Miss Universe 2021 is from India. Harnaaz Sandhu brought the crown to India after a gap of 21 years. Now, this sounds like news from the fashion world, but it carries a direct and painful message for China- the second-largest economy on the planet that has emerged as the ‘world’s factory’.
And the message is pretty loud and clear. India is rising as the world’s fastest-growing large economy, which makes it a fertile market for luxury and cosmetic brands to thrive in. The Chinese economy, on the other hand, is heading towards devastation and has become a hell for luxury products.
The downturn in the Chinese economy:
Make no mistake, the sponsors of international beauty pageants are guided by commerce and finance like any other business organisation. They find it beneficial to reinvigorate interest in countries and markets that show the capability of giving good commercial returns.
And good commercial returns demand a basic requirement- a thriving economy. The Chinese economy however is far from thriving. In fact, after the Evergrande crisis and the nationwide power crisis, China is looking straight into destitution.
As such, incomes in China are going to decline, which is already becoming visible due to low consumer spending. Make no mistake- the Chinese market simply doesn’t seem like the one that can give healthy commercial returns to cosmetic products and luxury brands.
Cosmetic and luxury goods have no future in China:
The consequences of a Chinese economic downturn are already visible in the luxury brands sector. Despite China’s dominance in global luxury brand sales, the country is suddenly becoming a non-profitable country for luxury brands. LookLook, a consumer research firm that works with luxury brands, surveyed 100 expensive-brand purchasers in China.
Every one in ten respondents in the survey cited Xi Jinping‘s crackdown on excessive shows of wealth as a reason for their reluctance to spend much on buying ultra-expensive goods.
As per LookLook CEO Malinda Sanna, one participant in the survey study cited a desire to not “attract unwanted attention,” as a reason for growing reluctance to buy luxury goods. Sanna said, “We’ve never heard that before”. She added, “I think the demand is definitely still there, but they’re being cautious”.
Some fashion brands in China are even encountering shoppers who look for low-profile goods without catchy logos or designs. Patricia Pao, CEO of the Pao Principle, a consultant for luxury brands in China, told CNN that people “don’t want to just walk around with big LVs anymore”. Premium liquor brands, such as baijiu maker Kweichow Moutai, also have witnessed a significant decline in their sales.
Luxury brands facing a tough time in China:
Xi is trying to build an “olive-shaped” society with a focus on ideas like “common prosperity” and equitable distribution of wealth. And when Beijing calls for egalitarian behaviour, it takes coercive action to ensure that citizens comply. This was visible when Xi cracked down on tech giants and other businesses.
To be very honest- the present era is not conducive to selling diamond-studded watches and ultra-expensive goods in China. Luxury brands will have to make an effort to appear subtle and subdued if they are to survive in the Chinese markets.
Alessandro Michele, creative director of Gucci, for example, was reportedly adjusting his trademark maximalism to adapt himself to changing market conditions in China.
Even if you sell luxury to a Chinese national, you have to ensure that your product doesn’t exhibit expensive traits because no individual would want to put himself at risk of being scrutinised by the Chinese government.
Add to it, the pressure exerted by the closed character of the Chinese economy. Foreign brands already have a hard time entering the Chinese market, and Xi’s austerity directive makes it even more difficult for luxury brands to survive.
At the end of the day, it is India that seems all set to drive global economic growth and demand for luxury products. If international beauty pageants are looking at India again, it is for a simple reason- India is rising, China is going down.