2020 is proving to be a challenging year for luxury retail in China and the world.
Most markets have experienced a sales slump followed by stagnation. China, however, experienced an initial decline and then the sales growth picked back up. In this post, we look at the chart released by Bain & Company that indicates how the markets are likely to recover.
What the data indicates:
- Some markets are poised to lie flat for the foreseeable future.
- Other markets, China especially, have already picked back up and resumed growth. Since Chinese consumers make up ~35% of the global luxury goods market, brands present in China stand the best chance to weather this storm.
- Global luxury sales are anticipated to decline by 25-30%.
Why some countries will recover faster:
- With many governments still struggling with crisis management, China has been clear of the virus for over 6 months. China’s now resumed strong growth and output.
- The size of China’s economy ensures a healthy demand for foreign goods and resources.
- Some countries and regions have been minimally impacted due to severe prevention measures (and in some cases mere luck). These regions have continued to operate at a slower rate but without extended lockdowns or closures.
- The strategies some governments are pursuing is exacerbating the spread of the virus.
Changes to buying habits in the luxury market we’re likely to see:
- Unfortunately, the damage to tourism means both domestic and Chinese tourists won’t be buying luxury goods while travelling.
- So the luxury market is further concentrated to Chinese buyers inside China.
- A shift towards digital shopping and e-commerce has now accelerated.
- Greater relative purchasing power in China where almost everyone has resumed work, compared with the West which is still crippled by the impact of lockdowns.
- Position yourself in the China market if you aren’t there already. Better to be in growing markets than shrinking ones.
If you’d like to better position your brand for future growth and prosperity, get in touch with us today. We help luxury brands overcome obstacles and unlock success in the world’s most important market. All the while sidestepping the risks and traps for new players.