Fashion labels that depend on China’s overseas tourists for a huge chunk of sales must now follow them home.
By guest author Carol Ryan from Wall Street Journal
For the world’s top luxury brands, the battle for Chinese consumers is moving to China. A stampede on social media is the latest front.Staying away from online platforms like Alibaba’s Luxury Pavilion and WeChat is no longer an option now that international travel has ground to a halt. Previously, most luxury sales were made to Chinese consumers when they vacationed overseas.
“Brands didn’t have to bend to the will of the market in China from a digital perspective,” says Danielle Bailey, managing vice president at Gartner. This year, China’s luxury shoppers are expected to make 50 % of all global luxury purchases, but they will mostly shop at home.
Globally, sales to Chinese nationals are still tracking down for most brands, yet some spending is being clawed back in mainland China itself. Kering, the Paris-based company that owns Gucci and Bottega Veneta, said this week that sales in the country increased 40% in the second quarter compared with the same period of 2019. Sales of Louis Vuitton and Christian Dior, the top fashion brands of Kering’s crosstown rival LVMH Moët Hennessy Louis Vuitton, were up 65 % in China on the same basis.
The big Parisian luxury houses don’t have the automatic advantage in China that their size and dominance of tourist hot spots implies. In a Bernstein ranking of 22 brands’ ability to capture spending by Chinese shoppers in their home market, Christian Dior ranks 15th, Gucci 20th and Yves Saint Laurent is second to the bottom. In an effort to compensate, these brands are among the heaviest spenders on Chinese social-media platforms.
Brands like Omega and Cartier, owned by stock-market underdogs Swatch and Compagnie Financière Richemont, are in a better position. They are close to the top of Bernstein’s ranking, partly because a larger percentage of their global stores are based in China and the smaller price gaps between their Chinese boutiques and those elsewhere.
With the European and U.S. economies in deep recession, China is brands’ only hope this year. They are already getting creative. Trench coat maker Burberry is sponsoring a Chinese reality TV dance show, while Louis Vuitton is experimenting with live streaming—a freewheeling e-commerce format
As competition for Chinese spenders grows intense on their home turf, expect brands to move far from their comfort zone.