Hainan is leaning towards China as the center of gravity of the ‘burning fire’ luxury

When poets, writers and courtiers faced the favor of the Chinese emperors, they were banned on the island of Hainan to save themselves in the wild jungles and indigenous tribes.

Today, the tropical resort destination known as China’s Hawaii has become a rare bright spot in the world luxury market, which has been severely damaged by the coronavirus epidemic.

“The island of Hainan is on fire,” John de Idol, head of Capri Holdings, the owner of the Michael Kors and Versace brand, told analysts in February.

Per Increased domestic costs, The Chinese government has turned the island into a center of duty-free shopping. Visitors can get involved in fashion from Gucci and Prada, jewelry from Cartier, beauty products from Estee Lauder or premium whiskey from The MacLan.

Hayanan became even more popular when the Covid-19 travel ban meant that Chinese customers, whose luxury sector had grown in recent years, could no longer shop in Paris, London, Milan or Hong Kong.

The island is a powerful symbol of how the center of gravity is leaning towards China, reflecting the “repatriation” trend of Japanese buyers who bought Louis Vuitton and Balensiga abroad and now sit at home.

There is nowhere clearer than the sector leader LVMH, whose accelerated recovery has largely ignited China. Company Tuesday Excluding Japan, its first-quarter sales in Asia were 2 percent higher than in the same period before the epidemic in 2015.

Even when Chinese shoppers can travel again, analysts expect that they will continue to buy at home as brands open brick-and-mortar stores and expand e-commerce offers such as virtual stores. Alibaba’s Timal Luxury Pavilion.

According to the advisory bain, the share of China’s high-end purchases in 2012 increased from 322 percent in 2020 to more than 70 percent in 2020, and is expected to reach 55 percent by 2022. The effects of the epidemic faded.

These brands have been able to attract Amy Dai, a 30-year-old resident of Ble Chongqing who travels to Europe to buy luxury goods.

Last year, however, Dai took a two-hour flight from the city of Hainan in Sai Sanya to shop, and to become an online platform. Its spending on luxury items peaked at RMB 1m (150 150,000) last year, more than in 2019.

“Before the epidemic, I preferred to go abroad or occasionally buy from foreign purchasing agents,” he said. “I’ve been moving to domestic retailers since the epidemic started, because otherwise I can’t get the latest versions in time.”

The luxury sector is relying on Chinese customers to recover after 2020 where sales contracts have been signed. Roughly fifth 21 217 billion worldwide, according to Bain

Map of the location of Hainan, China

China’s relatively successful virus eradication and rapid economic recovery – GDP returns to growth Pre-epidemic level Fourth quarter – played an important role in maintaining optimism.

The recovery was encouraged by “recovery shopping”, or was initiated after the world’s most populous country emerged from it. Nationwide lockdown, But then there are ways to do something more sustainable.

“A lot of rich people have benefited from the epidemic because they work in high-growth industries or own well-performing stocks,” says a Beijing-based employee of a European brand. The person added, the high-end jewelry was “sold like crazy”.

The epidemic accelerated as China’s luxury markets continued to expand, such as the expansion of e-commerce, lower import tariffs, and tighter controls on gray markets driven by gray markets. Daigo, Professional buyers Who bought watches, jewelry, clothes and cosmetics abroad on behalf of the mainland Chinese. Brands had already begun to narrow the price gap which made Chinese products more expensive than stocks in Europe or the United States.

By 2030, Hayanan's duty-free sales will increase sevenfold

These national trends have encouraged luxury brands to invest more in China.

A report by Jefferies analysts found that only Louis Vuitton, Burberry and Gucci All stores had stores in China’s 25 largest cities, suggesting that others may need to expand their footprints.

Flagging Hayana could be an effective way to get in front of more Chinese customers.

Japanese beauty brand Shisido plans to double its sales counters on the island by the end of the year. Estee Lauder added that there is a strong demand for it.

According to Bernstein Research, beauty and cosmetics products account for about half of the duty-free sales in Hainan, while luxury products account for about one-third of sales. However, the number of luxury brands on the island has grown rapidly by 60 percent in the last six years. Bernstein analysts wrote, “We hope more will come.

Tourists buy bags at a haiku-free shop in Hayanan

Tourists buy bags at duty-free stores in Haikan, Hainan China News Service via Get Luo Unfei / Getty

Chen Jin, an analyst at UBS, said Hainan’s duty-free sales doubled to RMB 30 BN in 2020 compared to the previous year, and he predicted a compound annual growth rate of 40 percent between 2012 and 2015.

This growth was further underscored by policy changes aimed at building duty-free shopping on the island.

Last year, the Chinese government capped Ramb 8,000 for a single item, tripling the amount customers could buy from Hainan at an annual duty-free RMB 100,000. It has also issued three licenses to companies to operate duty-free shops, a significant increase from the seven licenses issued earlier in the 1930s.

But some luxury brands were wary of placing excessive bets on Hayanan, saying they could only sell there through wholesale deals with state-backed companies and not open their own stores. This gives brands less control over price and customer experience.

Others fear the island is at risk of abuse Daigo.

“We believe Hainan’s development is positive, but we must be careful and work together to ensure that it does not become the center of China’s gray market,” said Jean-Jacques Zuni, chief financial officer of LVMH, the world’s largest luxury group. .

“If customers travel to Hainan and come to our boutiques, we are ready to serve them, but not if it has to be bought in bulk and then resold to intermediaries.”

Despite these concerns, LVMH has expanded to Hainan through its travel retail division, DFS. The company has partnered with Shenzhen Duty Free Group, a duty-free mall called Haiko Mission Hills, located at the popular resort. It opened in January but will expand to more than 30,000 square meters in the next two years.

These national destinations could help relieve the crowds at Sharon Zhou, a 35-year-old marketing executive in Shanghai, during a trip to Hainan on the New Year. He was thrown away so much that he didn’t buy anything. You didn’t find the salesmen. . . People were stepping on my feet, ”he said.

Zhou Xiao Wang of Shanghai, Sun Yu of Beijing and Alice Woodhouse of Hong Kong reported.

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