The Bumpy Road of H1 2024 for Luxury Growth in China

Post by 
Thomas Piachaud
February 26, 2024

H1 2024 luxury growth figures? Prepare for a bumpy ride.

Luxury brands are struggling in China so far in Q1 2024. For brands that offer a specific China line in their P&L, we may see declines for all but the exceptional brands.

Why is this?

🚩 Q1 and Q2 in 2023 showed strong YoY growth, but that growth was misleading – the comparison was against a period where the domestic spend in China was on hold in 2022. 2023 was also boosted by the relative domestic relaxations of COVID policy with lingering limitations on international travel. The result? Trapped recovery spending in H1 2023.

🚩 2024 offers a different picture – data tells us that Chinese consumers have resumed travel. This means a shift in spending. Firstly, domestic luxury spend shifts internationally (thus we may see rises in Europe and beyond). Also, a reduction in the share of wallet towards goods into experiential (hotels, F&B, flights).

🚩 Additionally, last year, Valentine’s Day fell outside of CNY. This gave brands (especially W&J) a chance to activate against both. This year, Valentine’s Day landed in the middle. The result – a decrease in gifting.

🚩 With the day falling within the CNY holiday, some changes may be seen – gifting purchases are made internationally, experientially, or delayed - until couples reunite if they went to different hometowns).

The combination of all the above is highlighted by data. Comparing the two periods of 2022/12/27 – 2023/01/27 (CNY 23) and 2024/01/15 – 2024/02/15 (CNY 24):

⚡️ Brands posted on average 15% more posts in CNY 24 vs CNY 23 – highlighting a stronger focus on marketing to the Chinese consumer

⚡️ However, engagement dropped by nearly 8% across platforms – with WeChat and Douyin being the most affected.

⚡️ Total posts referring to luxury brands increased by 33% on Weibo, 23% on RED and 55% on Douyin – hypothesis: consumers are visiting these brands outside of China.

⚡️ Further support this hypothesis - overall Tmall luxury spend CNY 24 vs CNY 23 based on select flagship stores dropped an estimated 40%

⚡️ For the period 27th Dec – 15th Feb (to cover both) a 15% decline – encapsulating the overall outlook.It’s not all doom and gloom:

📀 Bulgari managed to increase their Tmall sales by nearly 500% YoY. Effectively coupling the CNY and Valentine’s period.

📀 ba&sh and SELF-PORTRAIT – who both had strong capsule releases on the platform way ahead of the festival managed to grow in strong double digits year on year.

📀 Miumiu, grew engagements by an average of over 1,000% across platforms and managed to double Tmall revenue YoY

📀 Balmain, BREITLING, HUGO BOSS and LANVIN all grew their engagements significantly, providing some revenue resilience.

The numbers may not rebound until Q3, where the market will normalize into fair YoY comparisons as we leave the pandemic in the financial rear-view mirror.

Brands must invest in H1 2024, in order to unlock an attractive H2 in 2024.hashtag#Chinahashtag#luxury

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