Beginning on September 1, flare-ups of covid infections in Chengdu have led to widespread lockdowns, forcing luxury malls and virtually all businesses except for those providing daily necessities to shut down. Meanwhile, in the technology hub of Shenzhen, residents went into lockdown during the weekend on September 3 with strict quarantine measures in place.
In Chengdu, as 21 million residents went into lockdown, major luxury shopping malls such as Sino-Ocean Taikoo Li Chengdu and Chengdu IFS suspended operations. In addition, due to stringent covid restrictions, luxury brands like Jaeger-LeCoultre cancelled its planned event in the city. Meanwhile, Bottega Veneta is likely to postpone its upcoming pop-up event in September.
When lockdowns hit major retail hubs like Beijing and Shanghai, Chengdu quickly rose to the occasion, becoming China’s fourth most important luxury hub with a contribution of about 7-8% in mainland China’s luxury retail.
However, according to Chengdu Municipal Bureau of Statistics, COVID-19-related outbreaks in July and a severe power shortage caused total retail sales of consumer goods in Chengdu to drop 0.5% year-on-year to 530.69 billion RMB, ($76.8 billion) during the first seven months of the year. Moreover, sporadic lockdowns have taken a toll on Chengdu’s rising luxury malls, with revenues of Taikoo Li declining 8.2% year on year.
To make matters worse, the travel and tourism industry is likely to experience a further slump due to the recent covid outbreaks. In fact, many cities across China are calling on the public to refrain from travelling home or going to large public gatherings for the upcoming mid-Autumn Festival on September 10.
Since the outbreak of the pandemic, luxury retailers in China have been facing waning consumer enthusiasm, rising economic uncertainty, high rents, and sporadic covid lockdowns. As the country continues to grapple with fresh outbreaks, luxury brands may want to consider shifting any marketing initiatives online rather than large physical events that could further jeopardise pandemic prevention measures as well as their own reputation.