1、Luxury Takes Centre Stage China Retail 2020 SPOTLIGHT Savills Research 32 Back on track Source Savills Research, MobTech Average footfall of luxury projects in six cities are 1% higher than 24-month average Footfall index of benchmark luxury project in six cities Footfall levels returned to 24-month
2、 average by Jun 2020 0 40 80 120 160 JanJun Beijing 0 40 80 120 160 JanJun Shanghai 0 40 80 120 160 JanJun 0 40 80 120 160 JanJun 0 40 80 120 160 JanJun 0 40 80 120 160 JanJun Key Jan-Jun 2019 Jan-Jun 2020 24-month average Guangzhou ShenzhenChengduWuhan -32% -4% +1% +55% -11% -22% The global luxury
3、market is pinning its hope on a swift recovery of the China retail market, a key driver of growth and one of, if not the, biggest market in the world. As life starts to get back to normal, albeit with some virus prevention measures remaining in place, shopping malls around the country reopened and r
4、esumed close to full operations starting in April. Over the five-day May holiday period, landlords and retailers implemented extensive promotional campaigns to stimulate sales. LVMH and LOral have already reported positive year-on-year (YOY) sales growth in China. Food consumption gradually recovere
5、d to pre-COVID levels in May while non-discretionary items continue to improve, in particular cosmetics sales accelerated to growth of 17% YoY and automobile sales rebounded and recorded a YoY increase of 6%. The luxury market also witnessed improving sales, supported by revival in footfall levels.
6、Benchmark luxury projects in six cities showed average footfall levels returning to 24-month averages in June. Considering luxury project footfall levels typically show a stronger correlation to sales than mass market projects, luxury brands are expected to see sales benefit from this pick-up in sho
7、pper presence. Luxury projects saw average footfall drop by roughly 80% in February, but quickly rebounded to an average of 54% of normal levels by March. In June, footfall levels reached the average of the past 24 months for the first time since the beginning of 2020. Footfall levels varied across
8、different cities with Chengdu witnessing the strongest and swiftest rebound with footfall exceeding historical averages as early as April. In June Guangzhou footfall levels outperformed historical levels while Shanghai remained just off the pace. Meanwhile Wuhan, the epicentre of Chinas viral outbre
9、ak, showed a stronger than expected recovery, with footfall levels reaching 89% of historical levels in June, even higher than Beijing where lockdown measures remain some of the strictest in China. Luxury Takes Centre Stage 2 A re-shoring of overseas luxury expenditure is contributing to the strong
10、rebound in Chinas luxury market post COVID-19, attracting luxury brands to expand store networks once again. 54 Enduring luxury Top-tier luxury retail brands showed their resilience and commitment to the China market despite rising economic uncertainties. Top-tier brands grew their average store cou
11、nt in key cities by 4% over the last 12 months, while affordable luxury brands saw their average store count fall by 3% over the same period. Retail brands did not merely see their sales impacted by COVID-19, but also their production capacity, as factories were closed or repurposed facilities to pr
12、oduce PPEs and domestic and international supply chains were heavily disrupted. A number of brands, LuxuryAffordable luxuryCosmetics +4%+8%-3% 2019 2020 Change in store count including Louis Vuitton and Chanel, chose to raise their prices in order to offset the slower sales and ration existing stock
13、s. China is home to a significant and rising share of the worlds high-net- worth-individuals (HNWIs) and they seem to be relatively unfazed by the pandemic. Although luxury brands may see pressure on global revenues, in China the price increases seem to have had only a minimal impact on short-term s
14、ales with the brand premium and status symbol of top-tier brands still highly attractive to Chinese consumers. Affordable luxury brands, on the other hand, are more likely to give discounts to stimulate sales with the slightly younger and middle-class consumers more sensitive to price changes. This
15、consumer segment may also be more affected or concerned about the current economic climate and may choose to be more selective with regards to discretionary spending. Reshoring of luxury spending A full resumption of international flights is unlikely in the foreseeable future, though there may be se
16、lective reopening with specific countries. In fact, the World Tourism Organization estimates that international tourist numbers will fall by 60% to 80% in 2020 due to the global spread of COVID-19. Chinese overseas travel growth rates had already started to slow in 2H/2019, increasing just 3.5% YoY
17、compared to 14.0% in 1H/2019 and 4.9 ppts slower than the growth in domestic travel. As Chinas tourism market continues to mature, the quality of domestic tourism has been significantly improving in terms of facilities, product/service offerings and overall experience. Tourism revenue accounted for
