China’s luxury goods market posts ‘robust rebound’, but post-Covid uncertainties remain
- China’s luxury goods market recorded 12 per cent year-on-year growth in 2023, according to Bain & Company, bouncing back from 10 per cent decline a year earlier
- Challenges posed by the recovery of consumer confidence and the evolution of overseas luxury shopping remain, even with China still seen as a leading luxury market
China’s luxury goods market enjoyed a “robust rebound” last year, but a challenging economic climate and increased overseas shopping limited its recovery, according to a new report from a global consulting firm.
The sector recorded 12 per cent year-on-year growth in 2023, Bain & Company said on Wednesday, following a 10 per cent decline a year earlier.
The recovery in the gauge that measures the purchasing power of expensive goods was helped by a low base in the second quarter of 2022.
But the second half of last year witnessed weaker growth mainly driven by a decline in consumer sentiment among middle- and high-income individuals, coupled with a high base in the third quarter, the report added.
Uncertainties remain regarding the speed at which consumer confidence will resume and how overseas luxury shopping will evolve
In 2021, China’s domestic sales of personal luxury goods increased by 36 per cent year on year to nearly 471 billion yuan (US$66 billion), according to Bain, as Chinese consumers were largely limited to domestic travel due to the coronavirus.
“As the market transitions to a post-Covid growth phase, uncertainties remain regarding the speed at which consumer confidence will resume and how overseas luxury shopping will evolve,” said Bruno Lannes, a Shanghai-based senior partner at Bain.
“By 2030, Chinese luxury consumption is expected to reach 35 to 40 per cent of the world’s total, with consumption in mainland China reaching 24 to 26 per cent,” Bain said.
Middle-class Chinese shun luxury spending amid hazy outlook
The recovery in 2023 was supported by the likes of fashion, lifestyle and jewellery sales, which witnessed a growth rate of between 15 and 20 per cent.
But sales of watches had a “softer rebound”, after increasing by between 5 and 10 per cent.
Such a rebound could be attributed to the recovery in domestic travel and stimulus measures implemented by the Hainan government, Bain added.
Another year of recovery for Chinese overseas luxury consumption, particularly in Asian destinations, is expected
But the average spending per shopper decreased by more than 25 per cent, it added, “likely due to lower discount levels, fewer daigou activities and an increased rationality among consumers”.
“The extent of this recovery in 2024 will primarily depend on the speed of economic recovery and changes in travel and lodging costs,” said Weiwei Xing, a partner at Bain & Company in Hong Kong.
“Another year of recovery for Chinese overseas luxury consumption, particularly in Asian destinations, is expected.”
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In December, a joint study by Bain and market research firm Kantar Worldpanel showed Chinese consumers, spooked by concerns over their job prospects amid a bleak economic outlook, were actively hunting bargains for consumer goods.
Total spending on fast-moving consumer goods, ranging from food and drink to cosmetics, dropped by 0.9 per cent year on year during the third quarter of 2023, the research report said.
The decline followed a 1.8 per cent year-on-year increase in the previous quarter.
Bain said Chinese luxury consumption – excluding daigou sales – is estimated to have accounted for between 22 and 24 per cent of the world’s total in 2023, with overall consumption about 16 per cent.
The Chinese market will become a benchmark for the global luxury goods sector
Bain forecast that spending on luxury items by Chinese consumers at home and abroad would make up between 35 and 40 per cent of the global total in 2030, buoyed by middle-class consumers increasing interest in expansive leather bags and watches.
Sales of luxury goods in China are also expected to account for between 24 and 26 per cent of the world’s total in 2030, it added.
“Excellent marketing strategies and smooth execution by luxury brands will continue to whet Chinese consumers’ buying appetite,” said Xing.
“The Chinese market will become a benchmark for the global luxury goods sector.”
