💎 LUXURY BRANDS SET THEIR SIGHTS ON THE UNITED STATES

Is the future of luxury fashion firmly intertwined with American shoppers? Some industry experts certainly believe so. In their quest for increased revenue and market growth, top luxury brands have been significantly expanding their presence in the United States. New boutiques in fresh cities, revamped larger stores, and high-profile U.S. events all indicate a heightened interest and investment in the American market. 🌟🛍️

A recent article by Business of Fashion suggests that luxury brands view this expansion as an opportunity, given that "American consumers are flexing their spending power." Much of the U.S. economy has rebounded quite impressively, at least in comparison to other nations. Stimulus checks have arguably fueled some of the fashion spending frenzy. Moreover, with the stock market bouncing back, the affluent have grown even wealthier. In essence, despite grappling with high inflation, luxury retailers anticipate a larger pool of potential consumers. 💰💼

The luxury goods sector, as a whole, weathered the global pandemic rather well. After an initial setback, it not only rebounded to pre-COVID-19 levels in 2019 but is also on course for sustained growth. Surprisingly, price increases, supply shortages, and restricted travel didn't deter demand, at least not in the United States and China. However, the impact of recent global events, such as the conflict in Ukraine, is yet to fully materialize. 🌐🌍

To be clear, luxury brands have never ignored the U.S. luxury market. Icons like Hermès, Chanel, and Louis Vuitton have enjoyed popularity here for years, maintaining boutiques in major cities. Recently, however, many have extended their reach to smaller markets, including suburban areas. For instance, Hermès has opened or planned boutiques in Princeton, New Jersey; Troy, Michigan; and Garden City, New York, to name a few. The target markets have even expanded to encompass southern cities like Charleston, South Carolina, and Nashville, Tennessee. 🌆👜

One could argue that the pandemic played a part in this expansion as numerous Americans relocated during these two years. Nevertheless, as the urgency of the pandemic diminishes, many Americans are returning to big cities. 🌃

Read: Birkins in the ‘Burbs

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In recent years, however, China has been the primary driver of luxury revenue growth. The combination of the world's largest population and a penchant for luxury was a lucrative partnership for luxury brands. This trend continued during the pandemic, as Chinese consumers shifted their buying habits online and within their own country due to store closures and travel restrictions. A prime example is Hermès, which witnessed a remarkable 65% revenue increase in Asia (excluding Japan) in 2021 compared to 2019, with an impressive 44.6% rise over 2020. It's important to note that Asia experienced the health and economic impacts of COVID-19 well before the United States. 🇨🇳

In contrast, the United States saw revenue growth of 24.4% over 2019. While impressive, it didn't quite reach the same level as China.

Image Credit: Vogue Business, Interbrand

Moreover, China accounts for a significantly larger share of revenues than the Americas (or any other region). Take Hermès, for example: from 2018 to 2021, the geographical area of Asia (excluding Japan) consistently represented more than twice the market share of the Americas. In 2018, Asia (excluding Japan) held a 36% market share, while the Americas accounted for 17.7%. In 2021, those figures were 47.3% and 16%, respectively. 🌏🌎

So, why this renewed focus on the United States? Economists point to the slowdown in GDP growth in China. Additionally, regional lockdowns in China, which have affected consumption, have also played a role. China's government is actively discouraging luxury consumerism with the "Common Prosperity Policy" aimed at narrowing the wealth gap. This policy restricts displays of wealth on social media, leading to content censorship. 😶🇨🇳

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Furthermore, younger Chinese consumers are prioritizing different shopping experiences. They are less inclined to chase after the latest shiny objects and are showing a growing interest in vintage and unique items. Despite historical taboos surrounding secondhand goods and superstitions, the resale market in China is on the rise. ♻️🎁

All in all, economists and luxury brands are acknowledging the possibility of a contraction in the once-expansive Chinese luxury market. With affluent Americans eager to shop and armed with ample funds, certain luxury brands see the United States as a fertile ground for growth—provided they can keep up with the surging demand. 🛒💎