18、12.4% of Chinas tertiary industry in 2019, the highest level on record. Overseas luxury spending used to account for over 70% of total luxury consumption by Chinese consumers according to Bain & Co. However, with the continued development of ecommerce platforms, improved after sales service and narr
19、owing of price gaps with overseas markets, more consumers have chosen to purchase within China since 2018. The COVID-19 pandemic is expected to accelerate the trend as both overseas travel and dai-gou activities are greatly restricted. The price gap between domestic and overseas markets continued to
20、 shrink as luxury brands normalize their pricing structures. The average price disparity between Shanghai and Hong Kong fell from 30% to 15% from 2013 to 2019, though, given online sales penetration rates, the actual price gap could narrow further. The central government has also recently released a
21、 series of policies to encourage luxury consumption to take place within Chinas borders, such as promotion of duty-free stores. The growth of duty-free networks as well as smaller outlets will likely continue though not too rapidly so as not to detract significantly from the numerous city centre loc
22、ations. Domestic travel bottomed out in February. Railway passenger volumes reached 50% of pre-COVID levels in April. China Eastern saw domestic travel fall to 11% of pre-COVID levels in February, but have since recovered to 47% in May with seat occupancy rising from 45% to 66%. Overseas traveler vo
23、lume, given the stringent travel restrictions, still remain weak, with April figures only at 1% of that before the pandemic. International travel of China Eastern 0 400 800 1,200 1,600 JanFebMarAprMay Thousands 20192020 Railway passengers in China 0 100 200 300 400 JanFebMarAprMay millions 20192020
24、Domestic travel of China Eastern 0 2,500 5,000 7,500 10,000 JanFebMarAprMay Thousands 20192020 Source CEIC, Savills Research 8%33%13% LeatherWatchCosmetics Price gap between Shanghai and Hong Kong Luxury Takes Centre StageLuxury Takes Centre Stage Exploring channels The pandemic has also accelerated
25、 the trend of luxury brands moving online. China online sales and marketing ecosystem is one of most developed in the world with innovative tools, new channels and product updates that are able to capture approximately 20-25% of consumer purchases. Luxury retailers, while initially resistant to the
26、lure of online platforms due to concerns of watering down their brand image and exclusivity, are now coming around to the idea that they need to embrace these platforms in order to reach the new wave of luxury consumers and adapt to Chinese consumer preferences. Luxury brands are not only exploring
27、traditional online platform icons such as Tmall or JD, but have also started to tap into some of the many different social platforms used by young consumers. TikTok and RED (also known as Xiaohongshu) recorded the opening of new accounts by several luxury brands in April. Brands also cooperated with
28、 KOLs to sell products direct to consumers, or launch vlogs or live shows to attract younger cohorts. TikToks fashion show in March with Chanel, Dior and Burberry was viewed over 4.0 million times. Meanwhile, Givenchy saw its number of fans increase 5.5 times after it launched a live show on RED. On
29、line marketplaces also help luxury brands reach more consumers in low-tier cities where physical stores would not be able to cover. Stronger ties with these consumers through online channel will potentially allow brands to expand their consumer base and establish greater loyalty. Online platforms al
30、so give brands the ability to better understand their consumer profiles and preferences and adapt to nascent consumer trends more swiftly. New Brand Accounts on TikTok and RED 2019 - May 2020 YOY increase of new account openings of luxury brands on TikTok and RED in April and May 140% Luxury Takes C
31、entre Stage Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout th
32、e Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst
33、 every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Resea
34、rch. SavillsMobTech Siu Wing Chu Head of Retail - China +86 21 6391 6688 James Macdonald Head of Research - China +86 21 6391 6688 Cheney Cao Business Development Director +86 155 0212 8077 JanFebMarAprMayJunJulAugSepOctNovDecJanFebMarMay Fendi YSL La Mer Omega Burberry Prada Louis Vuitton Shiseido
35、Loewe MCM Balen- ciaga Michael Kors Armani LOcci- tane Roger Vivier Bally SK-II Shu Uemura Rado Jimmy Choo Longines Gucci Tory Burch Max Mara BurberryFurla Dunhill Lanvin Givenchy Gucci Balmain Tiffany Moncler Cartier Tom Ford Salvatore Ferra- gamo Saint Laurent Coach Estee Lauder 20192020 Apr 6 25th Floor, Two ICC No. 288 South Shaanxi Road Shanghai China
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