Chinese consumers tipped to dominate luxury market
Print Edition
THE Chinese consumers will make up for at least 45 percent of the luxury market spending by 2025, up from an estimated 32 percent this year, according to the 17th edition of Bain & Co’s annual luxury study.
Personal luxury goods sales continued their revival last year, ensuring 6 percent growth globally at constant exchange rates to reach 260 billion euros (US$297 billion).
The positive trend is expected to continue with an estimated annual growth of 3-5 percent per year through 2025 to reach a market size of 320-365 billion euros, according to the Bain report, which was done in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
Over the past three years, Chinese spending on luxury goods on the Chinese mainland was twice as much as their overseas spending.
On China’s mainland, luxury sales are estimated to grow 18 percent at current exchange rates to 23 billion euros this year, driven by a rising demand rather than by price increases.
“Last year, we saw the global luxury market return to healthy growth, albeit at a more moderate pace than in the past,” said Claudia D’Arpizio, a Bain partner and the lead author of the study.
“That trend continued in 2018, reinforcing the ‘new normal’ we predicted, led by flourishing luxury demand from Chinese consumers, the continued rise of online channels, and increasing influence from younger generations of consumers.”
The report says online channels are likely to contribute to up to 25 percent of the total market size, more than double from today’s 10 percent, thus cannibalizing more “traditional” channels.
Online luxury shopping continues to accelerate in 2018, with an estimated 22 percent growth amounting to 27 billion euros.
The US market made up close to half of online sales at 44 percent, but Asia is emerging as the new growth engine for luxury goods online.
“New technologies are at once enriching the online and mobile shopping experiences, while potentially putting the role of physical channels at risk,” said Federica Levato, a Bain partner and co-author of the study.
“The luxury store-opening path is slowing down, leading to channel consolidation in the future.
“Brands must therefore rethink their physical channels, evolve their role from point-of-sale to point-of-touch, and use new technology to enhance customers’ in-store experiences,” she added.
However, the report also highlighted socio-political issues, commercial policies and potential short-term recessions as potential risks in the short term.
“Significant changes will face luxury brands in the coming years, and they shall keep in mind three key strategies: to be proactive in developing approaches to serve new customers and address market trends; be distinctive in designing a winning formula; and to keep in line the mindset of the next generation of consumers,” commented D’Arpizio.
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