Foreign firms pin hopes on market as consumer confidence recovers

With the approach of Qixi Festival, Chinese Valentine's Day, on Saturday, international luxury brands are launching limited editions of products featuring heart shapes and the color red to attract more Chinese consumers and make further inroads in China with localization strategies.

Since the COVID-19 pandemic has been brought under better control in China, and with international travel stagnating, China's domestic luxury market has rapidly rebounded and presented global companies huge business opportunities.

In the first half of this year, French luxury group LVMH, the owner of such brands as Louis Vuitton, Dior, Celine and Fendi, saw its revenue increase 53 percent year-on-year, its earnings report said.

The group attributed the growth to strong performance in its fashion and leather goods divisions, and hard luxury sector－which includes goods such as jewelry and watches. Asia, and especially China, continues to drive LVMH's major growth, accounting for nearly 40 percent of its revenue, it said.

"China's luxury market has grown rapidly, and Chinese consumers have become the main force in global luxury consumption. They serve as an important group to drive further growth of the global luxury market," said Zhang Weilin, an analyst at Lead-Leo Research Institute, a market research provider.

A group of luxury brands, including watch retailers Vacheron Constantin and IWC Schaffhausen, introduced more than 500 styles of new products in limited editions for Qixi Festival on Tmall, an Alibaba Group e-commerce platform.

Italian luxury brand Bottega Veneta launched a special edition of its wool handbag for the festival and first released it through a mini-program on WeChat. Louis Vuitton, Valentino, Dior and Gucci all rolled out related products with red hearts and love characters for the festival.

Tmall has become a major online site for global luxury brands to launch new styles in China. Last year, sales of high-end watches on Tmall surged more than 200 percent year-on-year, according to Tmall.

"Luxury brands are making more efforts in strengthening communications with China. Qixi, a festival that is unique to China, has naturally become a good opportunity for luxury brands to boost holiday sales," Zhang said.

"Launching limited editions of new styles ahead of Qixi can help brands better promote their products by leveraging the festival atmosphere and generating discussions on social media. Limited editions for holidays can also draw more young consumers to make a purchase through hunger marketing," she said.

Hunger marketing is a strategy that aims to generate a strong desire in consumers to buy items that other people also want.

During Spring Festival, China's Lunar New Year holiday, luxury brands usually launch products that feature the Chinese Zodiac and color red, and they tend to release derivative products such as red envelopes.

Consumer confidence on the Chinese mainland has recovered to the pre-pandemic level, according to a report released in June by global public relations firm Ruder Finn and Consumer Research Group.

The report surveyed 1,500 consumers from the Chinese mainland. Forty-one percent said they would consider increasing their spending on luxury products this year, especially in categories like cosmetics, clothing and shoes.

More respondents said that they have been buying more high-quality products since COVID-19 appeared because they want to treat themselves. They have started using online channels to buy luxury items, the report said.

Fueled by the favorable duty-free shopping policies, Sanya, in Hainan province, now ranks No 5 among Chinese mainland cities for luxury shopping. It follows Shanghai, Beijing, Guangzhou and Shenzhen, Guangdong province.

"Hainan is ideally placed to absorb Chinese luxury duty-free demand. Even after Chinese borders start reopening to leisure travel, Hainan is likely to play an increasingly significant role in drawing Chinese luxury spending," said Aimee Kim, a senior partner at the McKinsey& Co consultancy.

"With Hainan scheduled to become a fully duty-free island province by 2025 and growing fast to take a significant share of China's luxury market, it is imperative that luxury brands formulate a strategy to enter, operate, and scale in the market," she said.