7 December 2022
The Asian giant tightened its COVID-19 restrictions last week due to a spike in new COVID-19 cases. This has raised concern about a further slowdown in the country’s luxury market, writes World Footwear.
The Chinese government introduced new lockdowns in key areas such as Beijing, Shanghai, and the manufacturing hub Guangzhou, in addition to ordering mass testing, following the peak of 31 444 new cases reached on the 23rd of November, above the previous record of 29 317 cases in April. By the end of November, new COVID-19 cases amounted to 31 854.
The repeated lockdowns, under the COVID-19 zero policy enforced by the government, have caused China’s economic activity to slump in November. But the truth is store closures and supply chain issues have affected the results of major luxury Western fashion brands throughout the year, among them Capri Holdings, Tapestry and Farfetch.
“China’s luxury market is likely to slow down [further] as more and more entry-level consumers decide to save more money due to the uncertainty entailed by the zero-Covid strategy”, said Antonello Germano, luxury business analyst at China research and management firm Daxue Consulting to Vogue Business. Nonetheless, “it is unlikely luxury sales are going to fully dry up since core high-income luxury consumers are going to keep purchasing high-end goods”, he added.
According to a research by management consultancy Bain and Italian luxury body Altagamma, China’s luxury market can still rebound to 2021 levels between the first and second half of 2023. Depending on the lifting of the zero-Covid policy, the value of the personal luxury goods sector is expected to grow between 3% to 5% or between 6% to 8% at constant exchange rates next year.
Recent news signalling that several cities will be easing lockdowns regulations and testing requirement to respond to the wave of mass protests in the past few days against the harsh COVID-19-restrictions may be a relief for the sector.