The global luxury goods market is enjoying an upswing, thanks to growing wealth among mainland Chinese consumers, along with digitisation and “millenialisation” – adapting to young customers’ demand – that could further drive its growth. The market, valued at an estimated € 1.2 trillion (US$1.48 trillion) in 2017, is projected to expand at an annual compound rate of 4 to 5 per cent by 2020, according to management consultancy Bain & Co. In China, sales of personal luxury goods – clothes, handbags and jewellery – soared by 15 per cent last year, and when combined with purchases made abroad, Chinese consumers accounted for 32 per cent of sales worldwide. Such positive outlook has caught the attention of Chinese companies, leading to a high-end brand acquisition spree. Most recently, Chinese conglomerate Fosun acquired a majority stake in Paris-based fashion house Lanvin, while Shandong Ruyi bought a controlling stake in luxury shoe maker Bally, adding to its existing brands that include UK tailors Gieves & Hawkes and Aquascutum, and French apparel firm SMCP. Spending on luxury experiences, such as high-end food and wine and cruises had also risen – up 6 and 14 per cent respectively in 2017. Below are the views of three analysts – Carl Berrisford , UBS Wealth Management CIO equity analyst, Zhang Tianbing , Deloitte China consumer business sector leader, and Bruno Lannes , partner at Bain & Co China – on where the market would be trending. China luxury market Berrisford: We are certainly seeing a comeback in the luxury market, that has been quite evident over the past six months. There is also a structural discretionary income story. The number of people entering the ranks of the middle class [in China] is swelling every year and the actual discretionary income budget is increasing as people get wealthier. This is an important long-term structural driver for the luxury market. The fate of the Chinese economy is a key issue. You really want growth to be more diversified. If the Chinese property market turns down, you will see it in the luxury market because it would end the wealth effect. M&As Going forward, UBS expects more M&As in the luxury sector. UBS Investment Bank has forecast near-term annual growth of 10 per cent and long-term annual growth of 7 per cent for the sector. Berrisford: Chinese corporates are well aware that over 30 per cent of the brand market is driven by Chinese consumers and they want a piece of this action. There aren’t really any luxury Chinese brands that have been able to compete or attract the same type of sales as the big, global luxury brands. Zhang: China is growing faster than the global market place. This is very much about buying the brand and helping them to grow in China to capitalise on the domestic growth of consumption, particularly in the luxury sector. Chinese textile giant buys Swiss luxury brand Bally amid global shopping spree Fosun adds another luxury brand to crown as it takes control of French fashion house Lanvin Millennial consumers and digitalisation Most brands have not been quick to develop digital channels, and while global online sales of personal luxury goods jumped by 24 per cent in 2017, they still only accounted for 9 per cent of the total, according to Bain. Still, it estimated that this channel will reach 25 per cent of the market by 2025. Online sales are most prevalent in the Americas, with the region accounting for 47 per cent of the global total. But Asia is catching up fast, largely driven by China, whose online sales grew 43 per cent in 2017, against a 19 per cent rise for offline sales. The mainland is also seen as a pioneer for innovative digital services and models for consumer engagement, with the 40 leading luxury brands having official WeChat accounts in China. Zhang: For luxury brands, transforming themselves to make sure they are relevant in the digital age will be critical to the success and even survival of these brands. The risk is less on the macro level but rather the changes to the choices that consumers make, and the shift from the classic, major brands to the smaller boutique designer houses is a risk to these large brands. Millennials are becoming the major customer base … spending 50 per cent more time – six hours per week – online shopping than the older generations. They also live online and are a lot easier to be accessed and influenced via digital touch points. Millennials want to have more of a personalised experience. It is an interesting trend and it has a lot of implications on where the luxury brands need to set their distribution channels and how they interact with their consumers. They are starting to create consumer data visibility and insights with the purpose of improving store conversion. There are also attempts to upgrade store formats to make them digitally-enabled. Lannes: New consumers, mostly millennials, have been major contributors to the market growth. Millennials are digitally savvy and very knowledgeable about luxury. (This is an excerpt of an article in the April issue of The Peak magazine, available at selected bookstores)