Luxury brands are shifting their focus towards China for new store openings, as Chinese consumers increasingly choose to shop in their own country rather than travel abroad. According to a study by Savills, 55% of new luxury store openings in 2021 took place in China. This is a significant shift considering that China accounted for 21% of global consumer expenditure on luxury goods in the same year. However, the recent surge in Covid-19 cases in China could potentially slow down the momentum of new store openings.
Aside from China, the Middle East is also experiencing a surge in luxury store openings, although it only accounts for 3% of all new openings worldwide. In Dubai, many luxury labels are already present through monobrand stores owned by local franchisees and partners. However, with recent changes in government policies, international brands are now seeking to establish a direct presence and regain full control over their stores.
Interestingly, luxury retail growth in China and the Middle East has come at the expense of the European market. In 2021, only 14% of luxury store openings worldwide were in Europe, compared to 35% in 2019. This decline can be attributed to the decrease in tourist expenditure caused by the pandemic, as well as the maturity of the European luxury market.
While international travel is not expected to fully recover before 2025, Savills predicts a faster recovery in Europe and North America, which will subsequently boost consumer demand for luxury brands. Towards the end of 2021, North America saw an increase in store openings, indicating the possibility of a new wave of retail projects in 2022. Notably, cities like New York and Los Angeles remained popular, but second-tier cities like Dallas and Houston also saw significant store openings.
The luxury retail market is currently experiencing a trend towards greater concentration, with the three major luxury groups – LVMH, Kering, and Richemont – accounting for 41% of all new store openings in 2021. This dominance is expected to further increase as these groups continue to engage in mergers and acquisitions.
Looking ahead, Savills maintains a cautious outlook for the rest of 2022. The impact of recent lockdowns in China, along with rising inflation and geopolitical uncertainty, could potentially deter investors from acquiring new stores. However, Savills remains positive about the medium-term outlook for the luxury retail market.
Useful Links:
1. Why China is Becoming Luxury Brands’ Fastest-Growing Market
2. The Middle East Luxury Market: A Safe Bet for Brands?
