Opinion

When buying fever subsides

Cristina D’Agostino

By Cristina D’Agostino23 août 2022

Two years after the wave of buying fever that swept through luxury consumers at the first signs of an epidemic low, the expected “revenge buying” did not occur in China this summer. In the second quarter, the country recorded growth of 0.4% over one year, a significant drop compared to the first quarter, which recorded an increase of +4.8%.

It is therefore difficult for China to hope to reach its growth target of 5.5% in 2022. The consequences? A decline in sales in shops and a drastic drop in prices on the secondary market. In Asia as elsewhere, the most coveted luxury watches have seen their value halved, even though they are still priced above new. As the ultimate symbol, the safe-haven value of a Hermès bag has also contracted by 20%, according to the specialist media Jing Daily. Geopolitical uncertainties, inflation around the world and the fall of cryptocurrencies are directly affecting consumer sentiment, which is less inclined to spend lavishly, nor to accept the high and often overpriced price of a luxury good.

Since November 2021, the most desirable luxury brands had massively taken advantage of their dominant position to use the leverage of "pricing power", and increase the price of some of their items by 20% to 40%. The buying frenzy and the "proud of missing out" reflex so well maintained by the brands with ultra-exclusive capsule collections are now calming down. The demand for justification of these high prices is now pressing on the consumers’ side, who are more careful with their spending and demand a good price-quality ratio. Even the icon has a price ceiling beyond which it is dangerous to venture.

It will therefore be interesting to observe the next product launches in the second half of the year and at what price. It is a safe bet that brands will rebalance their range with more sober products, less complex to make, in order to maintain their margins.

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