the Chinese return to their stores
In Shanghai, during the Lunar New Year, the lines in front of the original Louis Vuitton store that emulates the bow of a cruise ship stretched around the corner. Luxury brands have managed to once again draw the attention of Chinese customers to fashion and cosmetic products, after a sharp drop in sales which was consolidated with the tariff war between the US and China. As a result, brands such as L’Oreal, LVMH and Burberry saw a large part of their income coming from the Asian market. they collapsedand with them their quotes. As examples of this financial debacle, just say that Bernard Arnault, president and main shareholder of LVMH, was the richest man in the world in 2023, according to Forbes, and now occupies ninth position among the greatest fortunes in the world. The blow that no one expected. The year had not started badly. Reciprocal tariffs of up to 20% on European goods they threatened with making luxury bags and watches that come out of the artisan workshops of European luxury brands more expensive. They arrived just when the sector I was hoping to land in the United States after weak years in China. Brands such as Rolex or TAG Heuer, manufactured only in Switzerland, were especially exposed to price increases due to tariffs. Added to that was another unexpected front. The war in Iran suddenly stopped purchases in great luxury centers like Dubai. Middle East has a weight 6% in LVMH sales. According to collected France24LVMH’s financial director, Cécile Cabanis, acknowledged that this demand was still “very low” at the beginning of the year. The blow subtracted about one percentage point to the growth of the group in the first quarter. China activates its luxury consumers. Meanwhile, something was changing in the pockets of the wealthiest Chinese consumers. The ChiNext, the Shenzhen technology index, broke the record of the 2015 bubble in May. It rose 26% so far this year. This indicator is increasingly important for consumption because brick-and-mortar is no longer the only refuge for family savings in China, and there are more and more investors. If the stock market makes profits, the consumption of luxury products it shoots. According to McKinsey, the weight of the house The savings of Chinese households has fallen greatly since 2016. Then it was around 90%; last year it was only a third. Money migrates to stocks and funds. “For the first time in several years, there are encouraging signs in China’s consumption,” resume Daniel Zipser, partner at McKinsey in Shenzhen. The figures that confirm it. According to the Chinese National Bureau of Statistics, sales cosmetics grew by 5.6% between January and April. General consumption remains lukewarm, but high-end cosmetics and beauty products they already emerge on sales charts. L’Oréal reported sales growth of between 5% and 9% in China during the first quarter. On Alibaba platforms, the ten most expensive beauty brands sold 39% more in those same months. The cheaper ranges, on the other hand, fell. LVMH itself noticed this in its physical stores. In the first quarter, the region that includes China grew 7% in organic sales, according to the company’s own reports. Louis Vuitton and Burberry also rebounded in Chinese brick-and-mortar stores. Ralph Lauren grew more than 50% in the country thanks to the New Year. They are the first green shoots. The rebound in sales in China tells only part of the story, but it does not mean that luxury brands have overcome the slump. The war in the Middle East continues to weigh on the most profitable business in the sector. Cabanis warned that the environment will continue to be very volatile in the coming months. In addition, the tariff tension left its mark on the purchasing habits of Chinese customers and many of them they started using local brands versus foreign ones. It is a nationalist turn that also touches fashion. “Full consumption recovery will take time,” warns Morningstar analyst Jeff Zhang in statements to Bloomberg. The rebound is real, but no one in the sector dares to call it a victory yet. In Xataka | The millionaire heir of Hermés adopted his gardener. Your fortune has evaporated before it reaches your garden Image | Flickr (Trump White House Archived)