This summer an influx of mid-range and luxury fashion and beauty brands expanded into the Asia-Pacific region. From Chanel to Prada, De Beers to Bvlgari, Brooks Brothers to Canada Goose – retailers continue to make strategic play to the Far East. Rather than concentrate on a single market, brands are branching out to where their consumers are, proving once again that omnichannel reigns supreme.

Luxury retailers are listening closely to the Street and monitoring where the new cash flow is originating. According to the Bain Luxury Report, the retail revenue stream flows East and West, with close to half of the global online luxury sales (€23 billion) dominated by The Americas, and significant growth emerging in Europe and Asia. Asia is a definitive choice, and many have the larger urban markets of China in their sights, specifically Beijing, which joins the ranks of well-known cities Shanghai, Tokyo, Dubai, Singapore and Seoul as the continent’s leading fashion capitals.

China has been a particularly strong driver behind this shift, with its consumers contributing a whopping 32%to the overall global market fueling sales at LVMH, Burberry and Gucci.

More than one billion people live in China, and 6% of them are considered affluent. That percentage represents 60 million consumers. That’s a lot of leverage! Luxury retail sales in China soared between 2016 and 2017, at approximately 142 billion yuan ($22.07 billion) as reported by Bain & Company. Outside of the Middle Kingdom, Asia forecasts a strong increase in the fashion and luxury markets with a similar uptick in 2018.

Of course, that was before the trade tension began heating up between the U.S. and China. Historically, the U.S. and Japan have held the top two slots in world economy rankings. But China’s accelerated economic growth in recent years has surpassed Japan’s GDP, and China is now the second-largest economy behind the U.S. As both nations duel for protectionism, the tariffs they are imposing will undoubtedly impact the global supply chain and manufacturing efforts of companies worldwide. Consider that the majority of manufacturing facilities housed overseas allow for everything to be sourced in one location from fabric production to trim and accessory assemblage to packaging and design.

The list of products affected by the tariffs is long and includes everything from soybeans and steel to fashion and apparel-related products. The final phase, if implemented by end of year, will increase tariffs to 25% on foreign goods imported to the U.S. from China, with lesser tariffs imposed on Canada, Europe and Mexico. Regardless, the implication is clear: coveted items manufactured outside of the States will become increasingly expensive, and retailers who do not absorb the costs may very well pass those expenses on to consumers.

Consumers worldwide will feel the shift, and that includes those in China, too. Stringent rules have been foisted on travelers upon re-entry to China from international markets and these jet-setters are subject to invasive searches by border patrol officers looking to unearth imported goods in excess of the duty-free allowance of 5,000 yuan ($727). This has tempered the ‘gray market trade’ where Chinese entrepreneurs, also known as the daigou community, buy products abroad (mostly in the U.S., Australia and New Zealand) to resell at a markup to domestic shoppers. And some luxury retailers are responding to the tariff by lowering their prices, like Louis Vuitton China, for example, who decided to mark down prices on a wide range of items to fully support the government’s efforts to reduce the price premium for luxury goods sold in China and overseas.

One avenue for continued growth in China is e-commerce. Several luxury retailers are exploring opportunities to expand their business across retail channels Baidu, Tencent, and most notably with Alibaba, China’s largest online marketplace. Richemont, the Swiss watch manufacturer, recently partnered with the e-commerce giant to expand their online offering. The partnership also leverages exposure for Richemont’s subsidiary, Yoox-Net-a-Porter’s luxury catalog, to Alibaba’s larger affluent audience. China, as can be expected, has also jumped on the bandwagon with’s sizable investment in Farfetch prior to its IPO.

With the uncertainty of repercussions from the U.S.’ threat to add another $267 billion worth of imports — essentially 100% coverage of U.S.-China trade — looming, China’s retail e-commerce may be the final frontier.

What are your thoughts about the trade tensions? How have they impacted your business? What are you most concerned about? Join in on the conversation tweet me @anjeesolankiCRE.

Anjee continues to be an insatiable enthusiast of all things retail. She’s a student of culture with a pulse on future shoppers and the fleeting trends constantly changing the retail landscape … driving retailers, landlords and developers crazy!