Is Guangzhou the future of luxury in China’s Bay Area?

If you are familiar with the recent development of the Greater Bay Area in China, you know that the Guangdong-Hong Kong-Macao economic belt is becoming a luxury superstar. As luxury shopping destinations in Southeast Asia (mainly Hong Kong, Macao and Singapore) have been badly affected by the pandemic, Guangzhou, the capital of Guangdong province, has once again become the first choice for most Chinese customers in this region.

Moreover, Guangzhou is a hub that connects the upstream and downstream sectors of the fashion industry. And, as it has long been home to China’s apparel and lifestyle industries, many luxury brands may have underestimated the city’s luxury consumer potential.

Why?

In this nascent post-COVID period, more Chinese have saved money and more residents of the Greater Bay Area have arrelatively higher income to spend on luxury goods. According to data from China’s National Bureau of Statistics, the average annual income of Chinese people has nearly tripled from $5,800 (37,000 yuan) in 2010 to around $15,000 (100,000 yuan) in 2020. And, as Gateway to the Bay Area, Guangzhou’s average disposable income per capita reached an impressive $10,800 (69,000) yuan in 2021.

Meanwhile, there has been a return to “local shopping” in Guangzhou, with international travel still restricted due to the ongoing pandemic. Meanwhile, Guangzhou’s appetite for luxury goods has rebounded remarkably. In April 2020, Hermes made $2.7 million in sales when it reopened its store in Taikoo Hui (one of Guangzhou’s high-end luxury shopping malls), which shocked the Chinese luxury market. Today in Taikoo Hui, many luxury brands witness long queues even on weekdays, which was almost never seen in Hong Kong – even when it was the top shopping destination. before COVID-19.

Guangzhou’s atmosphere is also favorable, as it has seen a boom in the local fashion industry in recent years. For example, the local brand CANUDILO, offering men’s collections based on Chinese culture, precisely targets its local customers, creating high-end products that dominate the market in Guangzhou and elsewhere in China. He also collaborates with famous local designers to create avant-garde pieces that have attracted loyal customers while bringing a new level of aesthetics. Such dynamism of the city pushes upstream and downstream fashion companies to develop, and in turn fuels the frenzy of luxury shopping.

What is Guangzhou’s potential?

The digitization of luxury spending has also made shopping more accessible here. Luxury brands have partnered with several Chinese e-commerce platforms in 2021, with more than 150 global luxury brands launching flagship stores on Chinese e-commerce platforms. And Guangzhou has also started to leverage its cross-border e-commerce industry. By collaborating with Alibaba (the parent company of luxury e-commerce platform Tmall.com), Guangzhou is building digital lifestyle hubs to help luxury brands unlock market potential through livestreams , cross-branding and social media campaigns.

But “the rising consumption of luxury goods in Guangzhou is not just the result of revenge spending after the COVID-19 pandemic,” said Jiang Runfou, who worked in luxury enterprises in Guangzhou for 20 years. “The structure of this spending has changed permanently after the pandemic, as Guangzhou has become the center of the Bay Area due to its local shopping culture, mature online/offline sales system, its quality buyers and its political support. But more international campaigns and a focus on the Gen-Z market are exactly what the city needs if it hopes to win competition with Shanghai and Beijing.

Guangzhou has become a luxury center in the Bay Area due to its local shopping culture, mature online/offline sales systems, qualified buyers and smart political support.

New consumers continue to flock to the city. And given that Millennials and Generation Z currently buy around 15% of all luxury goods in China, the luxury market is actually getting younger. Supported by its developed economy, cultural diversity and power of scientific and technological innovation, Guangzhou continues to attract more and more young Chinese people. It topped the ranking of China’s livable cities in 2021, according to Guangzhou’s Social Development Report Blue Book, and was also voted the second most attractive city for new talent in 2020, according to Baidu.com data. .

Guangzhou has seen a growing influx of international luxury brands and independent labels due to its expedient economic policies. The shift in purchasing power from Hong Kong to Guangzhou could prompt the city to explore more diverse retail formats, ranging from exhibitions and department stores to fashion shows and NPC campaigns. But Guangzhou will need to do more to prove its worth in the market to compete with Shanghai, Tokyo and Singapore while continuing to build on its strong local culture.

Local decision makers should take further steps to broaden the reach of the luxury and sustainable consumption market. Meanwhile, the expansion of online/offline retail will accelerate the repatriation of spending, steering sales towards luxury brands. Its luxury market, covering fashion, jewelry, hospitality, real estate and resorts, will all benefit from these moves, as these brands will be attracted by the economy of scale.

“The luxury market in Guangzhou and across China is vibrant,” said Zhang Yanzheng, an economist at the China Center for International Economic Exchanges. “Everyone is talking about new trends and waiting for new opportunities, so the potential for luxury consumption is very strong.”

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