Forget Paris and Milan. Luxury Spenders Are Staying in China

Forget Paris and Milan. Luxury Spenders Are Staying in China

Even as China makes its way through a bumpy Covid-19 recovery, the country's big spenders are splashing out. Luxury brands should pay close attention to where their cash is going. Right now, that's at home.

The share of Chinese consumers' high-end purchases made in mainland China more than doubled from 32% in 2019 to over 70% in 2020, according to Bain & Co. Luxury auto sales were resilient through the latter half of last year.

With the government promoting a so-called "dual circulation“ policy, to generate demand and supply at home, consumer confidence is likely to stay strong. So even when Chinese shoppers can travel to Paris and Milan again, domestic spending won't revert to pre-pandemic levels.

This has significant implications for the big luxury brands.

Soaring demand in China means they can get more out of stores that hadn't been generating good returns. Outlets in cities like Chengdu, where companies may have struggled to drive footfall before the pandemic, are now proving to be useful routes for reaching local consumers.

There may also be room for further investment. Analysts at Jefferies found that just three European fashion and leather goods brands “” Louis Vuitton, Gucci and Burberry Group Plc “” had locations in each