In the aftermath of the pandemic, China saw a significant boost in consumer spending, specifically a 48% increase in luxury goods. As restriction in global travel were still standing, Chinese consumers turned to domestic sources for their luxury purchases. This move boosted the overall economy but at the same time four main engines powered China’s luxury goods market.

First of all, repatriation has been a theme since 2015. With the new law in act, which caused the reduction of import duties and stricter market controls, has helped mainland China to develop and strengthen its attractiveness with consumers (Bain, 2020). Secondly, the generational change of shoppers has been a driver for the sales growth of the luxury market. As Millenials and Gen Z became number one shoppers of high-end products, seeing them more as an investment rather than an object you posses to show your economic availability, savvy brands are including cross-branded collaboration and customized product to attract these new young consumers. Thirdly, digitalization has widen the access to the luxury market. Omnichannel expansion increased across brands’ physical and virtual footprints and through cross-channel efforts such as luxury live streaming from pop-up stores (Bain, 2020). Lastly, Hainan duty-free shopping sales boosted due to attractive policy changes and international travel ban. As a consequence, Hainan duty-free shopping is the first step in the development of a domestic duty-free channel, with new licenses being granted (Bain, 2020).

This increment of allure towards high-end brands, has shifted the focus of these companies from the European market to the Oriental one. Thus, all their resources have been positioned in order to satisfy Chinese customers demands and by using local celebrities as a marketing approach.

However, the Chinese economy is showing signs of stagflation as prices are increasing and manufacturing data show a slower pace in production. This crack-down has started this late August when President Xi Jinping took a major decision upon the government’s regulatory campaign by promoting common prosperity and wealth redistribution. With this announcement, consumer goods companies faced some repercussions on their shares due to the new nationalism. The Chinese president not only resized the wealth distribution but also imposed restriction on their celebrities. The National Radio and Television Association has banned any kind of talent and reality show; therefore, goodbye to any kind of programs which were defined from the Chinese government “commercialization of minors” (Pambianco, 2021b). This censorship has induced many Maisons and brands to change their marketing strategy and penetration in the Chinese market.

What is more, the latest revelation, according to the national office of statistics, shows that the GDP of the People’s Republic has lost more or less three percentage points in Q3, going from 7.3% to 4.9% (Pambianco, 2021a). This change was caused by the energetic crisis and the real estate one, with a major unknown being the Evergrande situation, supply chain difficulties and the new policies imposed by the government. Overall, the Chinese economy went from being the most admired to reaching a major crisis which is also influencing the rest of the world.

 

Sources:

Bain. (2020). China’s Unstoppable 2020 Luxury Market. Bain. https://www.bain.com/insights/chinas-unstoppable-2020-luxury-market/

Pambianco. (2021a). Cina, la frenata del Pil gela il lusso europeo. https://www.pambianconews.com/2021/10/18/cina-la-frenata-del-pil-gela-il-lusso-europeo-328749/

Pambianco. (2021b). La Cina si prepara a tassare i beni di lusso inquinanti. Pambianco. https://www.pambianconews.com/2021/10/21/la-cina-si-prepara-a-tassare-i-beni-di-lusso-inquinanti-329270/