China will be a superstar country for the luxury segment once again, with patience and waiting time. Analysts and managers of the luxury segment are sure of it. It’s true that the zero-Covid policies implements by Beijing have caused a new and drastic reduction of sales (-30% since January, estimated Bain). But it’s also true that consumers’ trust in China remains intact. So, long-term, the forecasts for China continue to be very good, even with some threatening matters tied to political choices. “We don’t think of China quarter to quarter. Let’s look at the next 5 years: we are very optimistic”, says Antoine Arnault, CEO of Berluti and son of Bernard, boss of LVMH.
Who can wait
At this time, for the luxury segment, the USA are substituting China. But the segment’s manages are sure that China will soon be the center once again: the superstar for consumption. In fact, at the summit Business of Luxury by Financial Times, Gildo Zegna (CEO of Ermenegildo Zegna) reminded everyone that after any “difficult period”, China has then bounced back, and he expects it will happen again. “Am I concerned it will take longer than expected? Probably”, he says, “but we shouldn’t avoid doing luxury-related business in China, because they love this lifestyle”. Mr. Arnault also said he doesn’t look at China’s market on a quarter-to-quarter basis, as he “remains very optimistic” for the 5-year outlook.
China will be the place to be once more
After all, given the recovery of consumption in 2021, it’s fair to expect a similar recovery trend will take place in a few months. That is, even if China’s economy doesn’t have the same shine as it did a few years ago, due to a number of factors. For example: the “common prosperity” mentioned by the government and the average debt of families appear to have reached a peak. It’s clear, states Claudia D’Arpizio of Bain to the Financial Times, that the major risk is that “luxury brands will become so dependent on a single marketplace”.
Only a temporary crisis
Federica Levato, of Bain, believes that the Chinese crisis is only temporary. “Chinese consumers want to return to normality, to go out and buy in stores or online. Consumers’ trust hasn’t diminished. It’s only in stand-by due to this external matter”, she says to Il Sole 24 Ore. Luca Solca of Bernstein agrees. Chinese consumers will go back to shop “as soon as logistical aspects are resolved”. In fact, he concludes, “almost all brands are planning local openings”.