European Retailers Lose Biggest Luxury Spenders
Since the start of the pandemic in 2020, Chinese tourists — once the darlings of luxury spending on European high streets — have been such a scarce sight it’s causing retailers to revamp strategies going forward.
European retailers have had to consider how to cater to locals rather than tourists. In the 10 years before COVID, Chinese tourists were among the biggest spenders worldwide on luxury goods, accounting for one-third or €93 billion of global sales, Financial Times reported on Friday (Aug. 26).
Chinese shoppers purchased most of their luxury goods abroad to reap the authenticity factor, shop tax-free using European rebates, and save on the overall base price, which is often less than in China.
These reasons helped make Chinese tourists the highest per-capita luxury spenders among all travelers, accounting for two-thirds of the luxury sales in Europe before COVID, FT reported.
“Retailers really defined the shopping experience around Chinese tourists,” said Claudia D’Arpizio, Bain’s global head of fashion and luxury.
Retailers had hired Chinese-speaking staff and focused on the products favored by tourists from China, especially bags, which didn’t have to be tried on like clothing.
Industry analysts now forecast that Chinese tourism spending will see pre-COVID levels by 2025, depending on Beijing’s “zero-Covid” policy, FT reported.
Chinese buyers, however, are not expected to regain the dominant force on high streets that they had in 2019. Shoppers are anticipated to keep their spending in China.
“The next step is digging down into the next-tier cities, outside of Beijing and Shanghai,” Ting Zhou, founder of Yaok Group, told FT.
Despite rising concerns about increasing inflation and slowing sales in China, French luxury retailer LVMH posted 21% organic sales growth in the first half of 2022, PYMNTS reported in July. Sales across the LVMH platform of brands were up 28% half over half from 2021.
LVMH saw a 2% sales increase in France and the U.S. for the first six months of 2022, helping to offset both the drop in sales across Asia and shutdowns across Russia in the wake of its ongoing attacks on Ukraine.