SHANGHAI:
Louis Vuitton’s latest Shanghai store is not your average luxury flagship. The 30-metre-high, ship-shaped store, The Louis, is billed as an experience, and houses an exhibition space and cafe in Shanghai’s downtown Nanjing Road shopping strip.
The Louis, which had a grand opening on Thursday, will undoubtedly draw crowds eager to post pictures to social media of its gleaming facade and the photo-ready exhibits inside. But LVMH-owned Louis Vuitton will also be hoping it can stimulate sales among Chinese consumers whose spending on luxury goods has slowed.
LVMH’s business strategy aligns with a broader shift among luxury goods retailers from a transactional model – where a shop merely sells goods to customers – to enticing customers with “experiences” that ultimately spur growth.
The stakes are high for the luxury brands, which for years have relied on brisk sales in China to fuel their global growth, and ambitions, but are now facing a slowdown in demand in the world’s second-biggest economy.
The size of the Chinese market declined more than 18 per cent last year to around 350 billion yuan ($48.80 billion) and sales are on track for a flat performance in 2025, according to estimates from consultancy Bain.
Zino Helmlinger, head of China retail at real estate service provider CRBE, acknowledges that the luxury segment as a whole in China has taken “a hit” recently, though he believes the slowdown was expected.
“If you look at the megastars – I mean LVMH, Kering, Richemont, Hermès – they almost tripled their profit within five years,” he said. “At some point, there is some counterbalancing, there is only so much you can grow, only so much you can generate.”
In the first quarter, LVMH’s revenue in the region that includes China fell 11 per cent on an organic basis – the Asia-Pacific excluding Japan accounts for 30 per cent of the group’s total sales.
Chinese consumers, hard hit by broader economic uncertainty and a prolonged property market downturn, have tightened spending on discretionary purchases – luxury branded handbags among them.
Wall Street extended its rally on Friday, sending the S&P 500 and Nasdaq to all-time closing highs — with each adding half a per cent – while the Dow climbed one percent.
Shanghai native Natalie Chen, 31, says she already owns enough “stuff” and has redirected a significant portion of the funds she once used for luxury goods to travel.
“Truthfully speaking, I don’t feel that buying another bag will improve my life,” she said, though she has already visited a new restaurant opened by Prada in Shanghai and intends to check out Louis Vuitton’s new cafe concept with girlfriends.
“It brings a different kind of feeling than just [shopping] in a mall,” Chen said, though she was unsure the ship-shaped store would lead her to make any purchases outside of coffee and cake.
Still, the luxury brands are sensing a longer term opportunity to pump-prime sales.
While appetite for personal luxury goods in China and around the world is declining, hurt by economic pressures and price fatigue, sales rates of “experiential goods” are rising, according to Bain, which highlighted a surge in personalised luxury hospitality experiences and rising fine dining sales in its spring luxury report.
In 2024, for example, the overall personal luxury goods market worldwide fell 1 to 3 per cent even as experiential luxury spending rose 5 per cent, Bain said. Reuters
