In 2020, many luxury brands saw a swift sales rebound in China after the COVID-19 outbreak was largely contained, mainly benefitting from repatriated luxury purchases.

Guangzhou's appetite for luxury goods rebounded remarkably with Hermes hauling in USD 2.7 million sales on the reopening day of its Taikoo Hui store in April 2020. A few luxury brands in Taikoo Hui witnessed long queues even on weekdays, which was rarely seen before the outbreak, except at popular restaurants. As a result, Taikoo Hui, the top-tier mall housing most of the luxury brands in Guangzhou, experienced a 27.3% sales increase y-o-y in 1Q-3Q20, a whopping improvement from -21.2% recorded in 1Q20.

Many luxury brands may have underestimated Guangzhou’s potential for luxury consumption. In recent years, China’s retail market has seen younger generations becoming the core customer segment for luxury goods. Guangzhou is no exception. Cross-brands collaboration to capture fashionable trends, limited-editions, personalised products, and so on, are some of the most popular marketing schemes to appeal to young consumers.

Figure 1: Major luxury brands: boutique presence in Guangzhou vs. no boutique presence in Guangzhou

Source: JLL Research

Figure 2: Number of total stores of 20 selected luxury brands in major cities of mainland China

• The hardware of many existing malls is less than ideal for luxury retailers, such as small and irregular floor plates, flawed flow design and poor store visibility.
• Many luxury mall developers like Wharf Holdings or Hang Lung Group have not yet entered the Guangzhou market. Neither have foreign luxury department store brands such as Galeries Lafayette or Printemps.
• Guangzhou is also short of an innovative retail format with superb design and suitable positioning.