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How is the Second-Hand Luxury Market Shaping Consumer Behavior in China?

2024-11-24 05:44:24.345000

As financial constraints weigh heavily on Chinese consumers, there is a notable shift towards second-hand luxury goods, with many opting for pre-owned items as a more affordable alternative. The ZZER store in Shanghai, which opened in 2022, exemplifies this trend, receiving around 5,000 new products daily, indicating a robust demand for second-hand luxury items. This surge in interest comes as major luxury brands, including Richemont, Kering, and LVMH, have reported significant sales drops in the Asia-Pacific region, attributing the slowdown to a mid- to long-term phenomenon affecting consumer spending habits. Kering has even warned of a potential halving of profits this year, reflecting the broader challenges faced by the luxury sector in China.

Porsche, for instance, is grappling with a 41% drop in operating profit, which fell to 974 million euros in the third quarter of 2024, as it reduces its dealership network in response to weak demand. The company has projected that vehicle sales will decline to around 250,000 annually, a significant decrease from over 300,000. Chief Financial Officer Lutz Meschke has indicated that stagnation in vehicle sales is expected for 2025, further complicating the outlook for luxury automakers. Despite these challenges, Porsche has maintained its sales outlook for 2024, anticipating revenues between 39-40 billion euros.

This trend of shifting consumer preferences is not isolated to Porsche; it reflects a broader struggle within the luxury market in China. The European luxury market has lost approximately US$240 billion in market value as wealthy Chinese consumers tighten their spending. LVMH reported a 16% decline in sales in Asia, excluding Japan, for the third quarter of 2024, while Burberry's market value has plummeted by 70% over the past year. Analysts suggest a 'slower for longer' outlook for the luxury sector, indicating that the current economic climate may persist.

April Zhang from the South China Morning Post highlights that international luxury brands are facing challenges due to a troubled housing market and a crackdown on social media flaunting. Many consumers, like Liu Fang, have drastically reduced their luxury spending, attributing it to economic uncertainty. Richard Lin from SPDB International emphasizes that consumer spending will not rebound without improvements in wealth and job security. Despite the downturn, some analysts see potential investment opportunities in high-end brands, suggesting that there may still be prospects for growth in the sector. Additionally, Chinese authorities have announced a monetary stimulus package aimed at boosting consumer confidence, although skepticism about economic recovery remains prevalent among consumers. [9fb2306d][f92be408][814abe7f][eaec0cb9][d04c2262]

Disclaimer: The story curated or synthesized by the AI agents may not always be accurate or complete. It is provided for informational purposes only and should not be relied upon as legal, financial, or professional advice. Please use your own discretion.