Several luxury goods companies have reported an uptick in China this spring that people have been out of the lockdown for weeks, what some have encouraged Analysts say there is a trend of “revenge spending” – releasing paint-up claims if people aren’t forced to stay indoors.
This was despite Tiffany’s global net sales falling nearly 40% in May. “The performance of our business in mainland China is the first market affected by the virus, indicating that a strong recovery is underway,” CEO Alessandro Bogliolo said during the company’s earnings presentation on Tuesday.
“The data indicates that China is in recovery mode,” Bernstein analyst Luca Solka wrote in a note published late last month. Researchers at his organization have created a “rebound index” to track consumer confidence, indicating that sentiment among Chinese shoppers has improved significantly through the girl.
Due to the recent lift, China could be a market where luxury retailers are changing this year, according to Claudia de Arpegio, a partner at consulting firm Ben.
“It was actually very, very positive,” Edgardo Osorio, founder of the Italian shoe brand Aquazzura, told CNN Business. “China has always been, but especially now, one of the fastest, [responsive] Customers. ”
Chinese customers can spend more money on products at home because they cannot travel easily. Analysts say two-thirds of Chinese buyers’ sales usually occur outside of China.
However, most parts of the world still deal with epidemics, restricting foreign travel and opportunities for people to spend any extra cash.
“Instead of going on vacation, they could buy a Chanel bag,” said Fleur Roberts, head of luxury research at Euromonitor, adding that spending is rising in other countries, including South Korea. “We are seeing signs of the market returning to a certain extent.”
Some ‘buyers can stay after a“ psychological impact ”of returning to normal life,” D’RPGO noted.
Returning to China is important, because buyers there are vital to the global luxury market. According to Bain, they account for 35% of all global sales. Five years from now, the consultant estimates that estimates could shoot up to about 50%.
But the industry is still suffering
But that’s just part of the success story in China. Since customers are staying at home elsewhere and selling personal luxury items, including necessary purchases or cheap, unbranded products, handbags, shoes and clothing – it is still expected to put luxury shopping behind them.
Bain projects that sales of these items worldwide could drop as much as 35% this year with expected revenue of 180 percent euros (about 4 204 billion to 250 250 million). This is in comparison to the estimated 281 billion euros ($ 319 billion) received last year.
“Coronavirus is forcing companies to rethink almost every business model,” Roberts said.
The recent jump in sales within China “does not match the decline in sales of luxury brands from Chinese customers worldwide,” D’RPGO said. “Overall spending from China is much lower than last year.”
Raising “revenge costs” is not expected to be too long lasting. De RPGio added, “We see this as a kind of temporary effect.”
Tourists are the real need of the industry in China or elsewhere, he noted. “We hope the journey will be the last driver to return to true normality. It will take many months, maybe more than a year.”
The way we shop has changed
To combat the new reality of more abundant food supply in the domestic market, companies need to adjust their strategy and determine how to reach more local customers.
Originally urged companies to open more stores in China, collaborate with local artists, and form partnerships with Chinese players. This trend seems to be accelerating.
And as long as travel is restricted, brands may have to offer tailors in every market, analysts said.
This is a key issue for businesses, which usually rely on travelers’ crossroads and does not always spend significant time creating strategies for individual countries.
“It’s a big change for stores in Europe that really meant more to tourists – a shop in Paris or a shop in Milan,” the DRPGO said. Now, “growth will come from local customers.”
Boutiques to stay here
Some floor luxury brands that were typically held in e-commerce are also rethinking their strategies.
According to Euromonitor researcher Roberts, Swiss watchmaker Patek Philippe, for example, recently started selling timepieces online for the first time recently due to the crisis. The agency did not respond to a request for comment.
This suggests a subtle shift, although some brands say that the persuasion to go to a store in person will not go away anytime soon.
“For me, my boutiques, I decorate them like my home,” says Acoazura director Osorio. “You need a physical presence because you want to show and understand the final client [the brand]. “
Brands also see the store as an opportunity to “gain visibility,” according to the D’RPGO. That’s why no one will continue to invest in stores at airports right now, even if no one sees them right now, he said.
Even as the challenges mount, conventional retail is “included in the whole luxury world,” Roberts noted.
He predicted that firms could reduce the number of stores they operate or the size of each store – but they probably won’t pull it off perfectly.
And while Osorio defended the importance of a brick-and-mortar store, he acknowledged that the coronavirus had forced him to rethink his strategy in new ways.
The executive recently set out to facilitate his business, deciding that instead of collecting four a year, he would do only two. He instructed his team to relaunch the website to make it more mobile friendly.
“Incredible two months later where I was literally thinking, ‘How am I going to survive this?’ Now it’s almost: ‘How do I take my brand into the future?’ Osorio said. “It was probably the most creative four weeks of my life.”