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Rising inventory leads to unprecedented discounts by luxury labels in China


Growing concerns over unsold inventory, sparked by a decline in consumer spending, are leading to unprecedented discounts being offered by a few luxury labels in the Chinese market.

From this month, the price of a mall beige crocodile-pattered version of Balenciaga’s iconic hourglass handbag has been reduced by 35 per cent to $1,947on Alibaba Group Holdings’s the mainland’s dominant e-commerce platform, Tmall. This price is lower than those listed on the brand’s official websites globally and major luxury platforms like Farfetch.

A part of French luxury giant Kering SA, Balenciaga averaged a 40 percent discount on sale items during three of the first four months of 2024. The brand has also more than doubled its number of discounted products on Tmall, with these items accounting for more than 10 percent of its inventory on the platform from January to April. Last year, Balenciaga only offered discounts in January at an average of 30 percent and had no markdowns at all in the first four months of 2022.

Last year, online orders accounted for nearly half of China’s luxury revenues, according to consultancy Yaok Group. A majority of these orders were captured byTmall.

The decline in demand from the Chinese market has already impacted luxury earnings. Kering warned in April of a potential first-half profit drop of up to 45 percent, driven by weak Gucci sales in China. Burberry’s stock has more than halved in the past year due to weak demand in China and the US. Chanel also cautioned that conditions are becoming more challenging, even at the higher end of the market.

Additionally, Japan’s weak yen is contributing to the slowdown in sales in China, as consumers seek the lowest prices available by shopping in Japan.


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