China is one of the biggest markets for luxury worldwide. The luxury market in China has seen a healthy growth versus the same period two years ago for the first half of 2021(+107%YoY2). This acceleration continued during the first three weeks into July, but surprisingly dropped to +46% YoY2 during the last week, as seen on the chart below. Most noteworthy is the stock price drop for major luxury brands by mid-August, roughly about 10%.
Diving into the brand level performance. Both Hermes and Tods outperformed in July and maintained high growth, while LVMH remained stable. Within the LVMH Group, Celine posted the highest growth, but its share is relatively small versus Louis Vuitton and Christian Dior which account for over 50%. Still, these growth numbers are not enough to generate high growth for LVMH overall. Tiffany had a slight weak trend but only accounts for ~10% of LVMH which may not pose much significance.
Richemont’s performance remained strong. Kering on the other hand had a major weak offline trend overall, mostly with Gucci — while Bottega Veneta outperformed although this growth is not enough to offset weakness in other brands. Saint Laurent (excluding cosmetics) had a lukewarm performance versus other brands with strong growth. The observed weakness is likely due to channel shift — Sandalwood online sales data suggests a successful online penetration by Kering with the launch of Gucci official store on Tmall.
Wearing luxury brands is a way for consumers to show off their wealth, and a way for them to gain recognition amongst their peers, however if consumers take a step back, and really think about it, they need to ask themselves, what is good about showing off one’s wealth? Why is it good to buy luxury goods to get recognition amongst their peers? Isn’t being humble, working hard, building an expertise that benefits the whole society a better way to achieve one’s social status, one that is more sustainable, and makes yourself happier in the long term? Can you imagine that in the near future, you will see a group of young consumers, where instead of comparing what luxury brands they wear, but they compare how much contribution they make to our society or compare their skills in mathematics, engineering, sciences, arts or sports? Can you imagine a time where rich second generation, instead of flaunting their wealth on social media, they spend their time and effort into building technology, and business that benefits the society i.e. a more efficient way of generating renewable energy.
These new trends will gradually pick up, the question is when, and how big of an impact they have on luxury goods sales.