Fashion houses cut prices by 50% in China. In the former Celestial Empire, some fashion houses are applying unprecedented discounts on their items to cope with the panic generated by unsold stocks, a direct consequence of the decline in spending by local consumers.
«The demand for luxury in China is limited. Spending on luxury is below the pre-Covid growth trajectory of around +20% per year, despite significant benefits from the repatriation of Chinese to Japan, the rest of Asia and Europe.” they explain Luca Solca, Yi-Peng Khoo And James Hopperanalysts of Bernstein. In the last year, experts have observed, traffic in high-end shopping centers has fallen to single digits, while luxury sales have recorded a double-digit decrease. “A vicious economic circle is being triggered,” they highlighted.
The fall in property prices has dissipated the “wealth effect” of consumers, increasing people’s propensity to save, who actually feel poorer. This, in turn, is hurting the economy, as many industries, such as fashion, are experiencing a setback in end-consumer demand.
Hence, the strategy of many brands to drastically reduce the prices of their products. And so, for example, starting from this month, according to what was reported by an investigation by BloombergChinese buyers can purchase on Tmallthe continent’s most important e-commerce platform, owned by Alibabathe small crocodile-patterned version of the iconic Hourglass bag by Balenciaga for $1,947. That is a 35% discount. This price is the lowest among those listed on the brand’s official websites globally and on major luxury e-tailers, including Farfetch.
According to local sales experts, who however prefer to remain anonymous, Balenciaga, a brand in the orbit of the French giant Keringreportedly saw an average 40% discount on sale items in three of the first four months of 2024. The brand also reportedly more than doubled the number of discounted products on Tmall, accounting for more than 10% of its inventory on the platform from January to April, always second Bloomberg. During the same period last year, the label had only discounted items in January, and at an average of around 30%. However, it did not experience any decline in the first four months of 2022.
But a similar trend, according to local sources, can also be observed for other labels. Also during June, Versace, Givenchy And Burberry they have all cut prices, some by more than half, on Tmall and other national platforms. Versace’s average discount has jumped from around 40% in early 2023 to more than 50% this year. The Medusa fashion house and many other premium brands have offered discounts for longer periods of time this year than in 2023. The number of products on sale rose above the hundreds in the first four months, compared to just a few last year. It would have been unthinkable to imagine, until a few years ago, a downward price war for fashion houses that have always been characterized by exclusivity and value.
“It is in fact not common to see luxury brands, which usually try to clear out inventory through shopping centers or private sales, putting such advantageous discounts on a luxury platform,” analyzed another expert who prefers to remain anonymous. All this, as reiterated at the beginning by Bernstein analysts, is a consequence of what is happening to the Chinese economy. The job market is weakening, they explained, making people feel even more pressured and more likely to save.
“The real estate market appears to be the core of the system and its stabilization would be the key to breaking the economic vicious circle and restoring momentum to the economy,” they said. Another reason, as illustrated in their analysis, is linked to too many luxury shopping centers. “The return to home spending during Covid has spurred a pipeline of new luxury shopping centers to cater to the boom in local consumers. This factor and weak demand are producing a less favorable environment, just as many of these malls are opening,” Bernstein analysts concluded. (All rights reserved)
Posting time: 27/06/2024 02:00
Last update: 27/06/2024 02:00
