On December 30, 2019, only two days before the new year, the Municipal Health Commission in the city of Wuhan, China, issued an urgent notice to city hospitals about a handful of cases of unusual pneumonia that had been linked to the Huanan Seafood Wholesale Market. It was to be the start of a crisis that within months had engulfed the whole world.
By February 29, the novel coronavirus, now called COVID 19, was known to have infected some 85,000 people, more than 79,000 of them in China, where at least 2,835 had died. But by year’s end, while more than 80 million individuals had been infected worldwide, with 22 million of them still being active cases, China reported that only about 320 of its residents were currently ill with COVID. A series of draconian measures, including shutting the country and its vast population off from much of the world, had resulted in its being one of nations least affected by crisis that had started in its midst.
But China had proven itself not only to be successful in staving off the pandemic from a public health perspective. It also was remarkably nimble in avoiding the economic fallout that struck much of the rest of the world, and particularly the luxury product sectors.
A report entitled “China’s Unstoppable 2020 Luxury Market,” just released by the online giant Alibaba’s TMall shopping platform and the consultancy Bain & Co., states that that the Chinese luxury product sector grew by about 48 percent this year to about $52.9 billion, despite the pandemic. Worldwide, the global luxury market shrank by 23 percent, the report said.
According to the report, in a single year, mainland China’s overall share of the global industry grew to 20 percent, from 11 percent in 2019.
CHINESE CONSUMERS SHIFT THEIR ATTENTION TO HOME
Bruno Lannes, a senior partner at Bain who is based in in Shanghai, identified four factors driving the rebound in the mainland China market. These include the repatriation of sales from abroad to China, millennial and Gen Z shoppers, continuing digitalization of the luxury markets, and the Hainan duty-free stores, where sales by rose 98 percent over 2019, as part of the development of a domestic duty-free channel.
“Mainland China is the only major luxury market to grow in 2020,” Bruno Lannes, a partner with Bain’s consumer products and retail practices, told CNN Business. “China’s luxury market is now bigger than ever.”
But some of the growth clearly comes from Chinese consumers buying at home, rather than abroad. Mainland China’s portion of Chinese global luxury purchases peaked in 2020, the report said, but the growth in mainland China does not compensate for the Chinese consumption lost overseas.
Worldwide spending by Chinese consumers on luxury products is down around 35 percent, according to Bain and Alibaba, meaning that the Chinese mainland’s gain came the expense of destinations favored by country’s tourists, an in particular France, Italy, the United Kingdom, the United States and Japan.
With outbound tourism dramatically down as a result of the pandemic, worldwide spending by Chinese consumers on luxury products fell by 35 percent in 2020.
It was not only the pandemic than encouraged the Chinese luxury product users to spend more at home. Prior to 2020, mainland Chinese consumers were already showing a preference to make purchases domestically, and in response brands were reducing the price gap that had typically made their products cheaper outside of China.
China is most the world’s most online-savvy major luxury market, and this is expected increase in 2021.
ONLINE SHOPPING EVER MORE DOMINANT
China is most the world’s most online-savvy major luxury market, and the growing dominance of this retail outlet is only expected increase in 2021. Almost 40 percent of Chinese consumers plan to do more luxury shopping via over the next few years, according to Bain and Alibaba.
“We believe Chinese luxury consumers’ online shopping behavior has permanently changed,” the firms wrote in their report.
Major brands are taking note. Gucci, which is owned by the French group Kering, has just announced that it will open two flagship stores on Alibaba’s online luxury-shopping platform, which is a platform used by more than 750 million Chinese consumers.
“Gucci has strategically invested in and cultivated a ‘digital first’ approach globally, including the establishment of a dedicated Chinese digital ecosystem over the past years,” said Marco Bizzarri, the company’s president and chief executive.According to the report, most brands believe the Chinese market will expand by roughly 30 percent, as international borders start to reopen. Within five years, the report suggests, China will take over from the United States as the world’s largest luxury market.