Exclusive analysis of China's macroeconomic environment
and monthly movements in the luxury market
作者｜Jing Daily、高峰 编辑｜Jingyi Li
Image courtesy of Chloé
The Jing Daily KraneShares China & Global Luxury Business Index (the "China & Global Luxury Business Index" or the "Index") combines Jing Daily's on-the-ground insights with KraneShares' investment expertise to track the global market performance of the luxury industry through current news, stock prices, and stock market data based on Chinese consumer interest. Exclusive reports from journalists, as well as the luxury industry as a whole.
As the demand for travel from Chinese tourists grows, global cruise operators are facing new opportunities for expansion and revenue.
According to research by consulting firm Spherical Insights & Consulting, the global cruise travel market is expected to expand from $7.4 billion in 2023 to $22.6 billion in 2033, growing at a CAGR of 11.8%. Currently, the Caribbean remains the world's leading cruise destination, accounting for 34.4% of all cruise deployments; Europe is the second most popular region with 28.4%; The Mediterranean accounted for 17.3%. In addition, Asia also contributes significantly, accounting for 9.2% of global cruise passenger traffic, of which China alone accounts for 4.9%.
This year's search data around the Chinese New Year reflects the growing demand for cruise travel among Chinese consumers. According to travel booking platform Fliggy, bookings for domestic and international cruises during the Spring Festival holiday increased by 445% year-on-year. During the eight-day holiday, Shanghai handled the inspection of four inbound and outbound cruise ships, with more than 21,200 people entering and leaving the country, an increase of nearly 22% month-on-month.
According to the Piraeus Port Authority in Greece, Chinese tourists are a group that cannot be ignored, although the proportion of Chinese tourists in the total number of cruise ship tourists in Europe is still small compared to European and North American tourists. For example, for a week-long trip to Europe, the typical budget for a Chinese cruise passenger is around €10,000, with 45% of them under the age of 40, compared to 31% in the United States.
Chinese tourists are a group that cannot be ignored among European cruise tourists.
Image source: MSC
At the same time, China's domestic cruise industry is growing and has become a major competitor to international cruise operators in the Asia-Pacific region. The cruise industry in the Asia-Pacific region, with China at its core, is expected to be the main driver of passenger traffic growth over the next five years, accounting for 17.5% of global passenger traffic by 2027, up from 5.7% in 2019.
China's domestic cruise industry has gone from almost non-existent to a multibillion-dollar giant in a matter of years, a growth driven in large part by the country's nascent cruise industry. Earlier this year, China's first domestically built cruise ship, the Adora Magic City owned by CSSC Carnival Cruise Line Co., Ltd., a joint venture between China State Shipbuilding Group and Carnival Group, saw strong demand during the Lunar New Year period. With a gross tonnage of approximately 135,500 tons, the ship is a multi-faceted blend of the best of the world and Chinese culture, and features entertainment options such as Chinese dining, mahjong facilities and comedy shows. Since its maiden voyage, the ship has completed more than 30 voyages and received nearly 150,000 visitors.
In the face of competitive pressure from China, cruise companies based in Europe or North America are gradually launching products specifically for the Chinese market. Viking Cruises, for example, is trying to use river cruises to attract Chinese tourists who are looking for an in-depth European experience. Jeff Dash, executive vice president of Viking, said the company is offering "home-like on-board service rather than luxury entertainment," which is in line with people's preference for curated culturally immersive travel rather than just simple sightseeing.
It can be seen that the motivation to attract Chinese tourists is reflected throughout Europe, and cruise operators have increased their marketing efforts. However, a big problem for cruise lines in China is that they still need to increase their appeal to younger travelers, especially a new generation of consumers interested in culture and food.
This section was written by Gao Feng, who is a brand mentor, the founder and chairman of Shanghai Tired Bird Silin Brand Management Co., Ltd., and the initiator of the "Benevolence and Terroir" public welfare art project.
Contrary to the hotter weather since June, the retail market is showing signs of getting colder, with shopping malls in some of Shanghai's core business districts crowded and brand closures already undercurrent since the Chinese New Year this year.
The three companies focused on in this financial report analysis are from the three major sectors of luxury, beauty and sports and leisure, which to a certain extent reflects the development status of the Chinese market. While Richemont, the world's leader in jewellery and watches, is clearly less confident about the sustainability of the Chinese market's rebound, Yatsen, which has acquired French and British skincare brands, has chosen to locate its first global innovation R&D center in Shanghai rather than overseas, while VF Group, which has bucked the trend in Greater China, has also chosen to focus on the Chinese market. Indeed, China's current 10% of global revenue contribution is hopeful.
Richemont
On May 17, Richemont released its full-year financial report for fiscal year 2024, showing that in the twelve months ended March 31, 2024, the group's total annual revenue reached 20.616 billion euros, a year-on-year increase of 3%.
