This is part of STYLE’s Inside Luxury column. We are just a few days away from the Lunar New Year. The Year of the Rat will end and the Year of the Ox will begin. Since the ox is hard working and methodological, 2021 is supposed to be a year where hard work will be rewarded . This suggests a promising silver lining to many luxury brands that struggled in 2020. But not so fast! The Chinese luxury market was firing on all cylinders all along. It grew by almost 50 per cent in 2020, to be worth more than US$50 billion a year, according to estimates by EÌquiteÌ that have been confirmed by the data in Bain’s annual China luxury report. This is a stark contrast to the contraction of the global luxury market , which shrank unprecedently by around a quarter. To put this in perspective, given that China was already the world’s most important and most dynamic luxury market, growing faster than ever, the decline in other regions has been nothing but catastrophic. Some luxury brands I spoke to lost 75 (!) per cent or more of their business in North America and Europe, and a 50 per cent decline in these critical regions has been the norm. This indicates two things: first, China is the lifeline for global luxury brand, and second, despite the huge gains in China, the decline in other regions has led to a dire situation for most luxury brands. 6 reasons Alexandre Arnault can bring fresh sparkle to Tiffany & Co. The Economist Intelligence Unit recently published an analysis forecasting the speed of vaccinations. According to the data provided, Europe and the US will only see a large part of their population vaccinated by the end of 2021, while large parts of Asia and Africa will only experience widespread vaccination success much later, in mid 2022 or even 2023 and onwards. This view is probably more realistic than the overly optimistic expectations of 2021 being the end of the pandemic that many luxury brand CEOs had at the end of last year. In other words, 2021 may look a lot like 2020. For luxury brands, this is a call to action. The wait and see approach that many brands were taking through 2020 will not be a viable business model to survive in 2021 and beyond. There are important lessons from 2020 that brands should reflect on now. 10 luxury mahjong sets – priced US$1,000 to US$100,000 Let’s take a closer look at the stratospheric growth of the Chinese luxury market. There were a couple of one-time effects that were specific to the highly digital and young Chinese market. The Chinese luxury market has the highest share of Gen Z consumers, or consumers up to 25 years of age. According to EÌquiteÌ, the share of Chinese Gen Zers on total luxury is between 10 and 15 per cent, the highest in the world, and almost double the share in Europe and North America. Chinese Gen Zers are also the most optimistic and most patriotic consumer group. After the lockdowns of early 2020, they emerged with the “revenge spending” trend supporting the Chinese economy – a behaviour that we did not observe in other parts of the world. Deprived of opportunities to travel, they spent their money on luxury goods in mainland China that they would otherwise have spent in Europe, other parts of Asia, or in the US, which in part amplified the contraction of the luxury market elsewhere. Additionally, they redirected part of their budgets normally reserved for travel to buy leather goods, fashion items and jewellery. Another example of different habits is the social shopping trend, with hundreds of thousands of key opinion leaders (KOLs) and micro influencers aggressively promoting brands with endorsement deals. This hard-selling approach of luxury is unique to China and has probably helped to accelerate the market further as an unprecedented number of local influencers emerged in 2020. You won’t believe all these A-listers walked for Fendi’s SS21 collection Many of these are one-time effects that we will probably continue to see throughout 2021, but some will vanish considerably the moment that international travel resumes. And the KOL-based hard-selling is eroding brand equity. This means that luxury brands can’t expect the Chinese luxury market to grow at the same pace, at least not beyond 2021, especially in case of more travel routes opening. A lot of the one-time effects have already materialised, and while we expect the market to continue growing, the growth rate is likely to slow down considerably. Additionally, we see more brands entering the market and picking up significant share driven by the increasing demand of Gen Z – including Chinese luxury brands. Nio, the Chinese electric car maker, is a great example. This means that competition is heating up, and while the group of affluent Chinese customers is constantly growing, so are their options. Gen Zers are looking for purpose and meaning in the brands they buy. They are less loyal and expect much more in terms of corporate social responsibility. Is Stella McCartney making fashion more sustainable? Luxury brands will have to think differently to succeed in this new reality. Strengthening of brand positioning is critical for survival. And a step up in inspiration, too. The Year of the Ox needs to be a year of reset for luxury brands if they want to master the change in China, and outside China, where their sales plummeted. Just doing what they always did won’t help. The Year of the Ox will reward the hard working, according to the mythology around the zodiac sign. This should be the call to action for luxury brands to work harder and lead the change. Want more stories like this? Sign up here . Follow STYLE on Facebook , Instagram , YouTube and Twitter .