Editor’s Note
As China’s luxury market cools, iconic brands like Tiffany & Co. are scaling back their physical presence, reflecting a broader industry adjustment to shifting consumer demand and economic headwinds. This strategic downsizing highlights the challenges facing high-end retailers in a key global market.
Amid a sluggish Chinese market, Tiffany & Co., the jewelry manufacturer under LVMH, is planning to halve the size of its Shanghai flagship store. (AFP)
With China’s economic weakness impacting global luxury brands, market sources report that Tiffany & Co. plans to reduce the size of its China flagship store by about half, from approximately 12,000 square feet. Analysts suggest that LVMH’s flagship store downsizing may signal a “potential domino effect,” and they will continue to monitor the impact on the luxury industry.
Informed sources stated that Tiffany held a high-profile ceremony at Shanghai’s Hong Kong Plaza at the end of 2019 to open a two-level mall there. However, the brand will now reduce the store’s floor area later this month and has requested a rent reduction. The landlord is currently in negotiations with potential new tenants.
In the first half of this year, revenue for LVMH’s watches and jewelry division fell by 3% compared to the previous year, making it one of the worst-performing segments, with recurring operating profit plunging by 19%. The report indicates that Tiffany’s scaling back in the Chinese market highlights the increasingly challenging business environment global luxury giants face in China, characterized by an economic slowdown and a depressed real estate market.
As Chinese shoppers become more price-sensitive, seeking bargains in gray markets or overseas (such as in Japan with its weak currency), it has led to a significant decline in sales for global premium brands, stifling growth and increasing pressure on profit margins.
Data compiled by Reuters shows that the European luxury stock index (STXLUXP) fell more than 3% on the 5th, hitting a new low since early August. Two major luxury giants, LVMH (LVMH.PA) and Hermès (HRMS.PA), fell by 3% and 6% respectively. As for Burberry, it was recently removed from the UK’s FTSE 100 index.