Mainland China, which now accounts for 20 per cent of global luxe sales is forecasted to have the biggest market share by 2025. As per Bain & Company and Tmall report, the luxury goods market is forecasted to grow 48 per cent to almost $53.6 bn in 2020 with leather goods and jewelery the most in-demand categories. Demand growth is attributed to the increase in domestic spending resulting from a drop in international travel.
After Covid-19 lockdowns in early 2020, China’s luxury-goods market began to grow in April as consumers made purchases within the country. This repatriation of consumption is one of four factors driving this growth. Reduction in import duties, price harmonization and stricter gray market controls, helped China’s luxury markets boom, reports Bain. Positive consumer sentiment and increased wealth also helped to drive luxury consumption, as did government measures designed to encourage spending.
As per the report, Chinese millennial may be its core consumers, making up more than 70 per cent of the platform’s luxury fashion and lifestyle consumers, but Gen Z shoppers are an emerging strong category. Gen Z puts greater emphasis on “the pursuit of fashion”, and their purchase of luxury collaborations and limited editions increased 300 to 400 per cent between January and October 2020. Indeed, digitalization is another factor driving luxury in China, with Covid-19 resulting in online channels increasing luxury sales by around 150 per cent in 2020.
Another unique trend observed in 2020 was the online growth of domestic duty-free channel, including sales from the Hainan duty-free zone, where 55 per cent merchandise sold online. Similarly, China’s annual luxury online penetration also increased 23 per cent in 2020, up from 13 per cent in 2019, driven by beauty products and domestic duty-free sales.
However, despite the boom, Bain notes the growth in Mainland China failed to compensate for the loss of Chinese spend overseas – the drop in travel saw consumers’ total luxury spend fall around 35 per cent.