Freed from Taiwan’s tight border controls, luxury sector sales this year are expected to hit a new high across a wide range of categories.
Times have never been better for Taiwan’s luxury goods industry, which has been shielded from pandemic-induced suffering due to its reliance on a wealthy and spendthrift domestic clientele. Data compiled by market research provider Euromonitor International shows that sales of luxury goods – including luxury automobiles – have grown steadily since 2019 and are expected to reach a new high of NT$468.5 billion (15 .7 billion) this year.
Business is booming in most luxury categories of Euromonitor tracks. Personal luxury, which includes high-end designer clothing, leather goods, jewelry, eyewear, watches, writing instruments and stationery, consumer electronics and personal care products, is expected to reach a record NT$259.2 billion this year. Meanwhile, fine wines, champagnes and spirits are expected to reach NT$19.4 billion.
Regent Galleria, the luxury mall at the five-star Regent Taipei hotel, achieved record sales during the pandemic, chief executive Simon Wu said. With domestic shoppers accounting for 80% of sales, it has been able to adapt without too many difficulties with the lack of international visitors.
Taiwan’s luxury goods market has never been dependent on tourists, unlike Hong Kong, where they account for 80% of sales, notes Anna Dai, Hong Kong-based beauty and fashion analyst for Euromonitor International. Taiwan’s luxury consumers also tend to be among its wealthier population, which has been less affected by pandemic-related disruptions. Additionally, these Ultra High Net Worth Individuals (UHNW) have not been able to travel internationally easily for the past two and a half years. “Their high purchasing power is locked in Taiwan,” says Dai.
At the same time, the disruption of society by the pandemic has been less severe in Taiwan than in most other countries. Pursuing a de facto zero-COVID policy, Taiwan kept capricious contagion at bay until nearly 80% of the population was fully immunized and 60% strengthened, providing a high level of protection against adverse reactions. Although infections have skyrocketed since April, when the elimination strategy was quietly abandoned, 99.5% of those cases have been mild or asymptomatic.
“In 2022, the vaccination rate is high and people are less worried because they learned from their experience last year,” Dai says, referring to the epidemic that started in May 2021. This epidemic, which s ‘occurred when Taiwan’s population was largely unvaccinated, was the only time during the pandemic that luxury brands across categories experienced a pronounced drop in sales.
During the first 16 months of the pandemic, Domaine Wine Cellars, a specialist in Champagne and Burgundy, had made good business selling its products to high-end restaurants, which benefited from the same local purchasing power as the other segments. luxury. David Pan, owner of the Estate, notes that Taiwan saw “an explosion in high-end dining in 2020 and 2021 as people weren’t able to go overseas and young chefs were planning their next steps.” . Looking back, “some new restaurants opened at an inopportune time,” he says.
Although the number of cases in the 2021 outbreak peaked at around 700 a day, “this surge was severe by Taiwan standards,” Pan said. Noting the low vaccination rate (less than 1% at the start of the epidemic), Pan says “there was a lot of fear and the restaurant scene closed from mid-May to August”. During this period, sales of the Estate’s restaurant channel have plummeted, he adds.
VIP focus
Luckily for Domaine, its customers didn’t stop enjoying great wine just because the restaurants were temporarily closed. Its retail and VIP sales have increased, significantly offsetting lost revenue due to lack of restaurant sales. “The same consumers were still drinking; they just drank at home rather than at the restaurant,” says Pan.
From the VIP segment, he notes that they have benefited from the long bull run of the stock market and their investments in the Taiwanese real estate market which has appreciated throughout the pandemic. “They had as much buying power as before and continued to buy in similar volumes.”
Regent Galleria has been able to retain its existing VIP customers while adding new ones during the pandemic, said general manager Wu. He says the luxury mall has done so “by constantly improving and differentiating our VIP services from others , with rewards programs, exclusive events such as the annual gala evening, monthly activities and premium benefits such as our commercial butler service. The latter refers to personal shopping clerks who help Galleria customers arrange “private jewelry viewing, personal viewing, fashion advice, and gift delivery services,” according to a company press release.
In some cases, sellers of luxury goods have had to adapt their sales channels to the circumstances. While Taiwanese generally tend to be cautious about exposure to COVID, VIPs, who are the main drivers of sales in Taiwan, tend to be older (mainly in their 50s and 60s) and are therefore more concerned about infection, says Catherine Sun, mall manager and chief operating officer at Taipei 101. Young luxury shoppers have their own concerns, as some have young, unvaccinated children.
The brands at the Taipei 101 mall have adapted to the difficult circumstances by hand-delivering some luxury goods to the homes of VIP customers who did not want to go out. “Some items, like watches and handbags, can be sold more easily without the customer entering the store because they don’t have to try them on for size,” she explains. . Some watch buyers buy the watches for their personal collections or as investments and therefore do not focus on the fit.
Admittedly, clothing and shoes are less conducive to this type of sales. However, Sun notes that the American fashion house Coach, a specialist in luxury leather goods, has a dedicated sales channel on the LINE messaging app for its VIP customers in Taiwan, allowing them to select various clothes and accessories that Coach will then deliver to them. at home. If they like the items, they can pay Coach later. Otherwise, the company will take it back for free.
Euromonitor’s Dai expects Taiwan’s luxury retailers to continue cultivating the VIP market due to its unprecedented buying power. While some brands may offer enhanced online shopping, unlike some other retail segments, digital sales will not be the focus. Flagship physical stores will continue to play a crucial role in sales. For luxury brands, “online channels mean providing options,” says Dai. “That’s part of giving good service, but that’s not their goal.”
She expects luxury brands to step up their efforts to woo VIP customers as Taiwan prepares to ease its final border controls. Currently, all arrivals are required to self-quarantine for three days and “monitor their health” for a further four days. However, this could be replaced by a “0+7” policy without quarantine and seven days of self-health management by fall.
Outbound travel is expected to pick up rapidly as remaining border controls are eased. While many companies will breathe a sigh of relief, for luxury brands in Taiwan the change will be a challenge, Dai observes. “Revenue is expected to fall as consumers travel to Europe to buy cheaper luxury goods,” she says.
Not only are luxury goods generally cheaper in Europe than in Taiwan, but non-EU tourists visiting EU countries can also claim a refund of Value Added Tax (VAT) on goods they purchase during their trip, provided they depart within 90 days.
Anticipating an increase in outbound travel from Taiwan, luxury brands are trying to offer a wider selection of products, including products exclusive to Taiwan. “The idea is that you don’t have to go to Italy or France to get something exclusive,” says Dai. For its part, Domaine Cellars’ Pan estimates that many luxury retailers will face a temporary drop in sales. For the luxury consumer segment, “international travel is a way to spend money in a way they haven’t had access to in almost three years,” he says. “A lot of people are hungry to do that.”
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