Thanks for the invitation to "The China Show" on Bloomberg Television. In this segment, DLG (Digital Luxury Group)'s Managing Director, China Consulting, Jacques Roizen, speaks with Daniel Zipser, Annabelle Droulers, and Yvonne Man about the latest dynamics of Chinese luxury consumers. Jacques noted: "The Chinese luxury market is far more than the performance of luxury brands in China."
For months, my colleagues at DLG (Digital Luxury Group) and I have been arguing that the so-called “China luxury slowdown” narrative is the result of an incomplete perspective on the Chinese luxury market. This morning, I had the opportunity to share this perspective on The China Show with Annabelle Droulers and Yvonne Man of Bloomberg News, along with Daniel Zipser of McKinsey & Company. While it's true that the revenue of luxury brands inside China has declined, this is not an indication of weakness in the Chinese luxury market, but a sign that consumers are shifting back to their pre-pandemic habits: 👉 In 2019, Chinese consumers were making two-thirds of their luxury purchases outside of China. 👉 The travel restrictions imposed by China's zero-COVID policy forced them to spend exclusively within the country, leading to an artificial and unsustainable surge in domestic luxury spending. 👉 Now, as international travel resumes, we are simply witnessing a reversion to the well-established pre-pandemic behavior of Chinese consumers. 👉 Obviously, the lack of global price harmonization is further encouraging Chinese consumers to shop abroad and capture price differences, often in the range of 20-30%, especially in Japan, which has become a top destination for many Chinese luxury consumers. The key question is whether the rise in Chinese luxury expenditures abroad is compensating for the decline in domestic spending. The following three points suggest that this may be the case: 👉 International travel by Chinese tourists in the first half of 2023 was still below 40% of 2019 levels, but this year it has already recovered to 80% of 2019. 👉 Duty-free overall shopping by Chinese tourists according to Global Blue is up 22% in June 2024 compared to June 2019 - that’s 122% of what was spent in 2019, while luxury is just a subset, this is a strong indicator of the upswing of Chinese tourists consumption. 👉 Finally the fast growing gray market in China is also a form of purchases outside China. As reported by Shirley Zhao in her article last week for Bloomberg News, Dewu, which is estimated to capture 75% of the luxury gray market in China, sold $358 million of Louis Vuitton goods in the first half of 2024, which is over 14% of Louis Vuitton’s total estimated sales in China for the same period - see links in the comments. Rather than hastily downsizing their marketing investments in China, leading luxury brands recognize that while the location of Chinese luxury consumption may be shifting, it remains strategically critical to continue investing in the Chinese market, as Chinese consumers are still one of the most promising sources of growth for the global luxury industry. #China #Luxury #Branding #Growth #Market #BrandElevation #LuxuryMarket