LONDON — All eyes are on China, as it remains the only source of growth for most luxury brands amid a global pandemic. Analysts and local experts are confident that the country will continue to be the backbone for the sector for the rest of the year.
Imke Wouters, partner of management consulting firm Oliver Wyman, said there is a trend of further polarization among Chinese consumers in the second half of the year.
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“Trade-up remains strong in middle and upper classes, while strong trade-down emerges in the lower-income group,” she said. “We believe for the luxury spending, the strong consumer sentiment will continue for the second half. Sales of luxury goods in China are expected to end the year above 2019, as more Chinese who normally shop for luxury goods when they travel stay home and spend in the country. While for fashion spending, the market may revert back to some growth, yet still lower than the historic 5 percent-plus growth.”
Players with a distinctive premium fashion offering will do better than others. For example, Louis Vuitton’s biggest store in Shanghai is hitting a record-high $22 million monthly sales in August, because of the men’s wear show, Chinese Valentine’s Day Qixi Festival, and the fear of another round of price hikes from September. Meanwhile, second-tier luxury brands benefit less from the rebound.
Nick Cakebread, founding partner of Gusto Luxe, a Shanghai-based marketing and digital agency, which just launched dedicated solutions for sustainable brands, added that “brands with a clear point of view, including those putting sustainability at the forefront of their brands and communications, are driving consumer affinity and performing well.”
Localizing in the right way will also help brands stay ahead of their game in China. “You can enjoy the kind of commercial success that sees China continue to grow as their leading source of revenue. Get it wrong as a ‘foreign’ business, and you can go so far out as to be completely canceled from the country altogether,” Cakebread added.
All the brands went big with the Qixi festival, and among them, Balenciaga came up with the riskiest plan. The brand introduced a batch of limited-edition Hourglass Bags with Chinese calligraphy with a Tupao, meaning raunchy or kitschy, campaign. It went viral on Chinese social media. The campaign was hugely controversial, with some finding it offensive and vulgar, as the visual aesthetic can be interpreted as a mockery of China’s poorer past. But the younger generation appreciated the clever tribute, and the bags sold out online within days.