Global "luxury fashion brands" are worried as Chinese consumers now look inwards when purchasing luxury goods.
China's big-spending shoppers are back to shopping. But they preferred to shop at home rather than fly to other countries in the covid era. They're now doing more of their shopping at home, even with all mainland borders open again, and the consequences for foreign destinations and brands once reliant on deep Chinese pockets could be frightening.
In April 2019, 62 percent of luxury spending by China consumers took place inside its borders, increasing from 41 percent in the same month. According to a report from Bloomberg, those are the sales figures compiled by alternative data provider Sandalwood Advisors.
Although Chinese tourists are slowly touring abroad again, the analysts surveyed by Bloomberg said that the volume of their overseas shopping wouldn't return as before. Domestic luxury offerings have grown in sophistication and range, and the prices of goods are rising worldwide, hindering Chinese shoppers' enthusiasm for leaving their homes.
Before Covid, China was the world's fastest-growing source of tourists, with the bulk of their luxury spending, about 70%, taking place outside the mainland in 2019. The CNBC report states that shopping and vacation havens from Italy to Thailand have been enthusiastically waiting for their return.
Prudence Lai, senior analyst at market research, said, "A significant portion of consumption power will be trapped in the domestic market due to the ease and convenience," provider Euromonitor International.
The retail market in Asia popular with Chinese shoppers "will also see a flatter recovery track and would take longer to recover back to pre-Covid levels compared to other travel industries." She further said it "should consider exploring alternative source markets and create more channels for their customer base for growth."
Jonathan Siboni, founder and CEO of Paris-based data intelligence firm Luxurynsight said, "The local market inside China mainland should represent more than 50% of the total Chinese spending from now on."
Bloomberg reported last month: "With the continuous rise in spending at home, more luxury brands are focusing on investing in the region. LVMH, for instance, the world's top luxury conglomerate, is swerving resources out of Hong Kong and focusing more investment in mainland cities, including Shenzhen and Shanghai."
"Going forward, we expect a higher mix of local spending versus pre-Covid," said Agnes Xu, Sandalwood's co-founder and head of research.
"...as luxury is now more accessible in mainland China through years of store expansion nationwide and in Hainan."