Brief - The Hustle

‘Revenge spending’ may sound like fun, but is it really a lifeline for luxury brands?

Written by Nick DeSantis | Apr 30, 2020 8:48:12 AM

Everyone who’s stuck in isolation has probably quaran-dreamed about the places we’ll go and the things we’ll buy when we can finally leave our houses.

This month, we got an eye-popping preview in China. High rollers reportedly went straight to buying expensive handbags (and high-priced homes).

A Hermes outpost in Guangzhou raked in $2.7m on April 11, its first day of reopening.

Retail revenge is a dish best served gold

Nikkei and others have called the Hermes-plosion an example of “revenge spending” — when cooped-up shoppers can spend in person again, the theory goes, mall madness ensues.

“Revenge spending” conjures images of a jilted lover blowing money to get back at a spendthrift ex (I see your motorcycle, and I raise you a boat!).

But Quartz noted that the term carries a more specific meaning in China. It’s been used to describe the spending boom that followed the end of the Cultural Revolution in 1976.

These days, luxury brands are hoping for a turnaround when we elbow bump goodbye to the coronavirus. LVMH, the parent company of Louis Vuitton, reported “very substantial” growth for its main brands in China this month.

The Asian nation is a growth market for the most opulent form of retail therapy — it generated ~90% of the growth in the global luxury market last year, according to the consultants at Bain & Co.

But nothing gold can stay

A Bloomberg columnist predicted that the luxury boom is going to lose its luster.

If wealthy Chinese shoppers are buying big-ticket items now, it’s not so much a cure for cabin fever as it is a consequence of travel restrictions. People are looking for that Birkin bag closer to home instead of abroad.