The key points
- Bain & Co estimates that China will become the world’s top luxury market in 2025. Today it absorbs 21% of sales
- It closed 2021 with double-digit growth: + 36% on 2020, at 471 billion remimbi, over 66 billion euros
- Over 90% of the shopping was done at home, while online purchases grew by 56% over 2020
It has all the credentials to become the first market for luxury goods by 2025, after reacting to the pandemic and closing 2021 with double-digit growth: + 36% on 2020, to 471 billion remimbi, plus 66 billion euros, equal to 21% of the value of the entire market for personal luxury goods. And a 56% increase in digital sales, according to the report “A Year of Contrasts for China’s Growing Personal Luxury Market” by Bain & Co. Which identifies lights and shadows (such as the slowed growth in the second half of 2021) of the most promising (and complex) market for international luxury.
The year of the Tiger in brand projects
China – albeit in a phase of profound socio-economic change, also pushed by the policies of Xi JinPing such as the common prosperity that will strengthen the middle class – confirms itself as an important terrain of conquest for luxury brands. Who, as usual, have created ad hoc collections and special projects to celebrate the start of the lunar new year which opens today under the sign of the Tiger. If, for example, Gucci has created a vast collection called “Gucci Tiger”, Prada has launched the “Action in the Year of the Tiger” project aimed at all young talents of Chinese and international art schools under 30, called to propose their own personal interpretation of the tiger, to safeguard the Amur tiger.
Involving Chinese customers, especially the very young, directly in China is an increasingly decisive challenge for Western brands: thanks to the restrictions on international travel still in force (and which according to insiders will not be removed even in the first half of 2022), they concentrated their purchases on the domestic market. The “repatriated” share of consumption which, in 2021, absorbed between 94 and 98% of the entire expenditure.
Domestic market in exponential growth
The Chinese domestic market, despite having been colonized by the retail expansion of some brands (many of which have since reduced the points of sale) since the 1910s, began to grow only after 2016: the CAGR of 2% for the years that from 2011 to 2016, it jumped to 26% between 2016 and 2019. If the record year was 2020, with a growth of 48% over 2019, the estimated CAGR between now and 2025 is about 33%. In 2021, among the goods that recorded a greater increase in terms of sales, leather goods (+ 60%), fashion and lifestyle (+ 40%), jewelery (+ 35%), luxury watches (+ 30%) and beauty stand out (+ 20%).
Duty free and online: the new frontiers
An increasingly significant share of sales (in 2021 it was 13%, up 85%) is made in Hainan, a duty free island in the South China Sea. This is the new shopping destination for Chinese luxury lovers (who want to buy at discounted prices, with a discount percentage ranging from 30% to 55% on the official price lists). 50% of purchases in value are in beauty products.