CHINA – China’s second-hand and grey markets for luxury goods are booming, as price hikes from luxury brands in a weak economy are prompting some shoppers to look for cheaper ways to buy them, deepening concerns for the likes of LVMH (LVMH.PA), opens new tab. LVMH, the world’s biggest luxury group, reported a 3% fall in quarterly sales last week, undershooting estimates in its first decline in quarterly sales since the pandemic as demand in China and Japan weakened.
Italy’s Salvatore Ferragamo (SFER.MI), opens new tab also reported a fall in quarterly revenue, hit by a slowdown in demand from China. “The elephant in the room is that, in China, as long as price gaps (between China and other countries) exist, there is the opportunity for price sensitive consumers to go to the grey market,” said Max Piero, CEO of luxury intelligence consultancy Re-Hub, which tracks grey market luxury purchases in China.
That market, estimated to be worth $57 billion a year, has been fuelled in recent years by the rise of platforms such as DeWu, where luxury products, often sourced overseas, are sold at discounts from 20% to over 50% to prices at Chinese flagship stores. Re-Hub estimates that sales across 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 gauge of consumption, grew a subdued 3.2% in September and the weakness is a bad sign for global luxury giants as China accounts for around 25% of worldwide revenues for the sector.
Growing consumer interest in both the second-hand and grey markets is adding a headache to top-end brands seeking to defend their sales in China. “The rising prices of those luxury brands is definitely one of the reasons that more and more consumers are turning to the secondary market,” said Yi Kejie, a 28-year-old marketing content manager and luxury consumer. (Reuters)…[+]