One of the most cited forecasts by insiders in the luxury sector in recent years is that formulated by Bain & Co. which estimated that in 2025 almost one in two luxury customers (45%) would be Chinese nationals. The pandemic has changed the cards: after a brilliant start in the first quarter of 2022, the “zero-Covid” policies of the central government have put a stop to the growth of consumption. And if today’s day – in China it is Double 11 or Single’s day: the largest virtual shopping festival in the world – will certainly mark a peak in sales, the forecasts for the current year still speak of a slowdown.
2022 slows down but China remains a reference for world luxury
«2022 represented a year of slowdown for China and for Chinese consumers, especially in relation to the high growth rates of the past years – explains Federica Levato, senior partner at Bain & Co -. Consequently, and in the light of the current situation and in particular of the persistence of restrictive policies, we have revised our forecast future on China. We think that China and the Chinese will obviously remain fundamental drivers for the future evolution of the luxury market; similarly, we have also observed (this year in particular) how local consumers in “new” or “old” markets have shown a greater “appetite” for luxury and have strengthened their relative impact on the market ».
In 2021, according to the estimates of Bain & Co. (which will be updated on November 15 with the Worldwide luxury market monitor created with Altagamma), the People’s Republic had a market share equal to 21% of the 283 billion euros of revenues from luxury personal goods and was a candidate to become the first market of luxury in 2025. According to Levato, “The restrictive measures included in the approach zero-covid policy they effectively prevented the purchase of luxury goods for a large part of the population, mainly in the second quarter. The reopening started in the summer period has been alternating and many cities or districts still remain in partial lockdown today ». The closures seem to negatively affect consumer confidence more than the general economic situation: “The macro-economic context of the country which is slowing down for now does not seem to strongly affect the consumer of luxury”, says Levato.
Gen Z negatively affected by Covid zero policy
Although, on the occasion of the first reopenings, they returned to buying luxury goods, younger Chinese consumers seem to be the most affected by this loss of confidence: “They want to return to a normal life that has been missing for almost three years now – explains Yuan. Zou, head of Europe Luxury and Fashion of Hylink Digital Solutions, a Chinese digital agency that works with international luxury brands -, given that they are still subject to lockdown and mass testing, and thanks to this situation they have changed purchasing attitudes and priorities . For example, they don’t see the need to invest in a handbag or pair of shoes that they don’t have a chance to use. They prefer to spend on household products ». According to Zou “young people will return to spend but not immediately: it will take time and I don’t think it will happen before the second half of 2023. It is true that the government pushes consumption in line with the policy of” Common prosperity “to economically strengthen the class average”. According to Zou, purchases will increasingly move towards less famous brands, affordable luxury and premium brands. And consumption will be concentrated mainly in China even if “the Chinese will return to travel as soon as possible”.
Brand investments are restarting: shops, restaurants and exhibitions
In the meantime, the investments of the luxury brands on site are resuming: this summer there were some single-brand openings including Hermès in Wuhan and Missoni in Chengdu and just a few days ago Louis Vuitton announced the opening of its first restaurant in Chengdu. In Shanghai, on the other hand, Prada has just inaugurated Michael Wang’s “Lake Tai” exhibition, under construction in the Prada Rong Zhai cultural space until 8 January 2023. “The possibility of holding events remains – concludes Yuan Zou -, but the brands they have to deal with the fact that even with just one Covid case, everything is canceled, no matter how much it has been invested “.