Olympics fever drives sportswear in China

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Key takeaways:

• Luxury consumers in China remain cautious in their Q2 spending, with concerns around job security rising.
• International travel begins to slow, while Asia-based travel retail sees an uplift.
• Brand-led online commerce is carried by innovation from LVMH, Kering and Capri Holdings, as international multi-brand retailers struggle to compete with store-based luxury.
• Nike leads in sportswear purchases as Olympics fever takes hold.

Contrary to previous predictions of a mild quarterly uplift, higher-tier consumers (spending over RMB 52,000, or £5,660) continue to creep into the lower tier (spending less than RMB 22,499, or £2,450) in Q2 2024. Over three-fifths of respondents (62 per cent) landed in the lower tier for luxury purchases this quarter, now tracking 17 percentage points above where it was in Q2 2023. Middle and higher-tier spending also continues its downward trajectory, as both segments dip to their lowest levels within the research period at 28 per cent and 11 per cent, respectively. “We remain cautious about the state of the Chinese consumer in the short term, as weak macro indicators should continue to be a headwind for luxury spending,” says Carole Madjo, head of European luxury goods research at Barclays.

While previous quarters have forecasted a more positive future outlook, it seems consumers are less confident in their luxury spend for the upcoming Q3. Just 6 per cent of shoppers are expecting to spend RMB 52,500 (£5,720) or more, which is 15 per cent less than 2023.

The IMF revised their forecast for China’s GDP growth in 2024 to 5 per cent (up from 4.6 per cent), following better than expected growth in Q1, though consumers remain cautious. Continued consumer frugality is not unexpected. Significantly more respondents are using savings accounts at 64 per cent compared to 54 per cent in Q2 2023, with a particular increase among aspirational spenders aged 25 to 34 — from 55 per cent to 67 per cent year-on-year — a pivotal force in shaping the local luxury market. Adding further caution, job security anxieties have witnessed their largest annual increase, as a quarter of luxury consumers express concern about losing their jobs.

Chinese travel has witnessed some turbulence in the last year. Its status as the most-anticipated expenditure over the next 12 months is threatened by an 8 per cent dip in international travel plans for Q2 2024, down from 67 per cent in 2023. Meanwhile, 8 per cent of consumers are without travel plans (international or domestic) in the third quarter of 2024, compared to just 2 per cent in Q3 2023.

International travel outside of Asia remains the worst impacted, while domestic travel within Mainland China and Asia shows signs of stability. Domestic travel within the mainland is the most popular form of travel for making luxury purchases away from home, though destinations such as Japan and South Korea continue to boom as retail hubs, having witnessed the biggest combined growth from Q3 2023 to Q2 2024 of 7 percentage points.

Local resonance offers a life raft for luxury

Chanel remains the most-purchased brand in China, followed closely by Dior in second place, despite both having undergone purchase rate declines since this time last year (down 9 and 8 per cent, respectively). Prada and Louis Vuitton are the only two brands within the top 10 to defy the declining consumer spend, with 1 and 2 per cent respective increases in the last year.

Hard luxury player Bulgari enters the ranking for the first time during the research period as the 10th most-purchased brand alongside Cartier and Canada Goose (all in 10th place). Outside of the top 10, Mulberry, Loewe and Brunello Cucinelli see the largest annual rises in consumer spend (5 per cent, 3 per cent and 2 per cent, respectively). Overall, just 40 per cent of brands witnessed annual growth in the number of consumers purchasing in the second quarter of 2024.

Brand movement this quarter reflects the varying success of strategies implemented in response to a weakening consumer spend. Luxury conglomerate LVMH has introduced additional measures to personalise the online consumer journey using artificial intelligence in their partnership with Alibaba. Other brands, including Kering-owned Balenciaga, Burberry and Capri Holdings’s Versace, have taken to e-commerce platforms to slash prices by up to 50 per cent and incentivise spend.

