Lower-tier cities brighten luxury market

As luxury brands penetrate China's lower-tier cities, the market for such goods is acquiring new geographical dimensions, observers said.

Even though Shanghai and Beijing continue to be the top market segments, emerging cities such as Chengdu in Sichuan province in Southwest China and Hangzhou in Zhejiang province in East China are grabbing attention, narrowing the gap between them and first-tier cities, they said.

According to the China Urban International Luxury Brand Index compiled by the Yunhe City Research Institute, Shanghai tops the ranking. It is home to the most number of luxury stores, followed by Beijing and Chengdu.

Other cities in the Top 10 list are the two municipalities of Tianjin and Chongqing, and Hangzhou in Zhejiang province, Xi'an in Shaanxi province, Shenzhen in Guangdong province, Shenyang in Liaoning province and Wuhan in Hubei province.

The number of stores of luxury brands in those cities accounts for nearly 54 percent of the country's total.

The Yangtze River Delta region, a city cluster, houses the most — 26.8 percent — of luxury brands among the Top 30.

In addition to Shanghai, Nanjing, capital of Jiangsu province, has the widest coverage of luxury brands, despite the fact that each brand has only one store in the city.

In the southwestern region, luxury brand stores are gathered mostly in Chengdu and Chongqing, accounting for nearly 10 percent of the country's total.

Xi'an has more than 4 percent of luxury stores in the country, slightly higher than that in the entire Shandong province.

Chengdu, which boasts a vibrant shopping and lifestyle scene and the status of a regional economic powerhouse, has caught the fancy of executives of luxury brands.

In June, Bernard Arnault, chairman and CEO of LVMH and the world's second-richest person after Tesla chief Elon Musk, visited China. He was spotted at several shopping centers in Beijing, Shanghai and Chengdu, and video clips of his visits went viral on Chinese social media platforms.

The French entrepreneur visited several brand stores owned by LVMH, including Christian Dior and Bulgari, at Sino-Ocean Taikoo Li and SKP malls in Chengdu.

Last year, Louis Vuitton opened Louis Vuitton Maison store and its first restaurant The Hall at Taikoo Li, and a boutique store at SKP in Chengdu, mirroring the surge in consumption in the region.

Earlier this year, Francois Henri Pinault, chairman and CEO of Kering, also visited Chengdu, Nanjing, Shanghai and Beijing.

According to a UBS report titled"2023 Outlook: The Year of the Chinese Consumer" released in January, a stronger return of Chinese luxury consumers is expected this year, which could drive up earnings and valuations of global luxury houses.

The luxury store layout in the market reflects the location of high-end commercial centers or shopping malls in Chinese cities, market watchers said.

Shanghai has the most number of high-end malls and shopping centers including IFC and Taikoo Li, while Beijing is home to SKP, China World Mall and WF Central.

Zhengzhou, capital of Henan province in Central China, has Dennis Department Store that houses a high-end shopping center where Dior, Balenciaga and Thom Browne have set up pop-up stores.

In April, Wushang Group, the Wuhan, Hubei province-based retailer and shopping mall operator, introduced the Wushang's mall in Nanchang, Jiangxi province, which is renowned for its porcelain ware and rich mineral resources.

Nanchang's first luxury shopping center, Wushang's attracted more than 900,000 shoppers during the May Day holiday, with total spending exceeding 70 million yuan ($10.11 million). The mall is expected to house luxury brands such as Louis Vuitton, Gucci, Burberry and Versace.