Thibault Villet, an expert in retail and luxury goods in Asia and co-founder and former CEO of mei.com, a leading Chinese luxury and fashion flash sales retailer, shares his views on how consumption in China is rebounding after the health crisis.
Has the covid-19 crisis changed luxury brands’ strategies in China and towards Chinese consumers outside the country?
Despite the health crisis, demand from Chinese consumers for luxury products remains strong, particularly in the domestic market, as travel is at a standstill. Foreign beauty and fashion brands continue to attract a young, connected clientele that is highly accustomed to buying online. As a result, brands are accelerating their investments in mainland China in media and product launches, among others and are strengthening their digital activities on their own websites, but also on Tmall Luxury Pavillion (Prada), Wechat (Louis Vuitton) and JD.com (Lancôme, Elizabeth Arden and others).
What can you tell us about Chinese consumption during the crisis? What is the situation on the ground today?
The crisis started at the end of January in China and lasted until March 8, with offline sales falling by 70 to 90% during the period, while growth in online sales decreased. Logistics also saw a sharp slowdown.
Since March 8, online sales have been rising significantly, while offline retail is gradually returning to last year's level, although traffic remains lower.
Over the quarter, according to the National Bureau of Statistics in China, prestige cosmetic brands across all distribution channels saw negative growth (-12%) but online sales are up by 20%. It should be noted that makeup is suffering more than skincare, due to the cessation of social activities and people working from home.
Most brands are again growing this month and the recovery is gradual.
Will this crisis have a long-term effect on consumption in China?
It’s still too early to measure the long-term effects. In the short term, demand remains strong in China for imported brands, especially the most popular brands, which continue to gain market share. In the medium term, the logistics and supply chain aspects are to be looked at closely and could have an impact on sales in the second half of the year for some brands.
In the long term, the rise of local brands could spell competition for international players, as they are more reactive, have detailed knowledge of the Chinese digital ecosystem and a more responsive supply chain.
New niche-positioned brands will continue to find an audience; those that are eco-responsible, and those with a strong identity that offer high value-added products. At the same time, established brands will continue to gain market share, as the status they provide reassures the Chinese consumer.
How do you see the luxury landscape in China post-crisis?
Luxury in China will continue to move towards more digital—collaborations with KOLs and live streaming on Little Red Book are becoming a must—and more e-commerce, on Tmall and JD, but also Farfetch or WeChat. The market will continue to be a pilot in the use of new technologies to enhance the shopping experience, such as virtual consultations.
There will also be more multi-channel integrations and new experiences offered to customers as they move around the store.