The Luxury Life: Are big brands Louis Vuitton, Dior picking Japan, South Korea over China?

Be it a Bottega Veneta clutch or a Bvlgari ring, the Chinese love all things expensive. They are big spenders when it comes to luxury brands, driving global sales for more than a decade. But then came COVID-19 and upended lives in China and a lot more. Amid lockdowns and slow economic growth, the Chinese luxury lover had to take a backseat (somewhat). So then who stepped in? And what happens now that the Chinese have abandoned COVID-19 restrictions and are ready to travel the world?

No one was spared the impact of the pandemic; not even the high-end brands. But as the world, including China, is getting back to business, luxury giants seem to be treading with a bit of caution. They are looking elsewhere.

Asia is a big market and they are not letting that go. They are turning to Japan, which has been the OG buyer of luxury goods before China became the big spender, and South Korea, according to a report in Bloomberg.

All eyes on Japan

Long before the Chinese, it’s the Japanese had the purchasing power for high-end European brands. Now, fashion houses are paying more attention to it.

Louis Vuitton, which has reigned supreme in China, has a big collaboration with Japanese contemporary artist Yayoi Kusama. They have transformed stores across the world with Kasuma’s signature polka-dots and her replicas. The maison set a vibrant new pop-up in Kusama’s hometown of Harajuku, Tokyo earlier this month. The luxury giant launched products first in Japan and China before rolling them out worldwide, reports Bloomberg.

LV is not all. In Tokyo, the luxury fashion scene is popping. Christian Dior’s Designer of Dreams exhibition came to the Japanese capital in December and June will see Chanel host its Metiers d’Art fashion show.

In October 2020, the global luxury group Kering, which has brands like Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen and Brioni under its umbrella, opened its headquarters in Tokyo. And even Burberry, which did not have much of a presence in Japan until 2015, is trying to establish itself in the country, according to the report.

Japan was the first among the Asian nations to adapt to high-end fashion. While China took over and is now the second-largest market after the United States, Japan still spends big money on luxury fashion.

Media reports suggest that Japan is back on the growth path and revenues from luxury goods sales are expected to rise annually by 5.17 per cent (CAGR) between 2023 and 2027. The revenue from the luxury market this year is estimated to amount to $30.49 billion, according to market and consumer data platform Statista.

Also read: Indian luxury brands: Can they attract global interest?

South Korea, setting the trend

Consumers in South Korea are the ones that are dictating fashion trends in Asia. They have emerged as the biggest spenders of personal luxury per capita, according to the investment bank Morgan Stanley. It is estimated that South Korean total spending on personal luxury goods grew 24 per cent in 2022 to $16.8 billion, or about $325 per capita. That’s far more than the $55 and $280 per capita spent by Chinese and American nationals, respectively, CNBC reports.

Italian luxury fashion house Moncler’s business “more than doubled” in the second quarter of 2022 compared with before the pandemic, and for Cartier-owner Richemont Group, sales grew by double digits in 2022 compared to a year ago, the report says.

In China, Prada’s retail business declined by seven per cent because of the lockdowns but the “strong performance in Korea and South East Asia” helped mitigate it.

The increase in purchasing power has led to a rise in the demand for exorbitant products in South Korea. “Appearance and financial success can resonate more with consumers in South Korea than in most other countries,” analysts wrote in the Morgan Stanley report.

Plus, the Koreans have no hesitation to flaunt what they have. CNBC quotes a McKinsey survey that found that only 22 per cent of Korean respondents consider showing off luxury goods to be in bad taste, compared with 45 per cent of Japanese and 38 per cent of Chinese.

The Chinese conundrum

The pandemic and the lockdowns slowed China down. But consumers, who could not travel, continued to spend on luxury goods at home. While there was a slump in overall Chinese retail sales, luxury goods sales registered growth.

Sales of personal luxury goods in mainland China rose by 36 per cent to 471 billion yuan ($73.59 billion) in 2021 from the prior year, according to consultancy Bain & Company’s annual report on the luxury sector.

However, 2022 did not bode well for the high-end Chinese consumer. Bloomberg Intelligence research estimated that China’s luxury goods market share could have halved in 2022 thanks to shuttered stores in the first half of the year and a reticence from customers to return to stores beyond the initial reopening euphoria, reports The New York Times.

But will the situation change now that China has opened up? High-end retailers are reluctant because the market is volatile. The possible economic slowdown is also playing on their minds.It remains to be seen if the uncertainty in the country and the government’s call for “common prosperity” that seeks to reduce the yawning wealth gap in the country will influence the buying habits of its people, according to Bloomberg.

Also read: Why luxury brand Manolo Blahnik has waited 22 years to sell shoes in China

The future of luxury shopping

Before the pandemic, Chinese shoppers did not purchase luxury goods on the mainland because of higher prices. A larger part of the sales – 70 per cent – happened in Paris, London, Seoul and Hong Kong. And while China has now opened its borders, the surge in COVID-19 cases has made nations wary of Chinese travellers with many imposing visa restrictions.

“The return of the Chinese to Europe, where prices are lower, will take some time,” Luca Solca, senior research analyst at Bernstein, told Reuters.

So where does the Chinese luxury shopper go from here?

While luxury brands are keeping their options open, they are not turning a blind eye to China. In early January, as Beijing announced to loosen travel restrictions, share prices of luxury brands jumped.

The Lunar New Year is around the corner and everyone from Prada to Gucci is jumping on “The Year of the Rabbit” bandwagon. While there might be restrictions to travel overseas, there is no stopping them from flocking to the country’s local luxury destination, the tax-free island of Hainan.

In November last year, a study by Bain & Co said that Chinese shoppers will make up 40 per cent of luxury consumers by 2030. “China (and Chinese) are a fundamental growth driver in the long-term,” said Federica Levato, senior partner and EMEA Leader Fashion & Luxury at Bain & Co.

While Japan and South Korea are a sound bet, it looks like the Chinese luxury shopper is here to stay.

With inputs from agencies

Read all the Latest News, Trending News, Cricket News, Bollywood News,India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.