Global luxury brands like Omega, De Beers eye China’s retail boom as wealth expands in lower tier cities

Sales of luxury goods in China soared 48 per cent in 2020 to US$53.5 billion as the economy rebounded from a slump in the first quarter

Rents on premium ground-floor retail space are likely to see positive growth when leases come up for renewal: CGS-CIMB Securities

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Chengdu’s downtown shopping district is located just a short distance from local attractions such as the 1,000-year-old Daci Temple. Photo: Handout

Published: 8:30am, 27 Jan 2021Updated: 8:21pm, 27 Jan 2021

Global deluxe watch and jewellery brands are expanding into lower-tier cities in mainland China, as growing wealth powers the best performing retail locations for luxury goods in the world’s second-biggest economy.

Swiss watchmaker Omega, diamond jeweller De Beers and Italian ultra-prestigious jewellery house Buccelatti are among brands queuing to open new shops at Chengdu International Finance Square, one of the top 10 highest grossing malls in the country.

The capital city of southwestern Sichuan province, known for its spicy hotpots and chubby pandas, is enjoying a retail boom like in wealthier Beijing, Shanghai and Shenzhen. Since the Covid-19 outbreak was brought under control, “revenge spending” has resulted in long queues outside luxury brand outlets including Hermes, Cartier, Gucci and Dior in the city.

“It is quite natural that their strategy in China is not just focusing on core cities, but also going beyond the first-tier and to expand to lower-tier cities,” said Michael Cheng, consumer markets leader for Asia-Pacific at PwC based in Hong Kong. They “have a great pool of free-spending [consumers],” he added.

Buyers queue up outside a luxury goods store inside Wharf-owned Chengdu IFS in show of revenge spending. Photo: Handout

China’s economy, which rebounded to a pre-pandemic growth rate of more than 6 per cent last quarter, has also created a spillover wealth effect. The nation’s stock market reached the highest level since December 2015 this month, after surpassing the US$10 trillion mark in October.

Sales of luxury goods in China soared 48 per cent last year to 346 billion yuan (US$53.5 billion), according to a December report published by global management consultancy Bain & Co and online retail platform Tmall.