Over the past decade, the Chinese consumer has taken the lead in luxury shopping. Last year, Chinese consumers accounted for 70 percent of the growth in the personal luxury market and generated 40 percent of global luxury spending.
Then 2020 happened and the retail industry at-large was turned upside down in ways that shocked industry analysts and forecasters around the globe.
But despite travel restrictions and temporary store closures in the wake of COVID-19, retail in China, including its prized luxury sector, has since returned to normalcy with incredible speed.
To learn more about the significance of the Chinese luxury market and where it’s headed, we caught up with Erwan Rambourg, a respected luxury analyst and author of The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun.
His latest book Future Luxe: What’s Ahead for the Business of Luxury reveals why, even in 2020, the future of luxury looks optimistic.
RR: Erwan, we’re all talking about the Chinese luxury consumer. Can you tell me why? What should we know about these consumers?
ER: I think Chinese consumption has been front and center for the past 10 years. Actually, my first book was on that topic and explained how the reign of Chinese luxury shoppers had just begun. And we are still at that stage where there’s still a lot to recruit. And if you look at the next 10 years, I think there are reasons for optimism. In the very short term, I think it’s linked to the fact that the way the Chinese administration dealt with the COVID-19 issues was very speedy and very efficient.
ER: But if you’re looking at the luxury sector, last year the Chinese accounted for about 40 percent of sales and about 70 percent of growth. And I would essentially highlight three big themes ahead for Chinese luxury consumption. First, despite good growth over the past 10 years, I believe that sales the Chinese will probably double over the next five. There is a lot of potential to recruit the target market as many luxury brands are still relatively limited in China. And that makes me quite optimistic in terms of growth for the different companies. Secondly, I think most of those sales will take place in brick-and-mortar stores.
ER: There’s been a lot of talk around a shift to online sales and I think it’s feasible. But if you’re looking at Nike or cosmetics companies, the bulk of sales eventually will be online. I don’t think it will be the case for luxury over the next five to 10 years. The reason for that, again, is because luxury is essentially about recruitment. And because that is the case, first purchases will likely be in a store.
ER: We talk a lot about storytelling between the brands and the consumers and I think what is more important is the storytelling amongst the consumers. So my capacity to influence you as a friend, as a peer, and if you’re in the market of my first branded handbag, your story better not be, “I’ve clicked on this website twice and I got delivered 48 hours later.”
ER: That’s very boring. That’s very dull. And so I think because brands are still predominantly in a recruitment mode, that recruitment will take place in stores. The third surprise I would say, and this has been obviously accelerated by the COVID-19 crisis, is that by default there has been repatriation of growth in terms of Chinese luxury consumption.
ER: Up until the last year, about two-thirds of purchases made by Chinese citizens took place outside of Mainland China. There is no place to travel anymore, right? Everyone’s stuck at home as we are today. And so there was a repatriation of growth at home. As the travel trends pick up and the borders reopened, I do believe the majority of sales with the Chinese will actually take place in Mainland China in the future. ♦
To hear more from Erwan, stay tuned for his full interview in episode three of RETHINK Retail Luxury, a new series coming to the RETHINK Retail podcast channel Oct. 28.