There is some hope for the global luxury goods industry to stage a revival from the novel coronavirus pandemic related impact on their business as Chinese consumers have finally started to purchase high-end handbags, shoes and jewelry again.
However the road ahead for the leading global luxury brands is still froth with challenges as the companies will likely need to rethink the way they do business to cope up with the significant damage to their business caused by the pandemic as well as a shift in the manner of shopping of customers in many of the economies reeling with recession.
A rebound in sale in the Chinese market has been reported by a number of luxury goods companies this spring as people came out from weeks of lockdowns and has started to purchase in what is being called as ‘revenge spending’ which is the effect of pent up being released once people were allowed to move out of their homes.
Retail sale of Tiffany grew by 30 per cent in China in April and by about 90 per cent in May compared to the same period a year ago, said the luxury brand earlier this week. In comparison, the company reported a drop of about 40 per cent in its overall net global sale in May.
“Our business performance in mainland China, which was the first market impacted by the virus, is indicative that a robust recovery is underway,” said the company’s CEO Alessandro Bogliolo during the company’s earnings presentation.
Similar thoughts have been expressed by other luxury brands.
Sales of its clothing, bags and accessories in China were “already ahead of the prior year, and continuing to show an improving trend,” Burberry said last month.
China was pointed out to be the bright spot in its global business in the last few weeks by Swiss jewelry and watchmaker Richemont while reporting “strong demand” in a results announcement last month. The company had opened up its 462 boutiques in the Chionense market recently.
“The data indicates that China is in recovery mode,” Luca Solca, an analyst at Bernstein, wrote in a note published late last month. A “rebound index” which has been able to indicate a strong growth in sentiment among Chinese shoppers in the month of May, have been created by researchers at his firm.
According to Claudia D’Arpizio, a partner at consulting firm Bain, China could become one market where luxury retailers see a turnaround this year because of the recent rebound in consumer spending in the country.
“It’s actually been very, very positive,” Edgardo Osorio, founder of Italian shoe brand Aquazzura, said in a television interview. “China has always been, but is especially now more than ever, one of the most fast, [responsive] customers.”
However much of world is still reeling under the impact of the pandemic which has limited the foreign trips and the chances of people spending excess money that they had.
“Instead of going on holiday, they might buy a Chanel bag,” said Fflur Roberts, head of luxury goods research at Euromonitor, who added that an uptick in spending is also happening in other countries, including South Korea. “We are seeing signs of the market returning to a certain extent.”
(Adapted from CNN.com)