As the deadly coronavirus spreads in China, the world’s luxury industry could see sales impacted by fewer Chinese shoppers travelling abroad.
The talk of potential travel restrictions come at a time when luxury retailers would typically be expecting a windfall in sales to Chinese shoppers, with major national holiday Chinese New Year just days away. Luxury retailers in Europe are bracing themselves for potential hit to their sales.
Earlier this week, major luxury brands Louis Vuitton, Gucci and Cartier all experienced stock market declines ranging between 5% and 6%. Chinese consumers are these brands biggest customers, with a recent Bain & Company report predicting that China represents around 35% of the global income of the sector.
According to international payments provider Planet, Chinese shoppers are consistently one of the biggest spenders in Europe:
Last year saw sales to Chinese shoppers in Europe grow by 6% compared with the previous year. They also spent more – with the average spend per purchase experiencing double-digit growth (10%).
Chinese spending in key categories - luxury, watches and jewellery - witnessed double-digit growth in the UK last year, rising by 15% and 11% respectively. The average spend for watches and jewellery also rose by 19% - coming in at €2,854 on average.
In last year’s Chinese New Year spending period (29 January – 11 February) sales to shoppers from China, Taiwan and Hong Kong rose by 4% across Europe compared with 2017’s results. Sales to tourists from Taiwan saw growth of 27% during the celebrations making these nationals the fastest growing source market.
RPA Perspective Cities such as London, Milan and Paris will inevitably be hard hit by restrictions on travel from China. It will do little good to the already embattled Hong Market either.
Hong Kong’s leader Carrie Lam today outlined new measures to curb transport between her city and mainland China.
Hong Kong is suspending its high-speed rail link with China, and also cutting the number of flights in an attempt to limit the spread of coronavirus.
Sensible measures indeed, but they also highlight how the epidemic will hurt economic activity in the region, which has already been battered by the impact of long running political protests, outlined in last week’s RPA.
Regarding the UK, David Perrotta, UK Country Manager at Planet, said: “Chinese New Year [on the 25th of January], is a time marked by travel and spend abroad. This is typically a major opportunity for retailers in Europe. Travel restrictions could have a significant impact on sales during this crucial two-week spending period. Of course, we need to wait and see whether the Chinese government will take steps to control the virus, so in the meantime we will all be holding tight. Not all is lost, as a big part of sales from Chinese shoppers comes towards the second half of the year during another national celebration, Golden Week, which could aid a recovery of the sector.
