The Asia Pacific region has this year so far welcomed over 38%* of the total global luxury retail store openings and, according to Savills, it is the first time that the region has overtaken Europe as the predominant focus for the industry’s physical store expansion.
“Global luxury retail expansion has experienced a regional rebalancing in 2020,” says Anthony Selwyn, co-head of Savills Prime Global Retail team. “In recent years, we have seen many of our clients grow their presence across Asia Pac and the region has provided brands with a key contribution to their global businesses. However, the earlier reopening of retail markets across much of the region and a significant rebound in luxury spend recorded post-lockdown, has further accelerated their expansion strategies into these markets.”
Savills confirms that the regional uptick in activity has been largely driven by retailers expanding their physical footprint across China. The country is accountable for an 18.8% share of total global luxury openings for year to date in 2020, far outstripping the previous three-year average of 6.4%. China has also reported a 64.7% increase in luxury store openings compared with 2019 levels already, becoming the only major market to report growth over this period.
“Many retailers have utilised this year to expand their presence in order to meet the demand for luxury products, particularly at a time when Chinese tourists are largely unable to travel long-haul to traditional retail destinations such as London, Paris, and Milan,” comments Nick Bradstreet, Savills Prime Global Retail team, Asia Pac. “Since lockdown demand for luxury goods across China has been somewhat fuelled by ‘revenge spending,’ with certain retailers seeing record post-lockdown sales. Hermès, for example, reported a record daily store turnover in its Guangzhou flagship on the day of reopening in April.”
In addition to the current global travel restrictions, the luxury industry has identified the Chinese consumer as the most active, with their spend on luxury goods looking to increase this year by up to 30% on 2019 levels, according to Boston Consulting Group. Bain further predicts that the Chinese will account for 50% of global spending on luxury goods by 2025.
On the other side of the world, Europe and the US continue to be impacted by a resurgence in Covid-19 cases, prolonged economic downturns, and job uncertainty and, as a result, the global luxury market could be set to contract by up to -45% YoY, according to Boston Consulting Group. “Ensuring that your brand has an excellent profile in China will therefore be a matter of survival for many luxury retailers,” adds Nick Bradstreet.
In terms of locality, the Greater Bay Area of China** has been particularly active in terms of openings since the easing of lockdown, with Savills confirming that this region has represented an 11.0% share of global openings this year to date.
“All luxury brands have an eye on the Greater Bay Area as an area of tremendous growth,” says Bradstreet. “This area already represents 11.6% of China’s total GDP and this is set to triple in the next 10 to 15 years as the Chinese Government targets the area to be a technology and financial powerhouse to rival California’s Silicon Valley by 2035.”
