普华永道-中国奢侈品市场：为下一个浪潮做好准备（英文）-2020.6-13页_2mb

Summary of Mainland China/Hong Kong Luxury Goods Market - "Get ready for the next wave"

Core Content

The luxury goods market in Mainland China and Hong Kong has been significantly impacted by the global spread of the Covid-19 pandemic, with both demand and supply chains facing severe challenges. However, the market is showing signs of recovery, especially in Mainland China, while Hong Kong continues to struggle due to the 2019 protests and the epidemic.

Main Challenges and Impacts

• Global Pandemic Impact:

  • The luxury industry is highly vulnerable to economic downturns.
  • The Covid-19 outbreak has had a more severe impact than SARS due to longer restrictions on international travel.
  • Frozen travel retail business, supply chain shortages, and uncertain demand have all contributed to the crisis.
  • High offline operating costs and declining consumer traffic have further strained profitability.

• Hong Kong's Unique Situation:

  • Inbound travelers declined sharply due to both the 2019 protests and the pandemic.
  • Sales across all luxury sectors plummeted, indicating a significant drop in consumer activity.
  • Local consumption is becoming more important as Mainland Chinese consumers shift spending to the mainland due to lower taxes, digital platforms, and weakened currency.
  • Hong Kong's position as a financial hub and tax incentives still make it an attractive location for investment in the short to medium term.

Market Recovery Trends

• China's Rapid Recovery:

  • China is recovering faster from the pandemic compared to other regions.
  • By the end of March 2020, 98.6% of fashion industry manufacturers had returned to work.
  • Online and offline channels are accelerating recovery, with shopping malls and eCommerce platforms playing a key role.
  • Labour Holiday saw a significant increase in traffic and sales, with an average recovery rate of 59.3% and 36.3% growth in online sales compared to the previous year.

• Digital Transformation:

  • Livestreaming is becoming a major trend, with Make Up For Ever achieving a 30x ROI on TikTok.
  • Luxury brands are increasingly adopting eCommerce platforms like Tmall and JD.com, with many launching flagship stores and virtual pop-up experiences.
  • Omni-channel strategies are being prioritized to provide seamless customer experiences.

Strategic Recommendations

Short Term (2020 Q2)

• Optimise existing value chain by capitalising on inventory and new collections.
• Improve operational efficiency across tax, legal, and supply chain functions.
• Rationalise capital and operating expenditures to focus on strategic growth.

Mid Term (2020 Second Half)

• Explore changes in consumer behavior to better understand and target the market.
• Enhance eCommerce channels and digital marketing capabilities.
• Revitalise tax-efficient supply chains and in-country distribution networks.

Long Term (2021–2022)

• Redesign Omni-channel models to be more customer-centric and growth-driven.
• Digitalise customer engagement and rationalise product/service offerings.
• Reimagine value chain transformation to align with future market demands and consumer expectations.

Key Consumer Trends in China

• Younger, wealthier, and more digital-savvy consumers are driving luxury market growth.
• China's top 10% wealth population has a significant share in the global luxury market.
• Local consumption is becoming a critical growth driver, especially as Mainland Chinese consumers shift spending from Hong Kong to the mainland.

Conclusion

The luxury goods market in China and Hong Kong is at a pivotal moment, with recovery efforts showing promise in Mainland China but continued challenges in Hong Kong. Brands must adapt their store network strategies, digital engagement models, and supply chain operations to capitalise on the opportunities presented by the evolving market landscape.

Team Contacts

• Michael Cheng
  Email: Michael.wy.cheng@cn.pwc.com
  Role: Consumer Markets Leader Partner, PwC Asia / China & Hong Kong

• Jennifer Ye
  Email: Jennifer.ye@cn.pwc.com
  Role: Leader Partner, Risk Assurance, PwC China Consumer Markets

• Jane Wang
  Email: Jane.wang@cn.pwc.com
  Role: Partner, Tax, PwC China Consumer Markets

• Steven Zhong
  Email: steven.x.zhong@cn.pwc.com
  Role: Partner, Consulting, Operations & Supply Chain

• Rebecca Silli
  Email: Rebecca.silli@tiangandpartners.com
  Role: Partner, Legal Services, Hong Kong Consumer Markets

• Jenny Tsao
  Email: Jenny.np.tsao@hk.pwc.com
  Role: Partner, Tax, PwC Hong Kong Consumer Markets

• Jaelyn Kwan
  Email: Jaelyn.kwan@hk.pwc.com
  Role: Partner, Consulting, Digital & Customer