Buyers of Milennials and Gen Z have helped China double its global share of the global luxury market by 2020, with the market on track to become the world’s largest in 2025, even after the world economy returns to pre-pandemic levels.
The Chinese luxury market will grow 48% this year to 346 billion yuan, despite the COVID-19 pandemic, according to a report by Tmall, Alibaba trading platform BABA,
and consulting firm Bain & Company, published Dec. 16.
The global luxury market shrank by 23% in 2020, the report titled “China’s Unstoppable Luxury Market 2020” noted. However, China’s market share has almost doubled, from 11% last year to 20% in 2020.
Bruno Lannes, Shanghai’s senior partner at Bain, identified four factors that drove the rebound in mainland China’s market: additional repatriation, millennial buyers and Gen Z, continued digitization, and Hainan’s tax-free shops. The latter sales increased by 98% compared to 2019, reaching RMB 21 billion at the end of October 2020.
Several international luxury goods groups have highlighted the growing importance of sales in China to offset dependence on tourism, amid an unprecedented collapse in world travel.
Gucci, the fashion brand owned by the French group Kering KER,
announced last week that it will open two flagship stores on Alibaba’s online luxury shopping platform, which has more than 750 million Chinese consumers.
The first store, which sells fashion items, will open on December 21, while a second store focused on beauty products will launch in February 2021 and will be operated by Gucci’s licensing partner, Coty COTY.
“Gucci has invested strategically and cultivated a‘ digital first ’approach globally, including the establishment of a dedicated Chinese digital ecosystem in recent years,” said Marco Bizzarri, president and CEO of Gucci, in a communicated Friday.
Shares of Kering, which have fallen nearly 7% so far this year, were more than 2% lower than the first European operations on Monday.
Read: Burberry sales are back in growth, but the recovery of luxury goods may come to a halt
American Jewelry Tiffany & TIF Co.,
which is buying the French luxury giant LVMH MC,
by $ 15.8 billion, November exceeded Wall Street expectations for quarterly earnings as it benefited from a more than 70% increase in sales in China.
“One of the most exciting trends that have come out of the luxury market in 2020 has been the way brands have actively developed and strengthened their connections with consumers both online and offline,” said Chris Tung, director Alibaba Group Marketing.
“Global luxury brands have adopted new digital tools such as live streaming for consumer education or product presentation,” Tung added.
New growth in the Chinese market is expected until 2025, as Generation Z (those born after 1995) and millennials (those born between 1980 and 1995) continue to spend in luxury.
Nearly three-quarters of existing consumers in these cohorts have said they will increase or maintain their luxury spending by 2021.
However, global conditions are unlikely to return to normal before 2022 or even 2023. “Chinese consumers are likely to be cautious about international travel even after the reopening of borders.” noted the report, which added that as a result, most luxury brands believe that domestic growth will continue in 2021 around 30%.