Younger shoppers from China to lead recovery in demand

Long lines outside glittering boutiques like Chanel and Gucci are back in China.

Everyday, crowds gathering behind the velvet ropes have caught sales assistants off guard.

"I've been working literally around the clock since May," said Michael, a sales representative at French luxury house Louis Vuitton in Shanghai who was unwilling to provide his surname.

"People flock to the stores, normally popping very specific questions like－Do you have 'On the Go' (a handbag model)? And they leave with stuffed shopping bags."

The global luxury market was arguably among the hardest hit amid the novel coronavirus pandemic, which left countless people stuck at home, including the over 100 million Chinese travelers that luxury houses deem as their "best clientele".

International luxury companies have expected social distancing to take a heavy toll on their business. After all, more than two-thirds of the $106 billion that Chinese consumers spent on luxury purchases last year took place abroad, said consultancy Bain& Co.

But the outbound travel restrictions could well represent a silver lining for the long lackluster domestic market, which in recent months saw the Chinese splurging big as lockdowns and travel restrictions stimulated their appetites for some luxury products.

Upscale cosmetic group Estee Lauder has attributed its gradual recovery from COVID-19 primarily to the remarkable rebound in China.

In fiscal year 2020 ending June, the owner of Estee Lauder－Tom Ford and MAC brands－netted double-digit growth in China on almost every channel (with online sales at the forefront) and across all product categories for almost every brand, the company reported in late August.

"Net sales in the Chinese mainland where restrictions were lifted first saw strong double-digit growth year-over-year during the fourth quarter of fiscal 2020," the company said in a news release, where President and Chief Executive Officer Fabrizio Freda highlighted the vibrancy of the Asia-Pacific region, led by China, in navigating market uncertainties in the coming year.

Dispelling concerns, luxury skin care brands like La Mer also recorded double-digit growth on the Chinese mainland, whose iconic facial cream was priced at a somewhat prohibitive 2,500 yuan ($370) for 60 milliliters.

Online sales made up over 40 percent of Estee Lauder's total sales for the fiscal year, and growth in China was partially driven by successful programs during key shopping moments, such as the 618 Midyear Shopping Festival－but also by targeted and expanded consumer reach. Despite the curtailed travel retail section, its domestic travel consumption in China remained stable.

Likewise, sales in China for most of LVMH's brands turned positive compared with a year ago in the second half of March, said Jean-Jacques Guiony, chief financial officer of LVMH Group, which saw "very high growth rates" in the country in April for some of its products.

"Sometimes in excess of 50 percent," Guiony told The Wall Street Journal in an earlier interview. "It really shows the appetite of Chinese people has come back to previous patterns of consumption."

Xue Jingli, chairman of Consinee Group, China's largest exporter of cashmere yarn, agreed that global luxury brands see China bucking the overall gloomy trend.

"When I talk to our foreign partners, they report China to be among the very few (if not the only) markets where sales are gradually picking up after the COVID-related closures," said Xue, whose company sources for top-tier fashion brands from Hugo Boss and Max Mara.

"It's unsurprising to see a gradual pickup of the luxury market in China because people simply lack the conventional channels they normally turn to for luxury purchases, such as duty-free shops and outbound trips," said Peng Yanyan, head of the China consumer sector at UBS Securities, which remained rosy about the sector's performance in the country.

"As overall disposable incomes rise, notably for the well-off population, luxury products are 'a must have'," she said. "So the novel coronavirus has simply impeded supply in the short run, but demand is always here to stay."

In light of the booming demand, brands not only attract shoppers with a variety of tantalizing entry prices, but also ramp up prices on more luxurious and iconic offerings.

Wang Xiaohui, 33, a graphic designer in Shanghai, said her anxiety of not being able to secure a Chanel chain handbag has been exacerbated after reading numerous posts on Chanel's shopping craze in China's major cities documented by her peers on social commerce platform Xiaohongshu.