In terms of regional performance, Asia Pacific, which has a revenue contribution weight of 40%, increased 4% year-on-year, while Hong Kong and Macau both achieved double-digit growth. The Americas, with a revenue contribution weighting of 22%, grew 1% year-over-year, with mixed performance across categories; This was followed by the European market, which has a similar revenue contribution weight, with a year-on-year increase of 2%, supported by continued spending by local guests and Chinese tourists. The Japanese market, which has a revenue contribution of 8%, increased 8% year-on-year, and the weak yen attracted tourists, especially from China, to spend a lot of money; The Middle East & Africa, which is weighted to Japan, grew 7% year-on-year, with the UAE seeing particularly strong growth.
From the perspective of channel performance, the offline retail business, which contributed 69% of the revenue, achieved a year-on-year increase of 5%, and the direct store network with a total of 1,367 stores achieved year-on-year growth in all regions of the world. Wholesale & Licensing, with a revenue contribution of 25%, was flat year-on-year, with solid performance in the Jewellery category offsetting weakness in other categories. Online retail, which accounted for 6% of revenue, fell 6% year-on-year, and fashion and accessories brands saw sluggish growth.
In terms of category performance, Jewellery Maisons' "Three Musketeers" – Buccellati, Cartier and Van Cleef & Arpels – contributed 69% of revenue, up 6% year-on-year, and grew in direct and wholesale channels, across price segments and in all regions of the world. Specialist Watchmakers' "Big Eight" – A. Lange & Söhne, Baume & Mercier, IWC Schaffhausen, Jaeger-LeCoultre, Panerai, Piaget, Roger Dubuis and Vacheron Constantin – contributed 18% to revenue, down 3% year-on-year. While offline retail grew by 6%, performance was mixed across brands and regions around the world. Other divisions accounted for 13% of revenue, down 2% year-on-year, with most fashion and accessories brands seeing year-on-year growth, with brands such as Alaïa, Peter Millar, Montblanc, Delvaux, Chloé and Dunhill all having a portfolio of items or collections. The newly acquired Gianvito Rossi brand has just been incorporated into the financial statements since February 1, and the contribution weight is negligible for the time being.
历峰集团旗下珠宝世家（Jewellery Maisons）“三剑客”——Buccellati、Cartier 和 Van Cleef & Arpels 等品牌的营收贡献权重达 69%。
图片来源：Getty Images、Jonathon Kambouris
Looking ahead, Johann Rupert, Chairman of the Board of Directors of Richemont, expects a sustainable rebound in demand in China over time, emphasizing that it will focus on local customers in all regions of the world, strengthen direct interaction with them, and make the Group's operating conditions and performance rebound more healthy and sustainable.
Yatsen e-commerce
On May 22, Yatsen E-commerce announced its financial report for the first quarter of 2024, showing that the company's revenue in the three months ended March 31 was 773.4 million yuan, a year-on-year increase of 1%; gross profit margin was 77.7%, an increase of 3.4 percentage points year-on-year; gross profit was 600.9 million yuan, a year-on-year increase of 5.7%; Operating expenses increased by 31.7% year-on-year to RMB758.7 million, accounting for 98.1% of total net revenue from 75.2% in the same period last year. It recorded a net loss of $124.9 million, compared to a profit of $50.7 million in the same period last year.
In terms of categories, the revenue of the cosmetics category, which contributed 68% of the revenue, was 528.1 million yuan, a year-on-year increase of 3.2%; Skincare revenue with a revenue contribution weight of 32% was 245.3 million yuan, a slight increase of 0.1% year-on-year.
In terms of brands, French skincare brand Galénic and British skincare brand Eve Lom achieved high year-on-year growth in all channels, among which Galénic's "Antioxidant No. 1" VC serum, Eve Lom's cleansing cream and Dr. Wu's mandelic acid essence and other star products continued to top the sales list; In terms of makeup, the biomimetic mask essence lipstick of Perfect Diary, the silkworm pen, blush cream, and liquid eyeliner pen of Xiao Odin, and the Q1 water essence lipstick of Pico Bear are still continuing.
French skincare brand Galénic achieved high year-on-year growth across omnichannels.
Image credit: Galénic
Looking ahead to the second quarter, Huang Jinfeng, founder, chairman and chief executive officer of the group, said that the group will continue to consolidate the market position of the existing "super single product" while further expanding the product portfolio, and expects to achieve revenue in the second quarter between 858.6 million and 901.5 million yuan, with a year-on-year increase of between 0% and 5%.
