Chinese big spenders, long the backbone of the global luxury industry, are back. A rebound in stock prices is reviving consumer sentiment and reigniting demand for high-end goods among Chinese consumers after years of stagnation, Bloomberg reported on Saturday.
Earnings results and industry data from companies including L'Oréal, LVMH and Ralph Lauren show that wealthy Chinese consumers have begun opening their wallets for high-priced fashion and beauty luxuries amid the strength of Chinese equities.
According to data analytics firm BigOne Lab, first-quarter sales at offline stores in China for LVMH-owned Louis Vuitton and Burberry Group returned to growth. Gucci's sales declines narrowed, while Coach posted a notable upswing. Ralph Lauren's first-quarter sales jumped more than 50% from a year earlier, helped by Lunar New Year holiday demand and an influx of new customers.
The trend was also evident in the luxury beauty segment. Data from Hangzhou Zhiyi Tech showed that combined sales of the top 10 brands priced above 200 yuan (about 44,000 won) on Alibaba's e-commerce platforms Tmall and Taobao rose 39% from January through April. By contrast, lower-priced brands saw slight declines in sales.
"For the first time in several years, encouraging signals are emerging in China's consumer market," said Daniel Zipser, senior partner at consulting firm McKinsey & Company. As in other Asian countries recently, China is seeing luxury consumption sentiment revive amid an artificial intelligence (AI)-driven stock market boom, analysts say.
Money in China is shifting from real estate to financial assets. According to McKinsey, the share of Chinese household savings allocated to real estate plunged from 90% in 2016 to about one-third last year. The funds have instead moved into stocks and financial assets. The Shenzhen ChiNext Index, centered on venture and information technology (IT) firms, has climbed 26% this year and last month broke through its peak from the 2015 bubble.
"Luxury consumption is closely tied to the income expectations of wealthy households," said Fu Zhifeng, chief investment officer at Shanghai Chengzhou Investment Management. "A strong stock market creates a 'wealth effect' in which consumption rises as asset prices climb, providing upside potential and a positive influence on indicators."
Still, some analysts cautioned that a recovery in luxury demand may not translate into a broader pickup in Chinese consumption. "The real estate and stock markets are still highly volatile," said Jeff Zhang, an analyst at Morningstar. "It will take time for consumption to fully recover."
In Korea, where the KOSPI has continued its high-flying run, the number of consumers buying luxury goods is also rising. According to the retail industry, first-quarter luxury sales at Lotte Department Store rose about 30% from a year earlier. Shinsegae Department Store's luxury sales also grew 29.8% over the same period. With the KOSPI surging from around the 4,200 level early this year to break through the 8,000 mark, the trend is interpreted as people who made money in stocks stepping into the luxury market.
