Bernstein: China’s Offline Luxury Consumption Surpasses Growth Expectations
According to a recent report from Bernstein, affluent Chinese shoppers have continued to drive luxury sales growth, despite a weakening economic outlook.
Based on data obtained by Bernstein from CR Land, a retail partner of MixC, same-store sales growth for luxury brands at MixC’s mainland China malls registered 26 percent year-over-year growth for the five months ending in May.
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MixC is a top luxury and fashion retail operator in China that counts major luxury brands such as Louis Vuitton, Dior and Hermès as its tenants.
Despite geopolitical tensions and macroeconomic uncertainty, the global personal luxury goods market is projected to grow between 5 and 12 percent in 2023, or to between 360 billion and 380 billion euros, according to a recent Bain-Altagamma report.
A speedy China recovery and sustained growth from Europe and America means growth would reach the higher end of the spectrum, but a realistic scenario, with a slower recovery in China and a slowdown in the rest of the world, will lead to growth between 5 and 8 percent.
Despite a slowdown in the affordable luxury and jewelry categories, top luxury brands such as Louis Vuitton, Chanel, and Gucci have continued to perform well, the Bernstein report noted.
“Even during economic downturns, affluent consumers are willing to pay a premium for unique and differentiated products,” the report said.
“Consumers who continue to purchase premium brands prioritize the in-store experience and personalized service that offline channels offer,” the Bernstein report said.
To meet increasing consumer demand, megabrands such as Louis Vuitton, Dior and Chanel will launch outsized and exclusive retail offerings in first-tier cities. For example, both Louis Vuitton and Dior recently unveiled hoardings for landmark stores in Beijing’s Sanlitun Taikoo Li shopping complex.
Apart from luxury retail, Bernstein noted that premium sportswear brands, such as Lululemon, Arc’teryx and Descente, are also “doing well.” In comparison, mass-market players, such as Nike, Adidas, Anta and Fila, are seeing weak demand in premium malls, as China’s middle-class cuts back spending on discretionary goods.
Data from MixC also revealed that a resurgence in offline shopping had helped premium cosmetics brands offset losses in online sales.
According to Bernstein, the category saw a 14.6 percent drop in sales on Tmall, Taobao and Douyin for the first five months of 2023 but saw outstanding growth from January to May at MixC outlets.
“Skin care and color cosmetics are expected to be in high demand as consumers seek to enhance their personal appearance and feel more confident when interacting with others,” the report added.
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