Bain & Co. x Altagamma: China continues to drive luxury growth in 2023
China is set to have a significant impact on the global luxury industry's growth in the coming year.
Based on the Luxury Goods Worldwide Market Study – Spring 2023 conducted by Bain & Co. and Altagamma, it is projected that the market for personal luxury goods will experience a growth ranging from 5-12% in 2023. This growth will lead to a substantial increase in market value, reaching an estimated range of $393 billion (equivalent to 2.8 trillion RMB) to $415 billion (equivalent to 3 trillion RMB). These positive expectations remain intact despite the uncertainties in the global economy and tensions on the geopolitical front.
The high-end industry had an exceptional year in 2022, achieving an unprecedented market value of $376 billion (equivalent to 2.7 trillion RMB). Several factors contributed to its continued growth in Q1 2023. These include China's decision to reopen and ease its zero-Covid policy restrictions just in time for the Lunar New Year, leading to an influx of Chinese and Russian tourists in Japan and Southeast Asia. Additionally, European consumers regained confidence in the market, and hyperinflation showed signs of improvement by gradually decreasing.
Based on Bain's insights, the travel retail sector is experiencing a much-needed rebound, primarily driven by the vibrant markets of Southeast Asia and Japan. Image source: Unsplash.
The Jing Take: Federica Levato, who helped write the report and is a partner at Bain & Co., as well as the leader of the company's EMEA Luxury Goods and Fashion department, stated: "The luxury industry is now shifting into the era of 'literally me,' where individuals are focused on expressing their individuality rather than just striving for material items that denote status."
Luxury has now stepped into the era of "literally me," which is characterized by a longing to display our advancement beyond mere items that inspire us, prioritizing individuality rather than social standing.
According to the report, the most successful sectors consist of renowned and extremely high-end timepieces, accessories such as jewelry, and fashionable bags. The act of spending is influenced by the belief that these items hold significant worth, leading consumers to prioritize quality over quantity when making purchases.
Across China and other regions, the concept of personalization, do-it-yourself, and customization is becoming increasingly popular among youthful consumers. Specifically within the beauty industry, there has been a notable surge in the demand for niche fragrances, indicating substantial growth in this sector.
Following three years of Chinese consumers preferring to buy luxury goods domestically, luxury brands must now prepare to receive affluent Chinese tourists globally as China's international borders reopen.
For example, the study highlights that Hong Kong and Macau have seen a significant increase in popularity as top choices for Chinese tourists ever since the country started allowing travel again. Japan and Southeast Asia are also witnessing the initial influx of Chinese travelers who have a keen interest in purchasing jewelry and timepieces.
Based on information provided by the Ministry of Culture and Tourism in China, a staggering 106 million people embarked on domestic tourism journeys across the country during the Dragon Boat Festival in 2023. This marked a notable increase of 32.3% compared to the previous year and a significant 12.8% surge compared to the pre-pandemic period in 2019. When it comes to outbound travel, some of the sought-after destinations for tourists were Hong Kong, Seoul, Bangkok, Singapore, Macau, Tokyo, Osaka, Taipei, London, and Phuket.
In the future, high-end brands have a lot to be happy about. According to Bain & Co., the market for luxury goods is expected to grow to about 2.5 times its current size by 2030. Nonetheless, only brands that can quickly adapt to changing consumer preferences and market dynamics will be able to take advantage of the profitable Chinese market.
The Jing Take covers a noteworthy news story and offers our editorial team's examination of the important implications for the luxury sector. In this regular column, we assess various topics such as new product releases, corporate consolidations, and engaging discussions emerging on Chinese social platforms.
