The luxury market has experienced significant changes in recent years, with the recent slowdown following a 2-3 year boom period, particularly due to the COVID-19 pandemic and its aftermath.
Yanmei explains, "During COVID as you can imagine, people are constrained, can’t go out - they have a bit of money in in their pocket because they don't have anywhere to spend it. So naturally we see a boom throughout COVID. The demand surged during that time, especially a lot of aspirational customers, because if they want to reward themselves, they naturally spend their money on these luxury goods."
However, as restrictions eased and people changed the focus of their spending, the market began to normalise. As the expendable income of the pandemic has been replaced by the recent squeeze on living costs, a number of luxury brands have seen their share prices tumble in the past year. A recent study by wealth management firm Saltus showed 16% of cash rich Brits had cut down on their personal spending due to financial pressures, cutting down on luxury items and designer clothes.
A key factor in the luxury market's current state is the Chinese market – historically a big player in the global high-end goods market – returning to pre-pandemic levels. One of the last countries to remove COVID restrictions, China’s economy has been slow to bounce back, and its real estate sector – which contributes to nearly a third of the nation’s GDP - is currently in crisis.
"The whole market is really counting on China to actually have more people travelling abroad," says Yanmei. "That’s where you see a lot of Chinese clients shopping: when they go abroad, they tend to buy more things."
The industry is now looking towards the upcoming summer season with cautious optimism - Yanmei says that department store executives she has spoken to are expecting consumers from China to return to about 80% of what they were pre-COVID.
While the Chinese market recovery is slower than anticipated, there are emerging opportunities in other markets. Yanmei points out, "There are other interesting dynamics in other markets such as the Brazil market, the India market - countries with rising middle class or wealthy people, who are starting to travel again."
For Yanmei, the key for the luxury sector now is whether these emerging markets can compensate for the slower recovery of China’s economy: "The question mark is really, will their demand surge be enough to compensate what we have lost from the Chinese market?"