(TAN): Luxury retailers around the world are extremely dependent on the spending habit and power of Chinese tourists, whose sales are now reportedly being hit by the outbreak of the coronavirus in China.
Chinese shoppers accounted for over a third of the global spend on luxury products to USD 115 billion in 2018, with most of that shopping taking place on vacations outside China, reports said. But with Chinese buyers isolating themselves and calling off foreign trips where they spend lavishly on expensive brands, shares of brands such as Louis Vuitton, Compagnie Financière Richemont, and Kering have gone down, reports said.
According to reports, France receives two million visitors from China every year, touted to be the biggest spenders that account for a huge slice of the tourism market – while they make up for just 2.5% of all tourists entering France, they contribute 7% of the country’s total dividend from tourism that amounts to EUR 4 billion (USD 4.41 billion approximately). They are reportedly responsible for a third of sales in the country’s luxury goods sector, owing to which Paris-based stores specialising in luxury goods are reporting a sharp dip in Chinese buyers and could suffer losses.
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Value Retail, owner of Bicester Village, a luxury shopping outlet in Oxfordshire, England that is extremely popular with Chinese tourists, reportedly said they were keeping an eye on the virus.
“In light of the recent outbreak of the coronavirus in China, we are monitoring the situation closely as well as following guidance from the World Health Organization and will be taking any measures advised by government and expert authorities,” a spokeswoman for Value Retail was quoted by MarketWatch as saying.
Bicester Village, reportedly the second most popular destination in the United Kingdom for Chinese tourists after Buckingham Palace, draws over seven million visitors a year, a sizeable portion of which is from China. Home to luxury brands including Ralph Lauren, Hugo Boss and Burberry, it is such a favourite destination for Chinese shoppers that Chinese ministers have made guest appearances there on Lunar New Year, and onboard announcements are made in Mandarin as trains get closer to the Bicester Village station, a report said.
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However, with more international airlines cancelling their flights to and from China, fewer Chinese travellers will be able to fly out of the country over the next few weeks, as per reports. Cathay Pacific suspended its flights to Wuhan, the epicenter of the virus outbreak, until February 29, while it reduced its capacity to and from mainland China by at least 50% until the end of March. Air France, Lufthansa, SWISS and Austrian Airlines, on the other hand, suspended all flights to and from mainland China until February 9.
On social media platform Wechat, some Chinese professional shoppers who purchase luxury items overseas for consumers back in China, reportedly changed their advertisements from luxury goods to that of disinfectant. Luxury brands have reportedly shut their boutiques in Wuhan and are limiting employee travel to mainland China.
The timing of the outbreak was especially challenging as the Lunar New Year forms the peak travel season for Chinese citizens, which is also the time when they spend excessively, with total spending estimated at USD 150 to USD 160 billion, according to reports.
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The industry reportedly endured a massive blow in 2002 when SARS or Severe Acute Respiratory Syndrome broke out in China, although the country has in the meantime become increasingly significant for the luxury goods sector. According to a report, a 10% fall in Chinese consumption during the first six months of the year could mean a 2% drop in the topline of luxury firms, and hurt annual profits by up to 4%.
“Our concern is that the luxury goods sector is significantly more exposed to Asia and Chinese consumption today than in at the time of the SARS outbreak in late 2002,” The Wall Street Journal quoted Citigroup analyst Thomas Chauvet as saying.
At least 362 people have reportedly died from the virus.
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