How Luxury Industry rebounds from coronavirus in China
Coronavirus has now hit most parts of the world. Wuhan was the epicenter of the coronavirus outbreak, and hence, China was the first country to go into complete lockdown. Needless to say that the world’s economy is in a crunch, and the uncertainty of the duration of lockdown is making it worse with every passing day. Now, when most of the world is still in strict lockdown, China has started to recover.
While almost all the industrial sectors are suffering the economic heat, the luxury industry is on a rebound from coronavirus. Thanks to so-called “revenge spending,” the luxury industry in China is already in a recovery mode. This shopping behavior of Chinese shoppers can be used to predict the rebound pattern of the luxury industry, globally.
Here’s is how Chinese shoppers that are loaded with cash are helping the luxury industry to take a rebound from deadly COVID’19:
V-Shaped Recovery of Luxury Industry
A V-shaped recovery means a bounce back in the sales after a sudden and drastic decrease in the following quarter. Up until last week, the pattern was not clear enough. But, as soon as the restrictions were lifted to some extent in China, luxury shoppers rushed to their favorite brand stores, and many brands, therefore, made record sales in a single day. This shopping behavior is now being called revenge shopping, and it is very likely that this trend will be seen in the rest of the world as well once the lockdown is lifted.
Online and On-Store Recovery
Although online shopping was an option in the strict days of lockdown in China, people were reluctant since the delivery time was uncertain. Now, as China is stepping towards lifting the restrictions, the online luxury market is reviving as well. People have started to buy their favorite luxury items like Junghans watches online. It is an indicator of the V-shape revival of the luxury industry as the online market is a big platform for luxury shopping in China.
The historical precedent of the V-shaped recovery of the luxury industry supports the confidence of the rebound of the luxury industry from coronavirus. In 2003, during the outbreak of SARS, retail sales growth halved over the course of just two months. However, it jumped up to the normal level as soon as the situation got a little better, while travel warnings were still in place for many Chinese provinces.
China Navigating the World to Normalcy
Initially, the analytics were encouraging last week, but with the increase in newly reported cases in China, it is a possibility that people will avoid crowded places. The eight-week timeline is forecasted to contain the virus from its present stage in China. After eight weeks, it is expected that luxury spending in China will bounce back to normal.
The rest of the world can use these indicators to predict the behavior of luxury shoppers and the rebound of the luxury industry from coronavirus.
The Ultimate Ripple Effect
Even if the spread of the virus slows in a coming couple of weeks, it is expected that tourism flows may continue to be impacted. However, in mainland China, the appetite for luxury looks remains strong as the foot traffic stalls, and public transport remains closed. This new fashion awakening and love for luxury brands in people have long been causing a ripple effect throughout China. This effect will be reflected in the V-shape recovery of the Chinese luxury industry.
Lastly, it is vital for luxury investors to understand that it will get worse before it starts to get better.