Chinese consumers splurge on luxury goods as ‘Covid hasn’t changed the lifestyle of the rich’
- Domestic purchases of luxury goods in 2021 in China was valued at US$74 billion, having totalled US$120 billion in 2019 for both domestic and international sales
- Luxury brands are being driven to tap into markets in China’s smaller cities as top-tier cities like Shanghai and Beijing are already saturated with stores and rent is high
A shopping frenzy that ensued at a newly opened luxury brand store earlier this week in Zhengzhou, the capital of the central Henan province, highlights the “huge consumption power” potential in China’s so-called lower-tier cities after two years of coronavirus restrictions.
Images and recordings of the lively scenes were shared on Redbook, the Chinese Instagram-like blogging platform, with one caption reading “Covid hasn’t changed the lifestyle of the rich”, while one user commented: “Wow, Zhengzhou really has so many rich people?”
Demand for luxury goods is still very high and Chinese consumers will still play a very important role in the [luxury goods] market, even after travel restrictions ease
“People in cities like Zhengzhou, so-called lower-tier cities, are still very wealthy and they’ve not really spent that much in the last 18 or 24 months, so they have huge consumption power,” said Michael Cheng, consumer markets leader for Asia-Pacific at PwC based in Hong Kong.
“Demand for luxury goods is still very high and Chinese consumers will still play a very important role in the [luxury goods] market, even after travel restrictions ease.”
Luxury brands have increasingly turned to markets in China’s low-tier cities, where spending on designer goods has become just as prolific as wealthier cities like Beijing, Shanghai and Shenzhen.
Top-tier cities like Shanghai and Beijing, though, are already saturated with luxury stores and rent is exceptionally high, which Cheng said will drive brands to tap into markets in China’s smaller cities.