A strict lockdown was lifted in Shanghai on June 1, allowing millions of residents who had been confined to their homes for more than two months to finally venture out, while shops were allowed to reopen.
To celebrate, Eric Young, founder of SHC’s exclusive Shanghai boutique Le Monde, hosted a gathering of friends and acquaintances at the store. “We felt good and wanted to buy new clothes,” he says, speaking in a WeChat call a week after reopening. “Business is pretty good because of the rebates. But is it really? Lockdowns are still happening in some areas. For example, downtown last night, they only blocked two blocks. It’s not really back to normal.”
Young and her friends weren’t the only ones in a profligate mood: On reopening day, luxury shoppers were seen lining up outside Hermès, Celine and Dior in a fit of “revenge spending,” where consumers They buy more than normal. as a reaction to having endured restrictions and limitations. Jessie, a 23-year-old gaming specialist from Shanghai, bought a £320 Acne Studios bag on a whim. “I really wanted to buy it for revenge, so I bought it on impulse,” she says.
But Jessie doesn’t plan to go back to spending on luxuries any time soon. “I have a lower threshold for what makes me happy now. Even going out in the sun, buying some delicious snacks, satisfies me. I prefer to spend a lot of money on experiences, for example traveling, rather than buying a bag,” she says. “Right now I think we don’t need luxury, because when you can’t even have the security of basic human rights, there’s no need for petty bourgeois consumption.”
Jessie and Young’s mixed sentiment reflects the uncertainty created by the Chinese government’s determination to stick to its “zero-Covid” policy and the swift and unpredictable nature of its restrictions. Just over a week after the lockdown was eased in Shanghai, mass testing and localized lockdowns were reintroduced, while in Beijing entertainment venues were closed and thousands were placed in home isolation following an outbreak at a bar in the city. Chaoyang district. This year’s lockdowns have been severe, hitting key financial and economic hubs like Shanghai and Shenzhen, as well as the capital Beijing, and affecting food supplies, online shopping and internal travel.
“I am 70 percent happy, 20 percent traumatized and 10 percent alert,” says Andrew, a 28-year-old research scientist from Shanghai of his post-lockdown state. His salary has not been affected by the lockdown, but he has become stricter on his spending, buying less overall and focusing more on higher-quality goods, including luxury items. “I’m glad life is getting better. I can go to work, buy things and live more or less like a modern city dweller. However, it is hard not to be traumatized for anyone who has experienced what happened in Shanghai. I am pessimistic about ‘life going back to normal’. It will never go back to normal and I prefer to be vigilant and prepared.”
This sense of uncertainty correlates with analyst suggestions that Chinese luxury spending will take longer to recover than in 2020, when it rebounded rapidly in the second half of the year. The recent restrictions in Shanghai, which in some cases meant brands closed up to 40 per cent of their Chinese store network, were duly noted in the latest financial results from luxury conglomerates Kering, LVMH and Richemont.
Despite widespread confidence in the resilience of Chinese luxury consumers, executives sounded a note of caution. “We should hope that China’s post-lockdown resurgence will not be as dramatic,” Richemont Chairman Johann Rupert said on a call with analysts in May. “China’s growth rate has slowed. I am not sure that any society that submits to that blockage can grow by six, seven or five percent. So yeah, it will be a while before they come back.”
Veronique Yang, managing director and senior partner at Boston Consulting Group, believes that consumers will begin to feel optimistic about their finances and the economy again in the next three to four months, with a recovery in luxury spending in the last quarter of the year to waiting for the resolution. of supply chain issues, which are currently disrupting deliveries to stores.
“The growth of affluent consumers in China remains unchanged and the government’s determination to further encourage consumption hasn’t changed either,” he says. “The fundamental outlook remains the same, but it is very clear that there is further polarization in the luxury sector, with big luxury brands doing very well despite the challenges of Covid and affordable luxury and the premium sector struggling. ”.
Blondie Tsang, president of luxury department store Lane Crawford, also believes that China is an “uncompromising luxury market. . . The biggest challenge will not be slowing down customer sentiment, but rather getting exciting, exclusive products quickly to travel-deprived, Covid-fatigued consumers who are desperate for news,” she tells me in an email. Lane Crawford’s flagship store in mainland China is in Shanghai.
The store did not do any business during the two-month closure, and when it reopened, shoppers were eager to return. But the enthusiasm quickly waned. “During the first weekend, our store was open, all of our VIP suites were fully booked, and we exceeded normal weekend sales,” says Tsang. However, “in general, the traffic has decreased. . . People are still cautious, so for us it has been a higher conversion from a lower traffic rate.”
Chinese shoppers understandably felt the economic fallout from China’s zero-Covid policy differently, and the middle class felt the pressure. Affe, a 39-year-old businesswoman from Shanghai, says she had to endure three months of costs with no profit, something she hopes will affect her earning power for at least the next six months. Liying Zhao, a 28-year-old music teacher from Shenzhen, has not been affected at all, splurging on a new Hermès bag after the lockdown was lifted.
And Plusplus, a 28-year-old shopper from Shanghai, was not affected financially, but her spending shifted from clothing to household items. “I don’t have as much desire for luxury items,” she says. “Now I spend most of my time at home, so it is more important to improve my quality of life there.”
“Wealthy groups may not be deeply affected, but some ordinary people will take time to recover. The epidemic has brought hardship to a large number of small and medium-sized enterprises and layoffs in many large companies,” says Wenyan Jiao, co-founder of Mushion, the Shanghai and Wuxi-based fashion boutique. “Sooner or later, everything will eventually return to normal. However, it will definitely be a big challenge for the retail market in general.”
Learn about our latest stories first — follow us @financialtimesfashion On Instagram