Luxury Goods Poised For Comeback In Asia; Digital Sales Gain Traction

COVID-19’s hit to brick-and-mortar shopping and the broader global economy slammed worldwide luxury goods sales in 2020, but purchases are actually soaring among Asian, Gen Z and online shoppers — who are sometimes one and the same.

“Even nowadays, when the number of new [COVID-19] confirmed cases exceeds hundreds of people every day, luxury department stores are full of people,” South Korean business publication Financial News recently reported. “On weekends, the waiting time is at least one hour to enter a Chanel or Hermes store.”

Financial News said South Korean consumers unable to take summer vacations due to COVID-19’s travel restrictions often used their unspent money to buy luxury goods instead. The publication said South Korea’s three top department store chains all reported double-digit year-on-year growth in luxury sales.

For instance, the Lotte chain reported sales of upscale home appliances rose 23 percent year over year, while those of imported audio equipment gained 16 percent.

“The consumer sentiment of those who could not travel abroad due to [COVID-19] was focused on premium home appliances,” a department store official told Financial News.

Chinese Luxury Sales Rise 48 Pct 

A recent analysis by Bain & Co. reported similar trends in China, the world’s No. 2 economy. Although Bain estimated that worldwide luxury sales fell 23 percent in 2020, an analysis of data from Chinese online shopping platform Tmall calculated that China’s luxury sales rose 48 percent for the year to $53.6 billion.

“After an understandably rocky start, China’s luxury goods market finished out 2020 with double- and even triple-digit growth rates for some brands,” Bain wrote in a recent study. “The domestic sale of luxury goods in China recovered strongly in the wake of early COVID-19 lockdowns.”

However, Bain added that much of the growth actually came from Chinese luxury shoppers buying domestically rather than while on overseas trips as COVID-19 locked down travel.

Still, the firm estimated that China’s share of the total luxury market nearly doubled to 20 percent in 2020 from just 11 percent in 2019, “putting the country on track to claim the biggest share of the market by 2025 — even after the world luxury market returns to pre-COVID-19 levels.”

Luxury Buyers Are Increasingly Younger And Female 

Figures show that younger and female buyers are driving much of the luxury market’s gains in both Asia and around the world. For example, Financial News quoted South Korea’s Shinsegae department store chain as saying that customers in their 20s and 30s accounted for 50.6 percent of all luxury sales.

And in China, Bain found that millennial shoppers accounted for 73 percent of Tmall’s luxury lifestyle and fashion shoppers during 2020’s first 10 months. That’s up by 82 percent from the same period in 2019.

Generation Z shoppers grew even more, rising 114 percent to account for 11 percent of Tmall’s total luxury shoppers. By contrast, Generation X or older shoppers made up just 16 percent of the total during 2020’s first 10 months.

Female shoppers also dominate the ranks of luxury buyers both in China and worldwide, according to Daniel Langer, CEO of brand strategy firm Equite and professor of luxury strategy and extreme value creation at California’s Pepperdine University.

“One of the biggest misconceptions many luxury brands have is thinking their target customers are male and roughly 40-50 years old,” Langer wrote recently in online publication Jing Daily, which covers the Chinese luxury market. “In China, up to 75 percent of personal luxury goods are purchased by women. And in countries outside of China, that number surpasses 50 percent.”

Langer added that millennials account for more than 65 percent of all luxury sales in China and more than 40 percent outside of China. “In other words, luxury is now young and female,” he wrote.

Digital Sales Are Key 

Not surprisingly, online sales are the face of the luxury market’s future. For instance, Gucci recently announced plans to open two stores on Tmall’s Luxury Pavilion either directly or through a partnership, reaching more than 750 million Chinese consumers.

“Gucci has strategically invested in and cultivated a ‘digital first’ approach globally, including the establishment of a dedicated Chinese digital ecosystem over the past years,” Women’s Wear Daily quoted Gucci President and CEO Marco Bizzarri as saying. He said opening on Tmall’s Luxury Pavilion “represents the next step in this strategy as we provide our customers in China with an authorized, customized eCommerce experience.”