Written by Casey Hall
SHANGHAI (Reuters) – China’s second-hand and gray market for luxury goods is booming, with soaring prices for luxury brands due to the economic downturn as some shoppers look for ways to buy cheaper, and LVMH There are growing concerns about this.
LVMH, the world’s largest luxury goods group, reported a 3% drop in quarterly sales last week, the first quarterly sales decline since the pandemic that was weaker than expected as demand fell in China and Japan.
Italy’s Salvatore Ferragamo also reported a drop in quarterly sales due to slowing demand from China.
“The problem is that as long as there is a price differential in China (between China and other countries), price-sensitive consumers may flow into the gray market,” said Max Pierrot, CEO of Luxury Intelligence. That’s what I mean.” Re-Hub, a consultancy that tracks luxury goods purchases on China’s gray market;
This market, estimated to be worth $57 billion a year, has been driven by the rise of platforms such as DeWu, where luxury goods, often sourced overseas, are sold at 20% to more than 50% off Chinese prices. It has accelerated in recent years. Flagship store.
Re-Hub estimates that sales of 48 brands on DeWu rose 19% year-on-year in the second quarter to more than 7 billion yuan ($984.4 million).
China’s retail sales, a proxy for consumption, grew subduedly at 3.2% in September, but the slump is due to a decline in global luxury goods sales, as China accounts for about 25% of the sector’s global sales. This is a bad sign for the majors.
Growing consumer interest in both the second-hand and gray markets is creating headaches for luxury brands trying to protect sales in China.
“The rising prices of luxury brands is definitely one of the reasons why more consumers are turning to the secondary market,” said Yi Kejie, a 28-year-old marketing content manager and luxury goods consumer. speak
Oversupply of used goods
After reporting third-quarter sales, executives at LVMH, home of Louis Vuitton and Dior, defended the luxury focus of their brands and said they had no plans to introduce new, more affordable products. .
They also pointed out that their brands have tight control over distribution, which reduces their exposure to the parallel market, and said they have no intention of getting involved in the second-hand market.
But China’s second-hand market has also been stimulated by the country’s economic slowdown, as more people look to make cash with their luxury collections.
Zhu Tainiqi, founder of second-hand luxury goods market ZZER, said: “The number of sellers is growing very rapidly, most of them selling luxury goods for the first time. “There is,” he says.
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As a result, the average purchase price has fallen from last year, and the average order value has also decreased by about 10%, Zhu said, adding that brands such as Louis Vuitton and Coach are still selling quickly.
China’s used luxury goods market, which includes platforms such as Plum, ZZER and Alibaba’s Xianyu, has grown at a compound annual growth rate of more than 30% since 2020, according to estimates from consultancy iResearch. I personally think this year the entire Chinese sector is likely to grow by about 20% this year.
Zhu said some consumers who are turning to second-hand and gray market products will still buy new luxury goods and shift only a portion of their spending to those markets.
“If the deal is really attractive and they trust us and realize that all our products are certified, then they will buy it,” he said.
(1 dollar = 7.1111 Chinese Yuan)
(This story has been corrected to say quarterly revenue, not quarterly profit, and LVMH in paragraph 2)
(Reporting by Casey Hall; Editing by Miyoung Kim, Raju Gopalakrishnan)
