SHANGHAI – China, which was first hit by the COVID-19 virus more than a year ago, is also the fastest to emerge from the pandemic-triggered lockdown. Thanks to a combination of high compliance when wearing masks, aggressive tracking of the population with QR codes, and weeks of quarantine policies, it has become one of the few countries that can say it is firmly on the way to recovery.
At the annual two-session session of Congress in early March, the government set a GDP growth target of more than 6 percent for 2021 after the country posted 2.3 percent growth in 2020 by deviating from its usual protocol and pandemic Publication of a GDP forecast for the next five-year period through 2025. Even Wuhan in Hubei Province, the epicenter of the outbreak, is expected to see GDP of 10 percent year-on-year growth this year.
Current data show that the country should have no difficulty in meeting these goals. Last week, China announced that GDP rose 18.3 percent in the first quarter, slightly below expectations of 19 percent but still a record. Retail sales rose 33.9 percent in the first quarter. Companies from LVMH Moët Hennessy Louis Vuitton to L’Oréal and Ralph Lauren Corp. highlighted China as a key market driving growth in the final quarter and beyond.
The recovery looks different in this large country. Life in Shanghai returned to what many might have thought normal by around April last year as mask restrictions were relaxed and people filled busy weekend markets and unpacked restaurants, bars and nightclubs. However, Beijing has had a tougher situation and seen more small outbreak clusters and more stringent measures than the country’s capital.
The 77-day lockdown on Hubei was finally lifted last April. Given that the province bore the brunt of the virus, people there understandably tend to be more cautious in their pandemic prevention and control measures. Until well into September last year, it was difficult to find someone in Hubei who was not wearing a mask.
“Things have normalized [in Wuhan] and the fashion industry is no exception, ”said Rae Zhang, a native of Wuhan and founder of Casaluna, a wedding dress retailer. She added that the provincial capital has seen a surge in investment and attention from both the public and private sectors, and many new commercial developments have gone online.
“Wuhan is indeed getting a lot of new shopping centers, be it Heartland 66, SKP, K11, Paradise Walk or the refurbished Wuhan International Plaza, I’m personally delighted,” she said.
In e-commerce, China’s already digitally savvy population has become even more digital in light of the events of last year. Luxury brands that previously considered selling Anathema online experimented with different formats. Annual luxury online penetration in China rose from around 13 percent in 2019 to 23 percent in 2020. It was also the year that livestream really came to the fore.
“While the trend has been booming in the country for several years, it became a lifeline during the pandemic as both brands and consumers flocked there in the absence of personal purchases,” a report by AlixPartners said. “The country’s livestream sales industry is currently valued at $ 66 billion, and the number of consumers viewing live streams increased 30 percent in the nine months between March 2019 and June 2020 alone.”
“A big contributor to this is the hugely successful shoppable livestream phenomenon,” the report continues, “which solves the issues of relevance, ease of access and the ability to get authentic reviews and a better look and feel for the product.” in one fell swoop. It’s not uncommon for popular livestreams in China to generate multi-million dollar sales in one session. “
Despite record gains in mainland China’s luxury market, luxury goods sales in China rose 48 percent in 2020 to 346 billion renminbi, or $ 53.5 billion. A report by Bain & Company and Tmall.com failed to compensate for the loss of overseas Chinese consumption. A decrease in travel resulted in a decrease in total luxury spending by Chinese consumers by about 35 percent, a larger decrease than any other group.
No place in the world felt the absence of Chinese tourists on the mainland as much as Hong Kong, which had been removed from the list of shopping destinations for this segment the year before because of bitter political differences. Last year, Hong Kong retail sales saw the largest annual decline since records began in 1981, falling 24.3 percent to HK $ 326.5 billion. Beijing has cracked down on the city’s autonomy by arresting and imprisoning hundreds of pro-democracy leaders, restructuring local legislation and effectively suppressing all forms of dissent under its new national security law.
In contrast, Hainan Island, a province near Vietnam, was inundated with investment from Beijing and boomed as a duty-free spending hub. Last summer, a comprehensive plan was presented to develop the subtropical island into an important special economic zone with considerable tax breaks and to increase the duty-free quota per person from 30,000 renminbi to 100,000 renminbi. The change sparked a run on the island to the detriment of Daigou hotspots like Jeju Island in South Korea. Hainan’s total duty-free sales reached 21 billion renminbi at the end of October 2020, up 98 percent from 2019.
International travel is still a long way off, but as soon as it becomes possible, industry experts expect Chinese people to travel overseas again to experience luxury in their favorite fashion capitals around the globe.
“The value of luxury and premium consumption, as distinct from mass consumption, still has a significant impact on the overall experience,” said Angelito Perez Tan, CEO of RTG Group Asia. “When these ‘original’ markets reopen, the total spending of the branded companies will be redistributed. However, brands that have been able to offer great value for money with a unique China boutique experience may ultimately persuade Chinese consumers to spend money domestically, which can affect global business allocation. “