Feb.8 (NBD) -- The news of a potential 8%-20% price hike of LV products worldwide on Feb 18 sparked a shopping frenzy in cities across China. Long queues formed outside LV stores, with shoppers waiting up to an hour to get in. Popular items were sold out quickly.

Photo/App screenshot

Despite that LV store salespersons and customer service denied any knowledge of the price hike, the enthusiasm of shoppers was not dampened.

On February 7th, an LV salesperson told NBD that customers still had to queue up for certain periods of time.

The pandemic has made people more rational and prudent with their spending. So why did a rumor of a price hike cause such a buying spree?

"It has to do with the customer base and their spending habits," said Wang Tianchi, CEO of second-hand luxury goods dealer iSheyipai, in an interview with NBD. During the pandemic, many high-net-worth individuals had no place to go and used some of their entertainment and travel budgets on luxury goods, Wang added.

Photo/Du Wei (NBD)

"The pandemic has caused a change in the customer structure -- the middle and low-income customer groups is shrinking, while the ultra-high-net-worth group is expanding. Under the US Federal Reserve's monetary easing policy, the assets of high-net-worth individuals in the US have appreciated significantly, making them more willing to spend more money on luxury goods."

The wealthiest 2% of global consumers accounted for 40% of luxury spending in 2022, compared with 35% in 2009, according to analysts at Bain & Co. And these ultra-wealthy individuals will likely keep on spending in times of economic hardship. China's luxury market typically attracts a high concentration of VICs, and this trend expanded in 2022.

NBD noticed that the battle for the Chinese luxury market has quietly begun. Shortly after the 2023 Chinese Lunar New Year, François-Henri Pinault, chairman and CEO of Gucci's parent company Kering, started his Chinese tour with a group of senior managers. Besides, executives from luxury groups such as LVMH and Cartier's parent company Richemont will also visit China.

"The visit of luxury executives undoubtedly shows their confidence in the development of the domestic luxury consumption market. In the long run, the potential of domestic consumption will be further released and China will gradually become the engine of global consumption, as well as the largest luxury consumption market in the world," Wang Tianchi told NBD.