chinese mainland rise by more than 50% year-on-year in early April. On April 11, Hermes reopened its Guangzhou flagship store and reportedly achieved turnover of $2.7 million in a single day.
E-commerce boosted luxury products sales, even with new intiatives. At the end of April, Tmall unveiled its “Luxury Soho” channel, marking China’s largest e-commerce giant’s entrance into the luxury outlet business. Brands such as Coach, MCM, LEANCCE LAMAVO, and Versace have already joined. Luxury brands are already present on Tmall through a similar channel called “Luxury Pavilion” which was launched in 2017. Under the COVID-19 crisis, many global luxury players faced an overstocked inventory and Luxury Soho had become an inviting digital channel to sell unsold products without diluting a brand’s identity. To access the channel, users need to search for “luxury product discounts 奢品折扣” on Tmall. Easy and quick.
“In the long term, we expect to see the definition of luxury evolve and become a state of mind, rather than ownership of things. In general, we predict ‘mindful consumption’－as opposed to buying without much thought or for the thrill of it”, said Laurel Gu, category director of consultancy Mintel China. Chinese luxury spending is expected to double to $169.7 billion by 2025, delivering 65% of growth in the market globally, a McKinsey report said. While the COVID-19 pandemic has made for a challenging 2020 the luxury goods sector can successfully weather the crisis and emerge even stronger.
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