Luxury braces as China hits new Covid record – Vogue Business

To receive the Vogue Business newsletter, sign up here.

China is tightening its Covid-19 restrictions after hitting a new record number of daily cases on Wednesday, raising fears of a further slowdown for the country’s luxury market.

China’s National Health Commission said the number of locally transmitted Covid cases reached 31,444 on 23 November, jumping above the previous record of 29,317 in April 2022. The government has introduced new lockdowns in key areas including Beijing, Shanghai and manufacturing hub Guangzhou, as well as ordering mass testing. 

“Consumer confidence has been dramatically knocked since the beginning of this year,” says Adam Knight, co-founder of China-focused brand consultancy Tong. “Rolling lockdowns, spiking youth unemployment and declining economic performance are all taking their toll. As long as such uncertainty persists, with a seeming lack of a central roadmap out of the situation, businesses should expect continued pressures.”

The repeated lockdowns have caused an economic crisis in China, with store closures and supply chain issues hitting Western fashion and beauty brands. Luxury executives across the world had hoped Chinese president Xi Jinping would use the stage at the Chinese Communist Party’s National Congress in October to announce a relaxation of the zero-Covid policy. But, in the end, China reiterated its commitment to stamping out, rather than living with Covid. Estée LauderCapri Holdings and Tapestry all cut back their outlooks recently, blaming China restrictions for the slowdown. Farfetch reported losses in China, while Ferragamo was able to offset the disruptions with strong sales in Europe and the US. Richemont said sales in China were “flattish”Ralph Lauren was an outlier, maintaining momentum in China. 

“China’s luxury market is likely to slow down [further] as more and more entry-level consumers decide to save more money due to the uncertainty entailed by the zero-Covid strategy,” warns Antonello Germano, luxury business analyst at China research and management firm Daxue Consulting. “However, it is unlikely luxury sales are going to fully dry up since core high-income luxury consumers are going to keep purchasing high-end goods. Affluent consumers will probably opt for more discreet luxury pieces during this period of economic slowdown and as a result of the Common Prosperity campaign [China’s strategy to address the wealth gap], though.”