According to a study by Bain & Co. published on Wednesday, the Chinese luxury market took off again in 2017 after slowing down in recent years, as local Millennials set their sights especially on handbags and high-end cosmetics.
In 2017, luxury goods sales in China grew approximately 20% over the previous year, and were worth CNY142 billion (€18 billion). It was the highest growth rate since 2011, when the market began to slow down as the domestic economy’s growth stuttered and the government started to implement anti-corruption measures.
Expenditure by Chinese consumers accounts for 32% of the worldwide luxury goods market, whose value is estimated at €262 billion. Chinese consumption is crucial to the performance of industry giants like LVMH, Kering and Burberry.
The Chinese market “virtually stagnated during the last five years. In 2017, it grew 20%, an extraordinary rebound,” said Bruno Lannes, a partner at Bain Shanghai, adding that lower prices and reduced customs duties played a decisive role.
China is trying to rebalance its growth model by stimulating consumption. But the government has also reduced import duties and fought against the parallel market operated by the daigu, buyers who sell off cheaply on the domestic market authentic luxury products bought in Europe. According to Bain, China’s domestic luxury goods market accounts for only 8% of worldwide luxury sales, since Chinese shoppers make three quarters of their luxury purchases abroad.
Bain expects luxury goods expenditure by Chinese consumers to grow strongly again this year, thanks to “Millennial-driven demand, and demand for high-end ready-to-wear apparel.” After the robust rise in 2017, Bain forecasts a sales increase of just under 15%.
The market’s rebound will again be chiefly driven by Millennial consumers, to the benefit of labels which have managed to revamp their brand image, like Coach, while more classic ones like Prada may lose out. “A new China is emerging, with new consumers who weren’t on the market five years ago and who have different profiles, expectations and tastes,” said Bruno Lannes.
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