MILAN, Jan 4 (Class Editori) — The battlefield for designer labels in China is shifting toward new market segments. With the increase in domestic shopping, a consequence of the severe restrictions imposed in recent months by the zero-Covid-19 policy, demand for high-end products has accelerated significantly especially in Tier 2 and 3 cities, where local consumers are driving the next wave of consumption. A phenomenon caused by rising disposable income and pandemic-related travel restrictions that have forced residents to stay and shop in these cities.
After the big Tier 1 metropolises such as Shanghai, Beijing, Guangzhou, and Shenzhen, Chengdu as well, located in the southwestern part of the country, has also become a hotspot for fashion & luxury brands, coming to host two shopping malls with more than 130 international high-end and premium brands. Changsha, Ningbo, Wuxi, Shenyang, Chongqing, and Xi’an are also on the rise.
“It is important to remember that these cities have a lower cost of living and a more relaxed pace. As a result, residents have more time to spend on social media, especially short video platforms such as Douyin, and online shopping. In addition, these consumers have a strong cultural identity, expressed in their taste for traditional Chinese clothing, distinctive architectural styles, local craftmanship, and cutting-edge youth subcultures. Brands must learn to respect local culture before entering these new market segments,” Hylink experts stated in the latest Chinese market outlook.
The pandemic and travel restrictions have not only urged residents to shop in their own cities, drastically reducing outbound luxury shopping, but have also given a boost to domestic travel. In 2021, before the zero-Covid-19 policy went into effect at the end of last March, more than 90% of Chinese consumers purchased luxury goods domestically, meaning 30 billion less luxury purchases abroad than in 2020.
The luxury industry traditionally attracts global consumers with 20-30% of the industry’s revenue coming from overseas consumption. “Before the pandemic, the number of outbound Chinese tourists exceeded 150 million per year, and they made purchases in destination countries not only to save on taxes, but also because high-end shopping is part of the travel experience itself,” experts continued.
This reversal led to a sale boom in Hainan Island, China’s most sought-after tourist destination and duty-free paradise, where revenue grew significantly during the pandemic period to 60.17 million yuan (8.25 million euros at today’s exchange rate). Chinese luxury consumers, unable to travel to their favorite international destinations such as Hong Kong and South Korea, fell back on Hainan to do their shopping, spending an average of 8,372 yuan per person (1,148.53 euros).
However, the duty-free shopping in the island is also flourishing thanks to Government incentives. In fact, in 2022, the Hainan provincial Government released a plan to encourage tax-free shopping, including a six-month duty-free shopping festival and 80 billion yuan (over 10.9 million euros) in vouchers to spend in this luxury shopping paradise.
Cosmetics, jewelry, and watches resulted the top 3 most successful products. Therefore, it is not surprising that many Western brands have chosen Hainan Island as the location of their first duty-free store in China or to launch new products. Last July, Renzo Rosso’s OTB Group opened its first children’s clothing boutique, Brave Kid, in Sanya to offer childrenswear collections from brands such as Diesel, Marni, DSQUARED2, N°21, and MM6.
(Source:Class Editori)
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