Reports

    Bain forecasts China luxury market to grow 4-6% in 2024

    Bain forecasts China’s luxury market will shrug off recent lackluster growth.
    Image: Shutterstock
      Published   in Fashion

    What Happened

    China’s luxury market will grow at mid-single-digits (4-6 percent) this year, Bain’s latest China luxury report forecasts.

    From 2017 to 2021, China's luxury market tripled in size as Chinese consumers returned to purchase luxury in China. However, due to the impact of Covid-19, the boom came to an end in 2022, resulting in a double-digit decline.

    In 2023, luxury consumption rebounded following the lifting of pandemic restrictions. The year started with a robust rebound in the first half, but a decline in consumer sentiment among middle and high-income individuals hit luxury sales in the second half. Overall, the market grew 12 percent year on year according to Bain.

    In 2023, luxury consumption rebounded following the lifting of pandemic restrictions. Image: Bain
    In 2023, luxury consumption rebounded following the lifting of pandemic restrictions. Image: Bain

    “The solid double-digit rebound is commendable, but China’s luxury market has not fully recovered to its 2021 levels. The recovery was tempered by the challenging economic climate and increased overseas shopping. As the market transitions to a post-Covid growth phase, uncertainties remain regarding the speed at which consumer confidence will resume and how overseas luxury shopping will evolve,” said Bruno Lannes, a Shanghai-based senior partner at Bain.

    The Jing Take

    Driven by strong momentum in the fragrance and make-up categories, the beauty segment posted growth of 8 percent in 2023. Overall, all categories within the luxury market in China rebounded.

    Fashion, lifestyle, and jewelry category growth ranged from 15 to 20 percent. Leather goods expansion was muted (10 to 15 percent), as consumers moved to the lower price bag segment. The watch category experienced the softest rebound with growth rates ranging from 5 to 10 percent driven by few key players (Rolex, Audemars Piguet, and Omega).

    The recovery in domestic travel and stimulus from the local government expanded duty free sales in Hainan by about 25 percent YoY, but still not back to 2021 levels. Notably, average spending per shopper decreased more than 25 percent — likely due to lower discount rates, fewer daigou activities, and increased consumer cautiousness.

    Bain forecasts domestic luxury spending will have decreased to 70 percent of their total luxury spendings in 2023 from over 90 percent during the pandemic years, as Chinese overseas tourism resumes.

    In 2023, Chinese luxury spending in Europe and Asia made up around 40 percent and 65 percent of 2019’s spending levels in those markets, respectively. These numbers are expected to increase, given the attractive price gaps in fashion and leather products between Mainland China and other markets.

     In 2023, Chinese luxury spending in Europe and Asia made up around 40 percent and 65 percent of 2019’s spending levels in those markets, respectively. Image: Bain
    In 2023, Chinese luxury spending in Europe and Asia made up around 40 percent and 65 percent of 2019’s spending levels in those markets, respectively. Image: Bain

    South Korean duty-free sales to international travelers are forecast to decline 30 percent to approximately $8 billion to $9 billion (60 billion to 65 billion RMB), given restrictions on daigou activity in the category. But Bain believes the daigou trade, or surrogate shopper market, is unlikely to cool off.

    Newer and more professional daigou are emerging, particularly in the fashion and leather goods sector. These personal shoppers are providing consumers with an aggregated and authenticated avenue for shopping overseas goods from wholesalers at lower prices.

    In 2023, Chinese luxury consumption accounted for 22 percent to 24 percent of the world’s total. Bain forecasts that by 2030, it will account for 35 percent to 40 percent of the world's total, with consumption in mainland China reaching 24 percent to 26 percent.

    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.

    Discover more
    Daily BriefAnalysis, news, and insights delivered to your inbox.