Big-spending Asians throw luxury brands Covid lifeline
● If evidence were needed of how far China has moved beyond the pandemic, perhaps the strongest was the scene at Christian Dior’s autumn fashion show earlier this week at an art museum in Shanghai.
The 750 guests lined the catwalk to watch models strutting to disco tunes, one in a sequin jumpsuit, another in a bright-pink dress, as creative director Maria Grazia Chiuri’s collection was livestreamed around the world. Those inside weren’t even wearing masks.
Asia has been a lifeline for luxury companies like Dior parent LVMH, thanks to its quick exit from the strictest lockdowns that have bogged down Europe and, to a lesser extent, the US. As the first of the major fashion houses to report firstquarter results, LVMH posted sales growth this week that smashed analysts’ estimates, driven largely by demand from the region.
That suggests more good news to come from fashion houses, even if growth varies widely across regions, brands and product categories. After recovering from a steep downturn in 2020, luxury is benefiting in particular from the appetite among millennial and Gen Z Asian shoppers for high-end shoes and handbags.
And those shoppers are increasingly spending their money at home and online, rather than travelling to the expensive luxury emporiums of Paris and Milan as they would have done pre-pandemic.
“It does seem this sector is Covid-proof,” said Andrew Shipilov, professor of strategy at French business school Insead. Luxury is “still the sector that people spend money on when they cannot spend on travel. It’s one of the winners [of the pandemic era].”
The luxury goods market in China grew 48% last year as travel disruptions boosted domestic spending, according to a December report from US management consultancy Bain.
The consultancy expects this growth will forge ahead, putting China on track to claim the biggest share of the market by 2025.
“The Chinese are already the first nationality buying luxury goods and will be the first engine for this market going forward,” said Federica Levato, a partner at Bain.
LVMH, which also owns Louis Vuitton, derived almost half of its revenue from Asia in the first quarter, and sales from the region excluding Japan surged 86% on an organic basis. That was followed by the US, which grew 23%. Sales were still down in Europe.
With catwalks having gone virtual for most of the past year in the dominant fashion capitals, Dior and Vuitton tried to entice customers by showcasing collections through Instagram and other online platforms. At LVMH’s largest unit, fashion and leather goods, revenue surged 52% in the first quarter.
Appetite for high-end fashion trumps travel restrictions