China Re-emerges: “Revenge Spending” Positive Signal

Market Analysis
16/03/2020 09:24

While the rest of the world is tightening measures to control the COVID-19 outbreak, Chinese customers - constituting a whopping third of global luxury industry’s sales and the driving force of global growth in this segment in recent years - are slowly returning to the country’s luxury shopping malls as local quarantine measures are eased.

After a winter that raged havoc for luxury brands, shops are reopening and there are cautious signs of recovery. Perhaps more important than the return of shoppers, experts say, is the mood of the Chinese consumers. The re-emergence of the Chinese market could be spurred by so-called “revenge spending”, a phenomenon referring to the moment in time after the era of chaos and restrictions of the Chinese Cultural Revolution, when consumer demand for luxury goods spiked.

As consumer’s plans and spending came to a standstill for over a month, they are now flush with cash and a desire to regain a “real life”. Interestingly, online shopping did not seem to fill the gap of brick and mortar shopping, as goods that were bought online often didn’t reach their destination during lockdown. As the rest of the world remains in lockdown, Chinese consumers, who traditionally spend a lot shopping abroad, will likely focus on the local market, a trend amplified by lower import duties and taxes.

Experts don’t believe the revenge spending trend will make up for what will most likely be one of the worst years in the history of luxury sales, and for many people, splurging on luxury will not be an option as the Corona-crisis impacted their income and they will likely focus on essentials. But the fact that life is resuming in some parts of the world is, to say the least, encouraging.