What Happened: China will play a pivotal role in driving global luxury growth this year.
According to Bain & Co. and Altagamma’s Luxury Goods Worldwide Market – Spring 2023 study, the personal luxury goods market will grow between 5-12% in 2023, reaching between $393 billion (2.8 trillion RMB) and $415 billion (3 trillion RMB), despite macroeconomic uncertainty and geopolitical tensions.
The luxury sector posted a record year in 2022, reaching a market value of $376 billion (2.7 trillion RMB). A number of factors kept the momentum going in Q1 2023: China’s reopening and lifting of its zero-Covid policy restrictions before the Lunar New Year; Chinese and Russian tourists flocking to Japan and Southeast Asia; the recovering confidence of European consumers; and the gradual decrease of hyperinflation.
The Jing Take: Federica Levato, co-author of the report, partner at Bain & Co., and leader of the company’s EMEA Luxury Goods and Fashion practice, said: “Luxury is entering the ‘literally me’ era, marked by a desire to show ourselves moving beyond purely aspirational items, valuing uniqueness over status.”
“Luxury is entering the ‘literally me’ era, marked by a desire to show ourselves moving beyond purely aspirational items, valuing uniqueness over status.”
The report shows that top-performing categories include iconic and uber-luxury watches, jewelry, and handbags. And spending is driven by the perception of valuable assets, with consumers looking for “less but better” purchases.
After three years of luxury shopping repatriation, Chinese shoppers are accustomed to purchasing high-end items at home. But now that China’s international borders have reopened, luxury brands should also be ready to welcome well-off Chinese tourists worldwide.
For instance, the report points out that Hong Kong and Macau posted a sharp acceleration as primary destinations for Chinese tourism since the country reopened. Japan and Southeast Asia are also experiencing the first arrival of Chinese tourists with a strong appetite for jewelry and watches.
According to data from China’s Ministry of Culture and Tourism, during the 2023 Dragon Boat Festival (from June 22 to 24), 106 million domestic tourism trips were made nationwide, a year-on-year increase of 32.3% and a 12.8% increase compared to pre-pandemic levels in 2019. Hong Kong, Seoul, Bangkok, Singapore, Macau, Tokyo, Osaka, Taipei, London, and Phuket are the most popular outbound destinations.
Looking ahead, luxury brands have plenty to cheer about. Bain & Co. forecasts that the personal luxury goods market in 2030 will grow to around 2.5 times the size of the 2020 luxury market. However, only brands that are fast to react to shifting consumer preferences and market changes will be able to capitalize on the lucrative Chinese market.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.