Chinese Luxury Retail Crashes

chinese luxury crash

China’s Luxury Retail is showing no resistance to the Great Retail Apocalypse of 2017. While the entire globe has been experiencing the worst retail outlet meltdown in recorded history, China’s high end and luxury market has recorded the most number of closures between July 2016 and July 2017.

Bernstein Store Count Database released it’s annual “Store Wars,” report–based on findings after tracking of about 7,000 stores, and its nothing short of apocalyptic.

In China’s case, this year’s report underlined 36 luxury brands—including institutional brands like Burberry, Saint Laurent, and Céline in the Chinese market.

Burberry and Dunhill had the most distressing number of shutterings in China in that august group.

In fact, China experienced 62 net closures of luxury brand stores during the Black Year—which was the largest number recorded by Bernstein geographically. Net closures meaning that even accounting for the number of new establishments opening, the number of closings was greater (by 62).

The firm’s analysts however, suggested that the numbers might be a correction to rapid over-expansion of luxury brands into the Chinese market.The country’s luxury industry  has been fueled by affluent Chinese consumers. Their sheer numbers may have given luxury brands unrealistic projections.

Bernstein further suggested that the quick expansion of luxury shops exceeds consumers’ real purchasing power.

Globally, the number of the net store openings by luxury brands has also for the first time run into the negative territory. The report said most brands have more or less closed some of their stores in the department stores, a traditional channel that accounts for about one-third of these brands’ global sales.

Chinese consumers have demonstrated some remarkedly different purchasing behaviours from those of the modern West. When they arent buying luxury items online, Chinese buyers, like upperclass shoppers from the golden era of commercialism prefer the experience of very high end, physical shops in first-tier cities like Beijing, Shanghai and Shenzhen.

Like everywhere else, China has witnessed an increasing number of luxury brands embracing e-commerce and launching stores with the country’s top two online retailers, Alibaba and JD.

Retailing giants like Louis Vuitton and Gucci have entered the complicated world of Chinese e-commerce to cater to upscale Chinese consumers.

Going forward, Bernstein expects to see fierce competition between established luxury brands and emerging ones, and the ability to identify themselves with consumers will be the key to determine the winners and the losers.

“Competition is set to become fiercer with more and more emerging brands gaining recognition and credibility,..We are convinced that brands with a well-balanced geographic store network and an omni-channel approach can have a competitive edge.”