Chinese Consumer Confidence is a blocking factor in uncovering revenue growth

Post by 
Thomas Piachaud
March 29, 2024

Consumer confidence in China has been a bumpy ride in the past years.

The metric acts as an index as to the overall confidence of consumers towards their current situation, with strong correlations between confidence and the propensity to spend - it is a key metric to understand in order to get an overall sense of a market.

So, how has the confidence of Chinese consumers changed in the past four years and where does it stand today?

🔎 Prior to COVID consumer confidence was often between 120-130 index (with 100 being the positive/negative point). This was typified by a boisterous outlook on the market and a strong willingness to spend, also resulting in strong growth across most sectors.

🔎 The initial onset of COVID can be seen in a 'Bump in the Road' of consumer confidence - reaching a low of 112.6 during June 2020, however the period that followed was markedly different than that seen in Europe or the US – a more resilient market performance and a bolstering of confidence - this 'Calm Amidst Chaos' led to the rapid development of many domestic Chinese markets for goods.

❗️Things changed Q1 2022 – drastically❗️

🆘 'The Confidence Cliff' – a period where confidence declined from 120.5 to 86.7 in the space of two months. This historically low consumer confidence continued until the end of 2022, where upon the lifting of all COVID restrictions some confidence began to grow.

📈As confidence climbed throughout Q1 – moving up to 94.9 by April – a V-shaped confidence recovery was hoped for, but instead, the market faced further uncertainties, and our ‘Mound of Optimism’ was short-lived – returning to 86.4 by July 2023.So where do we stand today?

A small increase heading into 2024, but not enough to feel confident in the outlook.Why is this important?Revenue growth in luxury correlates strongly with consumer confidence. During the ‘mound of optimism’ last year, we saw brands posting their strongest quarters of growth, with it softening as the year moved forward.

It is also worth noting that this is the confidence of the consumer, rather than the market. This lack of confidence is not something felt only towards the China market, but a generla feeling – and thus markets outside of China should be cautious about an over reliance on Chinese consumer spend on their revenue performance.What should brands do?Something as simple as consistently reviewing actions under the scrutiny of confidence:

❓‘Are the actions I am taking helping my consumers and potential consumers feel more confident in my brand or my products?’❓

Data Source: Statista

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