Despite an ongoing slowdown in luxury growth, new data released by market research firm Euromonitor finds that China remains on track to surpass Japan as the second largest market in the world for high-end goods over the next five years.
This rise in rankings will be preceded by a short-term drop, according to the firm. As the country’s slowing GDP growth and government crackdown on extravagant spending continue, China is expected to decline from third to fourth place in Euromonitor’s global 2014 rankings for luxury goods. “Luxury sales in China have increased by US$9.6 billion in the last five years and aside from the US, the top luxury market in the world with US$18.6 billion in sales, no other market came even close to that growth,” said Fflur Roberts, Euromonitor’s head of luxury goods research. “However, this impressive growth fizzled towards the end of 2013, leading many luxury brands to question their strategy for China and other emerging markets.”
This trend will be reversed by 2019, however, when China is expected to rise to its second-place standing—a later date than Euromonitor’s original prediction of 2016. The change will be due to an estimated 64 percent rise in disposable income, which will contribute to a 52 percent increase in luxury spending in real terms over the next five years, according to the firm’s prediction.
The growth rate rebound is already slowly happening: the firm expects 4 percent luxury growth in China for 2014, and an increase to 6 percent for 2015. While nothing like the country’s double-digit growth in previous years, the rates are higher than 2013’s estimated rate of 2.5 percent.
While the United States will remain on top as the world’s top luxury market in 2019, Chinese spending is expected to play a major role in its continued growth. “We expect to see more spending by wealthy Chinese tourists outside mainland China as well as amongst Chinese diasporas,” said Roberts. “Many high-income consumers from the mainland are likely to look to relocate overseas, with the US, Europe, and Canada top choices for a new home. As they move, so will their buying power.”
China’s high spending will also help propel overall global luxury growth to new heights: the firm predicts that total worldwide spending will reach $405 billion by 2019.