Will Chengdu Become “Shanghai 2.0” for Luxury Brands?

Buzz is what brands try to obtain on social media. But as the online environment gets more crowded, brands are starting to focus on the traditional offline experiences that have now become vital in guiding traffic on social media.

When it comes to offline events, the top two most frequently picked Chinese cities are without a doubt Beijing and Shanghai. But did you notice that more and more luxury brands are holding offline events in Chengdu (成都)? We’re seeing an interesting trend of luxury brands now favoring Chengdu more than other developed cities like Shenzhen and Guangzhou.

In 2019, Hermès chose Chengdu for its first global fitness gym show, which is typically only exhibited in 2-3 cities every year. Dior also once premiered its male collection in the city, and Louis Vuitton even held one of its exhibitions exclusively in Chengdu.

According to the financial publication EastMoney (东方财富), the top 10 Chinese cities on the GDP ranking board in 2020 were Shanghai, Beijing, Shenzhen, Guangzhou, Chongqing (重庆), Suzhou (苏州), Chengdu, Hangzhou (杭州), Wuhan (武汉) and Nanjing (南京). Chengdu was only ranked 7th on the list, so why is it attractive for luxury brands? What makes this city so appealing that luxury brands would choose it over other “fancier” cities such as Shenzhen and Guangzhou for offline events?

Covid-19 has accelerated the growth of domestic luxury consumption in China. While the global transaction amount dropped 23% in 2020, China’s luxury consumption GREW by 48%. As a forerunner to recover economically from the pandemic, China is expected to become the most significant contributor to the worldwide luxury industry in 2025.

And more specifically, young Chinese consumers are the main population boosting luxury sales. Based on the research by DataQuest China, among 14 iconic luxury shopping malls in China, 25% of the consumers are between the ages of 19 and 24. Shoppers under the age of 34 make up 65% of the total consumer group, and they consume a whopping 47% of the luxury products in China.

Chengdu is not threatened by Covid as well. Quoted from the China Luxury Retail Report, the city’s sales of Louis Vuitton, Gucci and many other luxury brands in 2020 grew 130% compared to the same time back in 2019. Such performance has attracted top-tier brands to open their second or even third stores in Chengdu.

Chengdu is also home to many international brands’ “first stores”. From January to September 2019, four international brands opened their first global stores in this city, one had their first Asian store open, and 37 others chose to open their first Chinese store here.

The Hong Kong real estate company known for building luxury shopping malls, Taikoo Li, opened its first two malls in Beijing in 2008, followed by Chengdu in 2015. Six years later in 2021, Taikoo Li finally reached Shanghai, and soon thereafter attracted more than 150k people to flood in on a single day. But, even Shanghai was not Taikoo Li’s second choice, Chengdu was.

Actually, these two cities are performing well in terms of luxury consumption, especially after Covid. Let’s first take a closer look at Guangzhou’s high-end shopping mall Taikoo Hui.

Luxury sales growth at Guangzhou’s Taikoo Hui have been accelerating rapidly in recent years. Its year-on-year growth from 2018 to 2020 were 11%, 20%, 36%. But what was most shocking is its TREMENDOUS 169.6% growth in the first quarter of 2021. The astonishingly rapid luxury consumption growth in Guangzhou naturally makes Taikoo Hui one of the most promising malls in the Taikoo family.

As for Shenzhen, key shopping malls in the luxury industry are The Mixc Shopping Malls. There are two. One was built in 2004 in the Luohu District (罗湖区) and the other just opened in 2018 in the Nanshan District (南山区). (Side note: Thrilling news for Shenzhen’s fashion lovers! Chanel will finally open its first boutique in the city, 20 years after its first Chinese store opened in Beijing.)

Despite these two cities’ growth in luxury consumption , not many luxury offline events take place there. Prior to the outbreak of Covid, luxury consumers living in the south of China would shop in Hong Kong and Macau, where they could enjoy at least a 10% “discount” from not having to pay for custom fees. People used to joke that the time needed for Shenzhen residents to cross the borders into HK was not even long enough for a Beijing white-collar to go to work (Beijing’s rent is really high and most people live far away from the CBD, so they have to commute for a long time to the office).

Besides the proximity to tax-free areas, many Guangzhou residents are more willing to pay for practical things (especially food haha), making these two cities less of a focus for luxury brands.

But as travel restrictions stand between mainland China, HK, and Macau, the aforementioned reasons for an under-developed luxury market in Guangzhou and Shenzhen are fading. Though it will still take time for these two cities to cultivate more of a passion for luxury fashion, the accelerated growth in luxury consumption in these two cities already shows that brands should start focusing their attention there.

Residents of Chengdu are generally wealthy and have a propensity to purchase luxury products. Chengdu’s GDP ranked first within the Sichuan Province (四川省), with 1.77 trillion RMB in 2020.

The Hurun Wealth Report 2019 showed that among the 32k families that possessed over 10 million RMB in property, Chengdu’s families make up about 50%, making the city a popular hub for the wealthy.

A car dealership website Yiche (易车) also reported that Chengdu is among the top 3 cities for luxury car purchases of brands such as Maserati, Lamborghini, Benz, BMW, etc. And it is exactly this group of people who often turn out to be luxury fashion consumers.

Chengdu residents also uphold a lot of traditions while embracing modern lifestyles. Sylvia Au Yeung, the Vice President and Managing Director of Tiffany China, once said in an interview that Chengdu people were showing great interest in the brands’ background story, and that’s part of the reasons why Tiffany’s T, Keys, and Victoria collections were very popular in the city.

Luxury consumption is booming in Chengdu with people’s respect for luxury brands and passion for fashion.

Chengdu is located in a flatland. It has rivers running throughout and generally good weather, making it a perfect place to grow crops in Ancient China. Therefore, it was chosen by a few emperors to be the capital city for a few dynasties, and the birthplace of the Three Kingdoms culture.

Chengdu is also one of the most internationally represented cities in West China. The city has nearly 20 consulates, numbering just behind Shanghai and Guangzhou.

Real estate operator RET listed out 40 cities that carried the most commercial vitality in China. Shanghai and Beijing were ranked top 2 without doubt. And the third? Well, you guessed it! It was Chengdu, not Shenzhen or Guangzhou. The report also showed that Shenzhen people were more interested in purchasing consumer goods, while Guangzhou people were inclined to buy only entry-luxury products.

City Commercial Charm ranking board 2020 pointed out that Chengdu was the top city among new first-tier cities in China in terms of the density of commercial spots, the activity of city residents, and the variety of people’s living styles.

And that’s the end of our virtual tour of Chengdu today! Have you been to Chengdu? Do you like the city? What are your takes on it? Feel free to share this article and let us know what your thoughts are!