Welcome to the April issue of the Retex China newsletter. Dive into the vibrant world of China, with the latest economic trends and fashion news straight from our Shanghai team.
In this issue:
- Economics Highlights: We will discover the latest economic developments in China, including ambitious GDP growth forecasts, increased industrial profits, and significant growth in automobile exports.
- Latest Market Trends: We will analyze how the evolution of Retail in China is affecting department stores and shopping malls, as well as the strategies of luxury skincare brands to grow in the Chinese market, and finally the lessons to be learned from the closure of BY FAR’s first Asian store.
- Fashion, Luxury & Design: The openings and closures in the world of fashion and luxury in China, focusing on events by Supreme, the withdrawal of brands like BY FAR and Zara, the challenges faced by Kering and Swiss Watch, the new strategies of Prada and Gucci, and the expansion of Rapha in the cycling market.
Without further ado, let’s begin our journey through the economic dynamics and Luxury trends of 2024!
Economics Highlights
GDP Growth Target: “Around 5%”
The Government has presented the economic guidelines for 2024, aiming for a GDP growth of 5%. To comply with the “14th Five-Year Plan” and to double the 2035 GDP relative to 2020, an annual growth of 4.7% is targeted for the next 15 years. Moreover, to support the creation of over 12 million new urban jobs and keep unemployment at 5.5%, a GDP increase of around 5% is necessary.
Industrial Profits in the First Two Months of 2024: Increase of 10.2%
Chinese industries have recorded a 10.2% increase in profits in the first two months of 2024, led by manufacturing industries of equipment and high technology, with increases of 28.9% and 27.9%, respectively. The recovery of domestic and external demand, along with the boost from the Chinese New Year holidays, further strengthened growth, with a 12.9% rise in profits in the consumer goods manufacturing industry.
Record Growth for Chinese Auto Exports: +30% in the First Two Months
Chinese automobile exports have recorded a strong growth of 30.5% in the first two months of the year, with 822,000 vehicles sold abroad. New energy vehicle exports marked an increase of 7.5%, totaling 182,000 units, while traditional vehicle exports rose by 39%, reaching 640,000 units, according to data from the China Association of Automobile Manufacturers (CAAM).
Latest Market Trends
Retail Dynamics in China: The Decline of Department Stores, The Rise of Shopping Malls
In China, there is a significant contraction in the department store sector, leading to the closure of many historic businesses such as Shanghai Pacific Department Store and Shanghai Landmark Plaza, despite the high customer turnout recorded before the shutdown. In contrast, shopping malls are witnessing extraordinary development, thanks to innovative Retail approaches that prioritize customer experience.
Top-tier commercial real estate groups have highlighted significant revenue increases, capitalizing on the evolution of consumer preferences towards a more engaging shopping experience than just purchasing products.
Shopping malls in China continue to thrive, offering engaging shopping experiences. However, the current challenge is differentiation in a market tending towards uniformity. Some traditional department stores, like Beijing SKP, are meeting this challenge by focusing on innovation, combining exclusive product offering with special events and loyalty programs.
Luxury Skincare Brands: How to Strengthen Presence in the Chinese Market?
Sisley, the prestigious skincare brand, is further strengthening its position in the Chinese market with a focus on “sampling economy” and Retail expansion. The launch of new products, supported by KOLs and spread on social media, is coupled with the introduction of innovative formats such as a 15ml face cream to attract new customers.
The recent opening of “Sisley House” in Shanghai, which blends French elegance with the city’s spirit, aims to offer a luxury, tailored experience that underscores the brand’s vision of exclusive and personalized personal care.
BY FAR Closes its First Retail Outlet in Asia: A Lesson for the Luxury Market
The localization strategy and refined image were not enough for BY FAR, which closes its ZHANGYUAN boutique in Shanghai. The decision highlights the challenges niche brands face in establishing themselves in competitive markets like China’s. Despite a surge in social media popularity, BY FAR failed to translate success into consumer loyalty due to a non-distinctive brand experience and slow product expansion.
Fashion, Luxury & Design
Supreme inaugurates its vision in Shanghai: more than a store, a community
Supreme, the renowned streetwear brand, has opened the doors to its first store in China with an ambitious goal: not just to be a retail outlet, but to become a meeting point for a community that identifies with the unique spirit of the city. Unlike traditional openings through partners or collaborators, Supreme intends to replicate in Shanghai the same spirit that has characterized its successful stores in Milan, London, and Chicago.
In this special week, the brand has also organized an exclusive event that will see the participation of about 50 friends and supporters of the brand, coming from Japan, New York, and Los Angeles, to celebrate Supreme’s arrival in the Chinese metropolis and strengthen its global community.