VF Group
On May 22, VF Group announced its financial results for the fourth quarter of 2024 and the annual results report, showing that the group generated revenue of $2,373.8 million in the three months ended March 30, 2024, with a gross margin of 48.4% for the quarter. Greater China recorded steady growth, up 10% year-on-year, driving a 2% year-on-year increase in the Group's Asia-Pacific business.
In terms of brands, The North Face's Asia-Pacific business performed well, achieving a year-over-year growth of 15% in the quarter, with Greater China achieving a strong growth of nearly 30% in the quarter. Timberland's Asia-Pacific results increased 12% year-over-year in the quarter.
For the full year 2024, the Group recorded total revenue of US$10,454.7 million. Despite the challenging consumer market environment, VF Group continued to perform well in Asia Pacific overall, with a year-on-year increase of 7% and a 13% year-on-year increase in Greater China. The North Face had a strong performance in the Asia-Pacific region, with a year-on-year growth of 31%. Timberland's Asia-Pacific results grew 10% year-over-year for the fiscal year.
Despite the challenging consumer market environment, VF Group's overall performance in the Asia Pacific region remained strong.
图片来源：The North Face、Timberland、Dickies
Marven Ma, President of VF Group Asia Pacific, said: "For VF Group, Greater China has always been an important engine of business growth. During the year, despite the challenging external market environment, the Group's business in Asia Pacific and Greater China continued its growth momentum. With the accelerated rise of the outdoor sports market and the further release of consumer demand for outdoor products, VF Group will continue to adhere to the 'consumer-centric' philosophy, focus on accelerating the organic development of its brand and product portfolio, and continue to develop and provide products, services and experiences that consumers love, contributing to the sustainable growth of the Group and its brands in the region." ”
- A few days ago, the China Association of Automobile Manufacturers (CAAM) held a hearing with EU trade authorities in Brussels on the ongoing countervailing investigation. At the meeting, China was told that the EU would impose temporary tariffs on Chinese electric vehicles on July 4, which could be as high as 38.1%, unless Beijing reached a "solution" to the issue of subsidies that the EU believes are distorting its market. In the face of competition from China's affordable electric vehicles, European automakers see this as a shift in EU trade policy to protect their local markets, and the tariff hike will significantly increase costs for Chinese automakers. In this regard, Chinese Minister of Commerce Wang Wentao said that he hopes to properly handle economic and trade frictions through dialogue and consultation, and if the EU continues to suppress Chinese enterprises, China will take all necessary measures to defend the legitimate interests of Chinese enterprises.
- According to the website of the Ministry of Commerce, on June 11, nine departments, including the Ministry of Commerce, issued the draft rules for promoting the construction of overseas warehouses and expanding cross-border e-commerce business, "Opinions on Expanding Cross-border E-commerce Exports and Promoting the Construction of Overseas Warehouses", which has become the key to China's foreign trade. Companies such as Shein, Temu, and AliExpress that ship Chinese-made products globally are growing rapidly, and this overseas expansion presents new growth opportunities for businesses that were previously focused on the domestic market, especially as the domestic market is currently affected by the macroeconomic slowdown, prolonged housing crisis, and income insecurity. The draft includes improving cross-border data management, optimizing export regulation, and supporting financing channels to help these companies "go global".
- Last month, Baidu's vice president of public relations, Xuan Jing, sparked controversy over indifferent comments about China's workplace culture, and public dissatisfaction with long working hours is growing. At the same time, Bloomberg recently reported that under the pressure of high living costs and economic slowdown, more and more young people are fleeing the "996" work culture in first-tier cities and moving to live in smaller towns. This trend may help narrow the gap between urban and rural amenities, but some analysts believe that the shift may be temporary, and that when the economy improves, young people are likely to return to big cities.
- Recently, the Beijing Municipal Bureau of Market Regulation drafted the "Beijing Live Streaming Compliance Guidelines (Draft for Comments)" to solicit public opinions. The draft for comments proposes that livestreaming practitioners should consciously oppose undesirable phenomena such as the supremacy of traffic, deformed aesthetics, chaos in the "fan circle", money worship, and food waste, and must not publish health food advertisements in disguised form such as introducing health and health preservation knowledge, nor may they mislead consumers with false statements such as "the lowest price on the whole network". In addition, in addition to the relevant norms for live streaming personnel, the avatars synthesized using artificial intelligence technology must also "abide by the rules".
- Christie's Hong Kong recently announced the results of its spring auctions, with a total of HK$2.3 billion and an average sell-through rate of 90%, with 42% of lots exceeding their highest estimates. Regionally, Greater China is highly active and Asia as a whole is strong, with Chinese mainland having the highest turnover, followed by Hong Kong, China, and Taiwan also making important contributions. In addition, the influx of new and young buyers reflects the continued growth of the region. Nearly a quarter of these buyers are new to Christie's, and 43% of new buyers are millennials.