London’s luxury retailers are optimistic before Chinese tourists return

Bond Street is popular with fans of luxury brands (Getty Images)

Bond Street is popular with fans of luxury brands (Getty Images)

This Sunday will be a celebratory mood as tens of thousands of visitors head to the West End and enjoy the capital’s Lunar New Year celebrations in full swing. The hugely popular festival has shrunk in the wake of the pandemic, but now that the lockdown rules have been lifted, a party atmosphere is expected in Trafalgar Square and Chinatown, with live music, food stalls and a lively parade.

Retail and restaurant patrons in central London will be among those excited by the event to celebrate the start of the Year of the Rabbit as the footsteps of domestic and some overseas shoppers instantly increase.

But in the longer term, brands hope that in 2023 higher-spending Chinese tourists are returning to region one, and the UK will get its share of the impact of China’s reopening, which analysts call the “big bang.”

“Chinese authorities are reopening both inbound and outbound travel at the same time — faster and in a “big bang” fashion,” Luca Solca, a senior research analyst at Bernstein, said in a note this month. He added that this is “great news for luxury goods” as Chinese consumers are returning to stores in China and returning to Europe.

A number of premium retailers are feeling optimistic about London trade in 2023 after good performance last year, and in many cases significantly re-increased business rates starting this April. It could also help them get more customers from the world’s second largest economy.

Retail real estate agents are in good demand for stores in the best locations. Paul Souber of Colliers says: “With the return of Chinese shoppers, we expect more high-end brands to enter the capital’s upscale districts.” He is aware of at least 50 international and domestic companies that want to open for the first time or more stores in the first region in the next 12 months. Cushman & Wakefield’s Peter Mace says stores are reporting good trade numbers: “This trend should continue into 2023 with very good requirements for both Bond Street and Sloane Street.”

When looking at the trade during the Chinese New Year celebrations, brands like Burberry and Radley London are among the brands that sell special collections that include socks bags and wallets with pictures of rabbits on them. These products could be popular in London as well as the rest of the world this month.

Jackie Hay, Radley’s chief product officer, says customers have been returning to the firm’s UK and international stores in greater numbers lately. “Every year we sell a special collection for this calendar event, and this year we hope our moon collection will be the most popular to date.”

However, companies may be waiting for a while for Chinese tourists to flock here. While overseas travel will become easier for Chinese citizens, ForwardKeys, which analyzes flight booking data, does not expect a boom in outbound tourism. He points out that ticket prices remain high and current scheduled international flight capacity is only 10% of 2019 level.

Helen Brocklebank, CEO of luxury goods trading organization Walpole, said: “The timing of China’s relaxation of zero Covid rules ahead of Lunar New Year is undoubtedly a source of optimism for British luxury brands. This is due to the second half of the year, when we predict the most significant increase in Chinese visitors. In preparation, it is an important opportunity to reconnect with Chinese customers in-store or – given the lack of direct flights from mainland China to London – online.”

But Brocklebank warns that London is at a disadvantage vis-à-vis rival European cities due to the loss of tax-free shopping there, which may send some prospective buyers to Paris and Milan instead.

The capital’s luxury sector may not yet have the big impact it could want from a China reopening, but there are reasons for optimism.

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