Can ‘revenge spending’ save luxury brands in China as shoppers emerge from coronavirus lockdown?

China is embracing springtime, as the Covid-19 outbreak continues to slow. On Thursday, March 26, China reported no new cases of domestic coronavirus infections for the first time since the outbreak began, and recent new cases have mostly come from overseas, signalling that the worst has passed for now.

But as more residents go outside and resume activities, a term that’s been discussed frequently in the media is coming to the fore, “revenge spending”. The phrase describes how shopping-starved consumers will come out of quarantine and overcompensate by making more purchases than normal. Brands have already seen a modest jump in sales, but how much can they rely on these predicted spending sprees?

Offline stores are already welcoming the recovery of foot traffic. Pictures of people lining up outside SKP Beijing and at Bicester Village in Shanghai have been circulating online.

It was reported that the high-end Hangzhou Tower mall opened for five hours on February 22 and achieved more sales than on the same date a year ago.

To confirm, we visited the busy local shopping district Sanlitun in Beijing on the afternoon of Saturday, March 14, where the recovery foot traffic was readily apparent. Even though few customers were spotted in stores, many people carried shopping bags, posed for pictures, and documented their new-found freedom in and around the malls. Long queues were forming outside the local bubble tea shop Heytea and the Apple Store.

China’s e-commerce market was also showing promising signs of life. The last major marketing event on International Women’s Day was a crucial indicator of how China’s consumption was bouncing back. In March, many major brands on Tmall experienced double-digit sales growth as compared to last year. Beauty brands like Estée Lauder and Lancôme stood out in particular, and since the virus outbreak called for a health focus, sportswear companies such as Nike saw sales increases.