After a bumpy few years, luxury brands are re-committing to China’s market as a weaker yuan and the US trade war funnel more Chinese high-end spending back home, Tiffany & Co CEO Alessandro Bogliolo said in an interview.
China’s luxury market has been on a roller-coaster since President Xi Jinping launched an anti-corruption campaign in 2012. The campaign curbed extravagant gift-giving among officials and business figures and weighed on the broader luxury sector.
But New York-based Tiffany’s sales grew more than 25 percent in mainland China in the second quarter of this year – in stark contrast to a three-percent drop in the company’s global turnover in the same period.
“This strong double-digit growth has been consistent now for several quarters,” Bogliolo told AFP in an interview while in Shanghai to launch Tiffany’s largest-ever product exhibition.
“I think this is partially because of the general trend in the industry, due to currencies and also to the efforts of the [Chinese] government to increase local consumption.”
China’s yuan has steadily declined against the US dollar a trend hastened lately by trade-war uncertainty.
A significant portion of luxury retailers’ sales comes from spending by Chinese tourists overseas, but the weaker currency curbs such buying.
Political protests this year in Hong Kong, where many mainlanders shop for luxury, have also hit sales there.
“Consumption by Chinese tourists in the US and in Hong Kong, because of currency fluctuations, has been decreasing in the last few months,” Bogliolo said.
But much of that spending is coming home to mainland China, and the profile of the typical Chinese luxury shopper is changing.
The sort of extravagant spending targeted by the government’s anti-graft drive “has essentially disappeared”, said Bruno Lannes, who heads up China consumer products and retail for management consultancy Bain & Company.
Today, he said, “it’s people like you and me buying for our own pleasure and our friends and family. There is no reason why the government should be concerned by that”.
Chinese shoppers accounted for one-third of global luxury spending in 2018, Bain reported in March. Of total Chinese purchases around the world, 50 percent are expected to be made within mainland China by 2025, up from 27 percent last year, the company said.
Lower Chinese import duties and a narrowing gap between prices in domestic and overseas markets are also contributing factors.
In response, luxury brands are offering additional purchasing channels in China and ramping up marketing.
Tiffany, with 35 shops in mainland China, will open a new one in Beijing’s international airport within weeks, and expand its China flagship stores in Beijing and Shanghai.
It recently also launched its own online shop in China.
By the end of this year, its Shanghai store also will include a Blue Box Cafe, branch of the iconic restaurant in its flagship New York outlet on Fifth Avenue.
Earlier this year in Shanghai, French fashion house Chloe organized its first catwalk show outside France, and Italian label Prada staged its first menswear show outside Milan.
“China is the fastest-growing market, so we have a lot of expectations from this market and a lot of investments,” said Bogliolo.
Mind the millennials
China’s new rich pounced on diamonds and other showy luxury goods when brands entered the market in the late 1990s, aiming to flaunt their wealth and status.
But that’s changing.
“Luxury in the past was about being ostentatious. Now it’s about being yourself,” Bogliolo said.
Market analysts say today’s younger, well-travelled and digitally savvy Chinese place more value on craftmanship, understatement or fun than just pure bling.
“I think Tiffany has gotten the message and has come up with youthful products,” said Wang Rui, a popular Chinese fashion influencer, pointing to the pendant of two simple crosses she bought herself.
“They have noticed that young people are more casual and living more freely nowadays, unlike before when everyone had to ‘be a lady’,” said Wang, 24, in long purple hairbraids, an oversized jacket and Balenciaga trainers.
Bogliolo said 182-year-old Tiffany is branding itself to be more “in tune” with the “much more educated and also sceptical” millennial.
“Luxury in the past was all about being exclusive, nowadays it’s all about being inclusive,” said Bogliolo.
“Luxury is an expression of society and culture. So there is a continuous revolution.”