As part of the “Reignite: Urban Art Reignition Project” at the Modern Art Museum of Shanghai, Supreme has strengthened its bond with Chinese consumers, emphasizing the cultural soul of the brand. With the exhibition of works that fuse skateboarding and street art, the two pillars of the Supreme philosophy, the brand has highlighted its cultural essence. In the layouts of the Shanghai store, works such as Kaws’ interpretations of past brand posters, life-size F1 cars created by Mark Gonzales, and sculptures by Priest were on display, vividly outlining the cultural heart and evolutionary history of Supreme.
Kering Group: cautious start to the year for the luxury industry
In the early months of 2024, the Chinese luxury market is showing mixed signals. The Kering Group reported a downturn in sales for the Gucci brand, largely attributable to the slowdown in the Asia-Pacific market. Attention is now focused on the first collection by Sabato De Sarno, with long-term expected results. Conversely, LVMH has highlighted growth, supported by a recovery in the Chinese market. Despite some stagnation during the Chinese New Year period, some brands have benefited from an increase in tourism. These early trends could pave the way for the sector in the coming months.
Swiss Watch faces the crisis: Swiss watchmaking slides in China
The well-known luxury watch brand Swiss Watch is facing a sustained drop in exports to the Chinese market for the third year in a row. Statistics released by the Federation of the Swiss Watch Industry have highlighted a 3.8% drop in February, with total exports of 2.15 billion Swiss francs. The reduction concerns both the volume of watches exported, which fell by 5.2% to 1.2 million pieces, and the high-end watch segment, above 3000 francs, with a drop of 1.8%.
More specifically, exports to China saw a 25% drop, followed by Hong Kong (-19%) and the United Kingdom (-2.1%). These data highlight a slowdown in the sector in the Chinese market, which represents a significant part of sales for Swiss Watch.
Zara’s strategic withdrawal from Dongguan marks a Retail trend
Zara proceeds with the closure of its Star City store in Dongguan, confirming a strategy of reducing its outlets in the Chinese market. The store, the largest in Guangdong with its 2000 square meters, represented one of the first examples of the brand’s expansion in the region. Between 2018 and 2022, the number of Zara stores in Mainland China has decreased from 179 to 119, which is a 30% contraction.
A downsizing trend that involves the entire Inditex Group, which has seen its store portfolio in China go from 589 to 242, with Pull&Bear, Bershka, and Stradivarius having already left the Chinese market during 2022.
Prada withdraws from Taikoo Li, Shanghai: reviewing expansion plans
Signals of change from Prada in the Chinese retail strategy: the brand has apparently canceled the opening of a new store in the luxury shopping center Taikoo Li, in Shanghai. Recent developments on the site, including the removal of fences after two years, suggest a different strategic direction for Prada, which could explore other avenues for its expansion in the second phase of the Taikoo Li project.
With Prada’s exit, Taikoo Li, one of Shanghai’s luxury shopping paradises inaugurated in 2021 with over 200 commercial establishments, records the withdrawal of its first major luxury brand, despite the significant 79% increase in retail sales last year, according to Swire Properties.
“Gucci Ancora” conquers Chinese hearts with its offline experience
Gucci has immersed Chinese consumers in its creative universe with the inauguration of the “Gucci Ancora” space, active from March 11 to 17 in prestigious locations such as ZHANGYUAN in Shanghai and various hotspots in Beijing, Shenzhen, and Chengdu. The brand has created an interactive pop-up that blends fashion, art, and music. The new “Gucci Ancora” concept has had an evocative impact on the Chinese public, as evidenced by the involvement generated on the #GucciAncora hashtags on Weibo, with readings reaching billion figures.
Observations by the magazine “Huagongzhi” confirmed the high interest in the initiative, with significant queues recorded especially at the Sanlitun Taikoo Li pop-up in Beijing, thus highlighting the success of the experience offered by Gucci.
Rapha pedals towards success in China: riding the cycling boom
The renowned cycling brand Rapha is preparing to land in the mainland Chinese market, with the debut of its official store on Tmall in April. The move follows the trail of growing enthusiasm for cycling in China, with Trek, the famous bicycle manufacturer, introducing Rapha products at its authorized outlets, and an already established presence in high-profile local stores.
Cycling is experiencing a real renaissance in China, with a significant increase in enthusiasts and a growing demand for specific equipment for this sport. This is reflected in the data from Tmall’s “Double 11” of 2023, which recorded an increase in sales of over 100% for cycling products, and in statistics from Xiaohongshu, which reports a 400% increase in posts related to cycling from January to October 2023, for a total of over 1.3 billion views. The trend indicates an opportunity for Rapha to peddle with momentum in the vast and promising Chinese market.
