The 2023 rebound spanned all categories within China's luxury market, with Fashion, Lifestyle and Jewelry leading the recovery with growth rates of between 15 and 20 percent. Leather goods grew by 10 to 15 percent, focusing on the lower-priced handbag segments.
“The strong double-digit rebound is commendable, but China's luxury market has not fully recovered to its 2021 levels,” he commented. Bruno Lannes, senior partner at Bain & Company in Shanghai. He attributed the moderate recovery to economic challenges and increased overseas purchases, pointing to uncertainties in the post-Covid growth phase, particularly regarding consumer confidence and developments in overseas luxury purchases. .
China's luxury market is projected to grow by mid-single digits in 2024, following a 12 percent year-on-year increase in 2023, according to the Bain & Company report. The 2023 surge, a rebound from pandemic lows, started strongly but slowed in the second half due to lower consumer confidence. All luxury categories experienced growth, with fashion and jewelry leading the way.
Hainan's duty-free sales grew around 25 percent in 2023, although still below 2021 levels. This growth was attributed to the recovery in domestic travel and the Hainan government's stimulus measures. Interestingly, average spending per buyer decreased by more than 25 percent, likely due to lower discount levels, lower Daigou activities, and greater consumer rationality.
Two key trends have been shaping China's luxury market and are expected to continue to do so: the return of luxury shopping abroad and the evolution of Daigou, a person who facilitates the buying and selling of international products on behalf of a customer in mainland China.
During the pandemic, more than 90 percent of luxury purchases were made in the country due to border closures. As overseas Chinese tourism resumes, domestic luxury spending is expected to fall to 70 percent in 2023. Chinese luxury spending in Europe and Asia in 2023 constituted about 40 percent and 65 percent from their 2019 levels in these regions, respectively.
South Korea's duty-free market, a major source of Daigou, particularly in luxury beauty products, is estimated to decline by 30 percent to around RMB 60 to 65 billion. This is attributed to Daigou's commission restrictions and limited supply of popular beauty products in the Chinese market. However, new, more professional Daigou models are emerging in the fashion and leather goods sectors, taking a platform-based approach to offer consumers aggregated and authenticated purchasing paths.
“The extent of this recovery in 2024 will depend primarily on the speed of the economic recovery and changes in travel and accommodation costs,” he said. Weiwei Xing, Partner at Bain & Company in Hong Kong. He also highlighted the importance of brands implementing harmonized global pricing strategies to maintain consumption in mainland China.
In 2023, Chinese luxury consumption is estimated to account for approximately 22 to 24 percent of the global total, with consumption in mainland China accounting for around 16 percent (excluding Daigou). By 2030, Chinese luxury consumption is expected to reach between 35 and 40 percent of the global total, and consumption in mainland China will reach between 24 and 26 percent, consolidating its position as the leading luxury market by global level.
Fiber2Fashion News Desk (KD)
