Geopolitics and Luxury. Taiwan: the delicate balance

The year that has just begun is anticipated by analysts as a year fraught with challenges. The primary concern is the multitude of elections scheduled across several nations, with Russia and the United States taking the lead. In 2024, three billion people will cast their votes, potentially reshaping the international landscape. Taiwan's government was the first to face the electoral test. On January 13, in the much-disputed island coveted by China, voters chose Lai Ching-Te from the DPP party, a politician consistently opposing any plans for reunification between Taiwan and China. Since his election, tensions have escalated between the two countries.

How is the luxury world navigating this situation?
While Taiwan represents a thriving market with a young and affluent clientele, viewing Western luxury brands as a means to portray a certain image of success, the weight of Chinese influence hinders collaborations and European brand investments on the island.

Established retail outlets in Taiwan have ensured excellent revenues for high-end brands for decades. In 2019, a benchmark year before the pandemic, luxury brands experienced a 2% growth compared to 2018, despite the Chinese tourism ban to Taiwan. For example, sales of leading luxury brands increased by over 30% at Shin Kong Mitsukoshi Tainan, one of the island's largest shopping centers. Before the health crisis disrupted the data, the revenue reported by the island's department stores amounted to approximately 10.7 billion euros. It's noteworthy that one of the most interesting sectors for European brands in Taiwan has always been eyewear. The Italian house Safilo signed a significant distribution contract with Luxasia, a retail specialist in omnichannel distribution of luxury beauty products in Asia, now extended to fashion and accessories.

In 2020, considered the black year for international trade, the luxury market in Taiwan faced no significant obstacles. Exemplary COVID management by local authorities led to sales growth and an upsurge in demand for high-end items. While international tourism came to a standstill, domestic demand soared. Taiwanese consumers who had planned to shop abroad redirected their spending to the island's department stores. Moreover, many major brands, blocked from selling their products in various countries due to store closures, turned to Taiwan. The Shin Kong Mitsukoshi Tainan shopping haven recorded a revenue of 2.39 billion euros in 2020, an increase from the 2.38 billion in 2019—a true exception on the international scale. Since then, the luxury market in Taiwan continues to exhibit positive performance.

However, the increasing pressure from China on foreign investors is a reality, and the victory of the pro-independence candidate can only contribute to tensions. Last July, Bulgari had to apologize to China for designating Taiwan as a country on its website. Similar diplomatic missteps were made in the past by other houses such as Givenchy and Versace, triggering backlash and boycotts from the Chinese. How then can the desire for expansion in the flourishing Taiwanese market be reconciled with the need not to offend Chinese authorities? The balancing act required of luxury players will be particularly challenging from now on.