China’s economy continues to stagnate, leading to a decrease in the purchasing power of Chinese citizens and a consequent decline in sales of luxury goods in the country. Amid this trend, luxury jewelry brand Bvlgari, a subsidiary of LVMH, has shifted its focus to the Indian market in an effort to offset the impact of diminishing demand for luxury goods in China.
According to a report by Bloomberg on November 30th, Bvlgari’s CEO Jean-Christophe Babin stated in an interview with Bloomberg TV that the brand is expanding its business in India to capitalize on the country’s robust growth and favorable demographic structure.
Bvlgari’s official website lists 13 boutique stores or authorized retailers in India, signaling the brand’s commitment to establishing a presence in the Indian luxury market. Babin commented that they anticipate a surge in luxury goods in the coming months or years, with India potentially emerging among the top five to eight global markets, if not in the top three.
A report by HSBC Bank’s “Global Entrepreneurial Wealth Report 2024” indicates that affluent individuals in India are increasingly investing their wealth in luxury real estate, luxury goods, and extravagant experiences. Despite geopolitical uncertainties and global economic headwinds, Indian entrepreneurs remain optimistic about the domestic market outlook, foreseeing continued growth in personal wealth.
The report highlights that 61% of wealthy Indian entrepreneurs allocate their wealth towards real estate for personal use, higher than the global average of 51%. Moreover, Indians are more inclined to spend on luxury goods (56%) and luxurious experiences (44%) compared to the global averages of 40% and 35% respectively.
On the other hand, China is grappling with an unresolved real estate crisis, indicating a prolonged economic downturn. European luxury firms like LVMH Moet Hennessy Louis Vuitton SE and Kering Group are facing challenges in the Chinese market.
LVMH Group reported a 3% decline in third-quarter sales on October 15th, falling below expectations and marking the first quarterly sales drop since the outbreak of the pandemic. The fashion and leather goods division, which includes Louis Vuitton and Dior brands, experienced a 5% decrease in sales, significantly lower than the anticipated 4% growth and the first decline since 2020.
Luxury powerhouse Kering Group warned of a potential drop in annual profits to the lowest levels since 2016, attributing the downturn to weak demand in China hindering the recovery of its flagship brand Gucci. In the third quarter, revenue from Chinese customers for the Kering Group declined by approximately 35%.
Despite the slowdown in the luxury goods industry, Babin downplayed concerns, suggesting that the relatively lackluster performance this year was partly due to the unusually strong demand in 2023, fueled by increased savings during the Covid-19 lockdown period.