Financial Times

Duty-free Hainan sales 'on fire' as wealthy Chinese splash out

Duty-free Hainan sales 'on fire' as wealthy Chinese splash out

High-end western brands bet on Asian shoppers staying at home beyond the pandemic

  • April 17, 2021
  • min read

Financial Times

Duty-free Hainan sales 'on fire' as wealthy Chinese splash out

The island is a powerful symbol of how luxury's centre of gravity is tilting towards China, mirroring the "repatriation" trend in earlier decades of Japanese shoppers who used to buy Louis Vuitton and Balenciaga abroad but now do so at home.

Nowhere is this clearer than at sector leader LVMH, whose accelerating recovery has been fuelled in large part by China. The company said on Tuesday that its first-quarter sales in Asia excluding Japan were 26 per cent higher than in the corresponding period of 2019, before the pandemic.

Even when Chinese shoppers can travel again, analysts expect they will continue to buy at home as brands open stores and expand ecommerce offerings, such as virtual stores on Alibaba's Tmall Luxury Pavilion.

The share of Chinese consumers' high-end purchases within the country soared from 32 per cent in 2019 to more than 70 per cent in 2020, according to consultancy Bain, and is expected to be about 55 per cent by 2025, once the pandemic effect fades.

Amy Dai is emblematic of the consumer that those brands have been able to attract. The 30-year-old resident of Chongqing used to make pilgrimages to Europe to buy luxury goods one of China's 170m annual overseas travellers whose spending accounted for more than a third of all global luxury sales before the pandemic struck.

But last year, Dai took a two-hour flight to the Hainan city of Sanya to shop, and to do so turned to online platforms.

Her spending on luxury items topped Rmb1m ($150,000) last year, more than in 2019.

"Before the pandemic, I did prefer going abroad or occasionally I would buy from overseas purchasing agents," she said. "Since the pandemic started I've switched to domestic retailers, because otherwise I can't get the latest editions in time."

The luxury sector is counting on Chinese consumers to fuel the recovery after a difficult 2020 in which sales contracted by roughly a fifth to €217bn globally, according to Bain.

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