China the lone bright spot in global luxury fashion
Even before the coronavirus outbreak that’s devastated the global economy, disrupted people’s lives and crippled the world’s supply chains, the outlook for the fashion industry was dim. If anything, it’s grown more bleak, and it looks to be a long, bumpy road before the industry bounces back.
However, there are signs of life in China, where the peak of the pandemic is in the rear-view mirror and the economy is quickly recovering.
An expert panel on the future of luxury fashion took place last week at the pop-up Harrods Studio during Shanghai Fashion Week, with industry insiders sharing their thoughts on the industry’s current situation and future outlook.
“It has been a difficult few months for the industry, and opportunities that allow us to come together, celebrate and support Chinese luxury brands are so important,” said Michael Ward, managing director of Harrods, which will soon open its first permanent space on the Chinese mainland in Shanghai. “Shanghai Fashion Week has emerged as one of the most exciting moments on the fashion calendar, and we are excited to come back to this global industry hub.”
The world’s most famous department store has built a long-standing position in the Chinese market, and The Residence is the next stage in this journey; with the investment in a permanent space within Chinese mainland for the first time.
The pandemic’s short and long-term impact on the fashion industry is up in the air, but one outgrowth has been the accelerated development of digital channels.
“As a fashion designer and brand founder, the pandemic has greatly subverted the traditional way I think about strategies and create my designs,” said Masha Ma, founder of MASHAMA. “I had to go digital in order to brand, operate, sell and communicate with my customers.”
Due to months of lockdowns and strict measures on social distancing, consumers’ purchasing behavior has dramatically changed.
As the Digital Luxury Report 2020 recently released by the Boston Consulting Group and Tencent Marketing Insight pointed out, the share of online purchases in the Chinese luxury market — which has benefitted from successful domestic pandemic control — is up 20 to 30 percent year over year. Conversely, the American and European markets are down 25 to 45 percent over that same period.
“The main reason for that growth may be attributable to the decline of global travel, making Chinese customers with strong purchasing power shift back to domestic shopping,” said Judy Liu, managing director of greater China for Farfetch. “In addition, shopping, to some extent, helps people find psychological comfort and relief. The digital channel for luxury brands is no longer a ‘nice to have’ but a ‘must have.’”
Another takeaway from this year’s Shanghai Fashion Week is 2020 will be a good year for independent Chinese designers and domestic brick-and-mortar stores due to lack of foreign competition.
More than 20 select shops have opened in Shanghai alone over the past few months, while new boutique shops in Hangzhou are as big as 600 square meters.
More domestic growth is predicted to take place in China’s smaller cities. According to the China Luxury Forecast — a report from Ruder Finn & Consumer Search Group, luxury consumers in lower-tier Chinese cities have shown strong purchasing power, and are poised to become the engine for future growth – outstripping consumers in first- and second-tier cities.
This reality echoes what designer Ma experienced after the pandemic’s peak in China. As a brand popular among southern cities, MASHAMA performs astonishingly well in Yongkang, a small city near Jinhua in Zhejiang Province, and other smaller cities.
“In Zhengzhou, Henan Province, I was shocked to find out four stores on the same street are selling my products,” Ma said.
The global luxury fashion industry is a US$300 billion market, which showed resilience after the 2009 recession when it shrank by 8 percent but grew by 14 percent in 2010.
The pandemic is a very different situation and may have a more far-reaching consequences, but industry leaders are bullish about the future of the Chinese market.