High-end e-tailer Yoox Net-a-Porter recently announced its decision to exit from China, referencing the competitive nature of the Chinese e-commerce landscape as a blocker to capturing luxury spend. Concerning discovery platforms in China, social media is the leading online channel for both brand and product discovery, according to those surveyed by Vogue Business.

In line with recent Xiaohongshu reporting, the relevance of digital platforms cuts across age groups, with almost half (49 per cent) of Gen X consumers (aged 35 to 44) affirming social media as a channel for discovery compared to 44 per cent of Gen Z (aged 18 to 24). Physical in-store purchases, however, continue to dominate as the preferred place of purchase for luxury shoppers in China, at 42 per cent in Q2. Meanwhile, year-on-year change in online shopping remains stable at 29 per cent.

To help mitigate the impact of China’s shifting consumer shopping habits, strategies must combine digital engagement with localised in-person approaches tailored to the domestic market. Resilient heritage house Hermès, for instance, recently collaborated with Chinese artist Song Dong on an in-store window display at its Shanghai boutique, illustrating the effectiveness of personalised offline engagements.

Jewellery overtakes casual footwear this quarter, regaining its status as the most-purchased luxury category. Hard luxury has seen a decline overall, however, dropping 8 percentage points in jewellery and 4 percentage points in watches, as spending power wanes. Small leather goods continue to excel, achieving their highest purchase rate since Q1 2023 at 38 per cent.

Handbags are set to return as the second most-purchased category in Q3, with 35 per cent of respondents expecting to make purchases.

Olympics fever set to further boost China’s sportswear market

Casual footwear has seen a consistently strong performance since Q1 2023, being the second or most-purchased item each quarter. Correlating with the rise in outerwear across China, research into local digital trends highlight the relevance of micro-trends such as ‘gorpcore’, ‘urbancore’ and ‘cosy athleisure’ in boosting purchases. According to data from the China General Administration of Sports, the scale of China’s sports industry grew 50 per cent in a five-year period to RMB 3.3 trillion (£360 billion) in 2022.

Sports brands remain the most-purchased across casual footwear and sportswear, with Nike (58 per cent), Adidas (54 per cent) and Puma (31 per cent) leading the way. Sixty-one per cent of Chinese luxury consumers are driven by brand name, followed closely by fashion (59 per cent) and exclusivity (41 per cent), reinforcing the potential of luxury disruptors like quarterly favourite Dior (17 per cent).

High-end tie-ups with technical sportswear brands are becoming increasingly common. Loewe, Cecilie Bahnsen and Maison Margiela have collaborated with On Running, Asics and Salomon, respectively, carving out the power collab that emerges when luxury and sports collide. And with the ‘luxury shame’ trend growing among aspirational middle-income consumers, more understated and lower-priced sportswear items could be just the ticket for houses feeling the slump.

While the demand for luxury sportswear is apparent, it remains a highly competitive market. IMD reports show that international sportswear leaders face mounting challenges in China from the rise of Guochao (translating to ‘national wave’), which favours local brands like Anta and Li-Ning.

Research conducted by Vogue Business in China offers a bright spot, however. Almost three-quarters (72 per cent) of Chinese shoppers think Olympic-related campaigns will increase their preference towards sports giants. The upcoming Paris games offer a strategic opportunity for global players to connect with Chinese consumers through storytelling and drive desired quarterly spending spikes by engaging discount-fatigued shoppers.

Boilerplate: *Vogue Business surveyed 532 luxury consumers in China, aged 18 to 64 in March 2023, 502 respondents in June 2023, 506 respondents in September 2023 and 506 respondents in December 2023, 503 in March 2024 and 500 in June 2023. Consumers were split by natural fallout across gender and age group (18 to 24, 25 to 34, 35 to 44, 45 to 54, and 55 to 64). Respondents were luxury shoppers with a minimum spend of RMB 1,000 (£109) on a single item or a total spend of RMB 8,500 (£923) over the last 12 months. Respondents were asked about their luxury shopping habits, spending and travel, as well as their purchases in sportswear. This is the sixth edition of an ongoing quarterly study of Chinese luxury consumers in partnership with Barclays Research.

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