It will be a year of restrained growth in 2024 for Chinese luxury. Offering the forecast, which outlines a mid-single digit advance, is the ‘China Luxury Report’ compiled by Bain & Company, according to which by 2023 the luxury market in the Former Celestial Empire had instead advanced by 12 percent. A growth rate driven by a strong first half of the year but also by an inevitably rewarding comparison with 2022 still overshadowed by the consequences of Covid.
Despite, therefore, the noticeable recovery known in the past year, by virtue of the fall of pandemic restrictions, in 2024 the luxury market in China will experience much more moderate growth, due to the current macroeconomic climate and the recovery of overseas purchases.
As early as the second half of 2023, the pace had already become more fatigued for the high-end, affected by a different propensity to buy among middle-class consumers and by the comparison with the previous third quarter, which was less flattering than for other quarters.
Ultimately, despite last year’s recovery, according to the U.S. consulting firm, “the Chinese luxury market has not yet fully recovered to 2021 levels,” noted Bruno Lannes, senior partner at Bain & Company. In fact, the rebound has been dampened, precisely, by “a challenging economic situation and the tendency to buy more abroad.” Thus, there remain “uncertainties regarding the speed of recovery in consumer confidence and the strengthening of cross-border purchases.”
In this sense, Hainan has been an effective litmus test: in the offshore island in southern China, which has experienced an acceleration in the Covid years riding on the domestic shopping trend, duty-free sales actually grew by 25 percent in 2023, while still remaining below 2021 levels.
In general, average spending per buyer fell by more than 25%, partly as a result of reduced discounts, less daigou (Chinese gray market, ndr) activity, supplanted by more structured alternatives in providing competitively priced items, and a lower consumer push.
These will represent, according to Bain, some of the directions for market evolution in the year just begun. As for the resumption of shopping beyond the Wall, if during the pandemic shopping within the country’s borders had reached 90 percent as a result of travel restrictions, by 2023 the percentage would have dropped to 70 percent as travel to Europe and the rest of Asia resumed. Also contributing to this is the price gap between luxury good that can be purchased in the motherland and abroad, a gap that has prompted many Chinese consumers to shop elsewhere.
According to the report, luxury goods consumption in China ranged from 22 percent to 24 percent of the world total in 2023, with mainland China standing at about 16 percent (excluding daigou). Despite the more moderate growth expected in 2024, by 2030 the Chinese high-end market is expected to come to weigh between 35 percent and 40 percent of global spending.
TKS PAMBIANCO