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Hainan ‘on fire’ as luxury’s centre of gravity tilts to China

When poets, literary figures, and courtiers lost their favor to the Chinese emperor, they were banished to Hainan Island to protect themselves among the wild jungles and indigenous peoples.

Today, the destination of a tropical resort known as Hawaii in China has become a rare and bright place in the world’s luxury markets, which has been hit hard by the coronavirus pandemic.

“Hainan Island is on fire,” John D. Idol, who heads Michael Kors and Versace brand owner Capri Holdings, told analysts in February.

To Boost domestic consumption, The Chinese government has transformed the island into a duty-free shopping hub. Visitors can enjoy Gucci and Prada fashion, Cartier jewelery, Estee Lauder beauty products and Macallan premium whiskey.

Hainan became even more popular when Covid-19 travel restrictions prevented Chinese consumers, who have been driving growth in the luxury sector in recent years, from shopping trips to Paris, London, Milan and Hong Kong. ..

The island is a powerful symbol of the luxury center of gravity leaning towards China, a Japanese shopper who used to buy Louis Vuitton and Balenciaga abroad but now domestically. It reflects the trend of “repatriation” decades ago.

This is nothing more clear than sector leader LVMH, where most of the accelerating recovery has been facilitated by China.the company Said on Tuesday First-quarter sales in Asia, excluding Japan, were 26% higher than the corresponding period in 2019 before the pandemic.

Even if Chinese shoppers can travel again, analysts expect the brand to continue to buy at home as it opens physical stores and expands e-commerce services such as virtual stores. Alibaba’s Tmall Luxury Pavilion..

According to consultancy Bain, the share of high-end purchases by Chinese consumers in the country is expected to skyrocket from 32% in 2019 to over 70% in 2020 to about 55% by 2025. I will. The pandemic effect diminishes..

Amy Die is a symbol of the consumer that these brands have been able to attract. Chongqing’s 30-year-old resident is one of China’s 170 million overseas travelers annually, spending more than one-third of global luxury goods sales before the pandemic. I was on a pilgrimage to Europe to buy a luxury item.

But last year, Dai used an online platform to shop in Sanya, Kainan, on a two-hour flight. Her spending on luxury goods exceeded RMB 1 million ($ 150,000) last year from 2019.

“Before the pandemic, I preferred to go abroad, sometimes from overseas purchasing agencies,” she said. “Since the pandemic began, we switched to domestic retailers, otherwise we wouldn’t be able to keep up with the latest version.”

The luxury sector hopes that Chinese consumers will help the difficult recovery after 2020, when sales curtailed in 2020. Approximately one-fifth Globally, it amounts to 217 billion euros, according to Bain.

Locator map in Hainan, China

China’s Relatively Successful Virus Suppression and Rapid Economic Recovery — Gross Domestic Product Growth Pre-pandemic level Fourth Quarter — Played a crucial role in maintaining optimism.

The recovery will initially be “revenge shopping”, or the most populous countries in the world National blockadeHowever, it has since been replaced by a more durable one.

Employees of a Beijing-based European brand said, “There are plenty of wealthy people who have benefited from the pandemic by working in high-growth industries and owning well-performing stocks.” It states. Luxury jewelery “sells like crazy,” he added.

The pandemic has also accelerated ongoing shifts in China’s luxury markets, including increased e-commerce, reduced import tariffs and tighter control of gray markets. Daigo, Professional shoppers People who buy watches, jewelery, clothing and cosmetics abroad on behalf of mainland China. Products sold in China are now more expensive than those in stock in Europe and the United States, as brands have already begun to narrow the price gap.

Hainan Duty Free Shop sales will grow seven-fold by 2030

These trends have led luxury brands to increase their investment in China.

According to reports from Jeffreys analysts, Louis Vuitton, Burberry, Gucci With stores in all 25 major cities in China, it suggests that other cities may need to expand their footsteps.

Flagging Hainan may be an effective way to stand in front of more Chinese consumers.

Shiseido, a Japanese beauty brand, plans to double the sales counter on the island to 60 by the end of the year. Estee Lauder also said it was experiencing strong demand.

According to Bernstein Research, cosmetology and cosmetics make up almost half of Hainan’s duty-free sales, and luxury goods make up about one-third of sales. However, the latter is growing rapidly and the number of luxury brands on the island has increased by 80% over the last six years. “We expect more in the future,” Bernstein analysts said.

Tourists buy bags at duty free shops in Haikou, Hainan

Tourists buy bags at duty free shops in Haikou, Hainan © Luo Yunfei / China News Service via Getty

UBS analyst Chen Xin predicts that Hainan’s duty-free sales will more than double the previous year’s level to RMB 30 billion in 2020, with a compound annual growth rate of 40% from 2019 to 2013. I am.

Further supporting this growth was a policy change aimed at building duty-free shopping on the island.

Last year, the Chinese government tripled the amount of money consumers can buy in Hainan with an annual tax exemption to RMB 100,000 and lifted the cap of RMB 8,000 for one item. We also issued three licenses to companies to operate duty-free shops. This is a significant increase from the seven licenses granted since the 1980s.

However, some luxury brands were wary of over-betting on Hainan because they could only sell in Hainan through wholesale contracts with state-owned companies and could not open their own stores. This gives brands less control over pricing and the customer experience.

Others are worried that the island is at risk of being abused Daigo..

Jean-Jacques Guiony, Chief Financial Officer of LVMH, the world’s largest luxury group, said: ..

“If consumers travel to Hainan and come to our boutiques, we’re ready to serve them, but if you buy them in bulk and then resell them to an intermediary, you can’t. “

Despite these concerns, LVMH expanded in Hainan through its travel retail sector, DFS. The company has partnered with the Shenzhen Duty Free Group at a duty free mall called Haikou Mission Hills in a popular resort. Opened in January, it will expand over the next two years to reach more than 30,000 square meters of retail space.

Such a destination could help reduce the crowd encountered by Shanghai’s 35-year-old marketing executive Sharron Zhou when traveling to Hainan during the Lunar New Year. She was so postponed that she didn’t buy anything. “I couldn’t find a sales person … People were stepping on me,” she said.

Additional reports by Xueqiao Wang in Shanghai, Sun Yu in Beijing, and Alice Woodhouse in Hong Kong

Hainan ‘on fire’ as luxury’s centre of gravity tilts to China Source link Hainan ‘on fire’ as luxury’s centre of gravity tilts to China

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