Handbags of famous brands displayed in a Shanghai store.
Zhang Yu, owner of a consignment store for luxury goods, hopes business stays as strong as it has been in the past two months amid the global economic downturn.
It's been a busy time for Zhang, who started "Milan Stop" in Hangzhou, 300 km south of Shanghai, seven months ago. Visitors wanting to resell their luxury items have surged since October.
"Business has actually gotten better since the financial crisis," he says. "People used to come with only one or two items, but now they bring five or six, or even up to 10 items, for commission sale."
Their eagerness to sell means more inventory to offer, more commission (often 10 percent of the sale price) and more opportunities to profit from price differences.
"Usually we don't ask any questions, but sometimes customers tell us anyway. Some women say they get less money from their husbands due to a business downturn, so they're selling their luxury collections for pocket money," he says.
The black shelves in the 30-sq-m "Milan Stop," the city's first second-hand luxury store, are packed with purses of the very best brands: Louis Vuitton, Gucci, Chanel, Prada and Christian Dior. They look almost brand new, and each is wrapped with a protective covering. Top-end watches and jewelry are displayed in the middle of the room.
A classic, limited-edition LV trunk is the store's rarest treasure. "The owner, from Hong Kong, lost money in copper and the construction materials business," Zhang says. "Pinched for cash, he began to resell some shelved luxury items. He also left his Bentley and Rolls Royce cars with a pawnshop."
The world's rich are being squeezed by the economic crisis. Consulting firm Bain &Co predicts that the luxury goods industry is likely to enter a recession in 2009.
A study released by Bain in October predicts that the industry, not yet experiencing the full punch of the global meltdown, will see a relatively modest growth rate of 3 percent in 2008, compared with 9 percent growth in 2006 and 6.5 percent growth in 2007.
But it also says that increasing spending by high net worth consumers in emerging markets like China, Russia, India and Brazil over the next five years, ranging from 20 percent to 35 percent, will help restore optimism in the long term.
Many sellers of luxury goods and services hope the China market will see them through the crisis and are lifting their marketing to that end.
Men's luxury goods retailer Alfred Dunhill and Swiss watch maker Vacheron Constantin opened new stores in Shanghai in mid-October, while French jeweler Cartier hosted a polo match in Zhejiang province neighboring Shanghai, entertaining its guests with a champagne lunch.
But Sun Yimin, an expert on luxury goods marketing at Shanghai's Fudan University, believes China will not escape the world slowdown of luxury sales.
China is more connected to the world than in the past and is also feeling the global chill, with double-digit economic growth falling to 9 percent in the third quarter. A growing number of factory closures and increasing unemployment are further curbing growth.
The super-wealthy, the main consumers of luxury goods in China, have seen their fortunes shrink due to losses in stocks and other investments. "They won't splurge like before," Sun says.
According to the US publication Forbes, the number of billionaires in China this year was just 24 compared with 66 in 2007. "The combined net worth of the 400 richest (people in China) dropped to $173 billion from $288 billion," said the magazine in late October.
Young office workers are another growing but vulnerable group of luxury goods buyers in China. Sun calls them "margin consumers," who might scrimp for months to buy an LV handbag but immediately stop buying when times are tight.
