Global Courant 2023-05-03 05:55:00
Mass to Hainan
The future of Chinese luxury spending can be seen in Hainan, a domestic hub for high-end duty-free shopping.
The South Island has seen sales skyrocket in the years when tourists were confined at home, and it hasn’t held up despite Beijing dropping its strict zero-Covid policy in late 2022.
Sales in Hainan’s duty-free malls in April remained 203 percent above 2019 levels, preliminary data from Sandalwood shows.
The shift even affects the traditional luxury capitals of Hong Kong and Macau, both China’s special administrative regions.
LVMH, the world’s largest luxury conglomerate, is shifting resources away from Hong Kong and focusing more on investments in mainland cities, including Shanghai and Shenzhen, Bloomberg reported in April.
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Going forward, “we expect a higher mix of local spending compared to pre-Covid-19,” says Ms. Agnes Xu, Sandalwood co-founder and head of research, “as luxury is now more accessible in mainland China due to years of store expansion across the country and in Hainan”.
Meanwhile, global brands are bracing for the impact.
They include Procter & Gamble’s premium skincare company SK-II, whose chief financial officer Andre Schulten told analysts in April that the company was not seeing “any return of Chinese consumers to travel stores.”
Most Chinese customers currently in Europe travel as individuals, LVMH’s chief financial officer Jean-Jacques Guiony said on the company’s latest earnings call, rather than in the larger travel groups that have become ubiquitous in shopping areas around the world.
Luxurynsight’s Mr. Siboni pointed to years of debilitating Covid-19 lockdowns and restrictions that he said had prompted more Chinese consumers to “rethink their lifestyles”.
“They no longer want to queue for three hours in front of a shop in Paris in the rain,” he says, “but want to contact a local sales representative who knows them and can advise them better”. BLOOMBERG
