Luxury Stock Rally, H&M Opens on Pinduoduo, Taobao Offers Free Delivery in HK | This Week in China’s Retail
Hey readers, the weekly wrap-up is back. I will try to deliver what just happened on China’s retail sector and also an anlysis piece each week. For this week, the in-depth analysis will reveal what went wrong of Hong Kong’s luxury malls in China, and why China’s local players are winning (stay tune).
Luxury Stock Rally Amid China’s Stimulus Policy
After a tough year, the luxury sector finally got a much-needed boost, spurred by China's latest round of stimulus, which fueled a rally in luxury stocks. The Europe Luxury Index (STXLUXP) surged 2.5% after the news on Tuesday, marking its largest recent gain. The pan-European STOXX 600 index rose by 0.7%, with the luxury-heavy French market outperforming, gaining 1.3%.
LVMH stock rose 3.2% by the close of the day, while Richemont soared 4.1%. However, Goldman Sachs cautioned that this China-driven rally in luxury stocks is built on shaky foundations and is unlikely to significantly boost high-end discretionary spending.
Junjie’s Take: The luxury sector has struggled this year, primarily due to its reliance on China’s market. Yet, top-tier brands like Hermès and Chanel have remained largely unaffected, as wealthy Chinese consumers continue to invest in brands with strong equity and value appreciation potential.
In contrast, brands that rely more on China’s middle class or newly affluent consumers—such as Gucci—have faced headwinds. While China’s stimulus measures may support luxury stock prices, they are unlikely to significantly boost overall luxury sales, as the middle class continues to battle declining incomes and inflationary pressures.
H&M Launches on Pinduoduo (China’s Version of Temu)
Swedish fast-fashion giant H&M is expanding its digital presence, launching a store on Pinduoduo and establishing an account on Douyin (China’s version of TikTok). H&M, which faced a backlash in China in 2021 over the Xinjiang cotton controversy, has recently been struggling.
Chinese consumers have shifted towards domestic and niche international brands, contributing to H&M's significant revenue drop. The company even closed its flagship store on Nanjing West Road in Shanghai.
Junjie’s Take: H&M’s move to expand into Pinduoduo and Douyin shows the brand’s eagerness to explore new opportunities in China. Notably, Pinduoduo, a Shanghai-based e-commerce platform, targets a broader, lower-income demographic.
It seems H&M wants to offer a wider price range to attract different customer segments on various platforms. For instance, on Taobao, H&M sells items priced as high as 1,000 RMB, but on Pinduoduo, the prices are significantly lower.
Taobao Promotes Free Delivery in Hong Kong and Southeast Asia
Alibaba’s Taobao is set to invest 1 billion yuan to offer free delivery to users in Hong Kong. The project will be managed by Taobao Tmall for vendor recruitment, while Alibaba International will handle user operations and logistics in Hong Kong.
Starting October 1st, Hong Kong consumers will enjoy free shipping on Taobao orders over 99 RMB. According to Cainiao, Taobao’s shipping company currently operates 800 pick-up points in Hong Kong, with plans to increase the number to 1,000 by year-end. Additionally, the free delivery service has been expanded to Malaysia, Singapore, and Taiwan, but the required minimum order value will be higher.
Junjie’s Take: With the growth of mainland China’s internet user base slowing and new user acquisition becoming challenging, many mainland companies are eyeing global markets. For example, companies like Meituan and SF Express are increasing their investments in Hong Kong and exploring emerging markets in Southeast Asia.
Meituan’s Hong Kong food delivery platform, Keeta, has already become the city’s most popular delivery app. Hong Kong, being the closest and most convenient overseas market to mainland China, serves as a testing ground for Chinese internet companies and consumer brands looking to expand internationally.
Miniso Invests in China’s Chain Supermarket
Chinese lifestyle retailer Miniso has purchased a 29.4% stake in Yonghui Superstores, making it the largest stakeholder in the company. Miniso, known for its affordable yet trendy products, has gained popularity, especially among young consumers. Yonghui, a leading supermarket chain in China, has a strong foothold in the fresh produce sector.
Junjie’s Take: Yonghui operates around 850 supermarkets and is the second-largest in China by sales volume. For Miniso, this acquisition presents an opportunity to leverage Yonghui’s existing channels to boost its revenue, which has been affected by the pandemic and competition from e-commerce.
Meanwhile, Chinese consumers are returning to large-format supermarkets, particularly membership-based warehouse stores like Costco and Sam’s Club, as well as local favorites like Fat Donglai Supermarket in Henan, known for its exceptional service. This signals a renewed opportunity for brick-and-mortar supermarkets in China.