Vogue Business: Luxury retail in China braces for Covid-related closures

VOGUE BUSINESS | MALIHA SHOAIB

A rise in Covid-19 cases in Shanghai and across China could force luxury retailers into temporary closures. That’s already happened to Chanel and Louis Vuitton.

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The uptick of Covid cases in China may be small, but they are sufficient enough to present a prolonged period of uncertain trading for luxury brands operating stores across the country. Chanel and Louis Vuitton have confirmed to Vogue Business that they were already obliged to briefly close flagship stores in the high-profile Plaza 66 mall in Shanghai on 11 January and the morning of 12 January.

Chinese officials are taking no risks, not least with the nation’s New Year celebrations fast approaching and the Winter Olympics opening on 4 February. 

In a statement to Vogue Business, Chanel said: “In the current situation, Chanel places the highest priority on the health and safety of our people, which includes employees, trade partners and clients. We are in strict adherence to the guidance of local authorities and are working closely with them to assist all our Plaza 66 employees to get tested for Covid-19 and taking other necessary prevention actions.” Louis Vuitton also confirmed its Plaza 66 store closed during the same time frame.

Further disruption could impact brands operating in the world’s largest luxury market. Plaza 66 contains five floors of high-end brands and is home to many of Shanghai’s luxury flagship stores, including Louis Vuitton, Hermès, Cartier, Chanel, Dior and Prada. Over the past month, new Covid cases in Shanghai have increased and the city is reporting its first symptomatic cases. Local authorities have suspended flights and curbed tourist activity following evidence that a number of new cases were linked to overseas arrivals.

The luxury industry relies on China to drive a significant portion of sales. The country accounts for over a third of the global luxury market and is set to surpass the US as the world’s largest market by 2025, according to Euromonitor. Sales have been strong in recent months, with China reporting few cases of Covid to disrupt internal retail activity. However, now concerns are rising of a prolonged period of stop-start business. Ports and manufacturing hubs are also likely to face disruption if mass lockdowns continue.

Luxury brands should, at least, be more prepared for new lockdowns in China this time around, nearly two years into the pandemic, says luxury retail analyst Robert Burke. “Brands are not in shock or paralysed by this kind of news [anymore]. A year and a half ago they weren’t prepared. Now they know how to function in a limited way [with] a store closure and still do significant business.”

Chinese consumers’ ease with omnichannel shopping may also help. Young Chinese consumers are very accustomed to shopping via social media and e-commerce platforms, with online retail proving a key driver of the luxury market’s resilience.