Global consultancy Boston Consulting Group (BCG) said on Tuesday that the potential slowdown in Chinese demand for luxury goods would be vital in determining the trajectory of the global luxury goods market in the medium term.
“What’s more dangerous [for the global luxury goods market] in the next three to five years is the Chinese demand -- whether it would be slowing down will be much more important than the impact from tariffs,” said Christine Barton, senior partner and managing director of Boston Consulting Group, who gave the keynote speech at Luxury Daily’s “Luxury FirstLook 2019: Digital Acceleration” conference on January 16 in New York.
Barton’s statement confirmed the sentiment expressed by many luxury brands recently. Two weeks ago, electronics brand Apple slashed its sales estimate for the first quarter of 2019, citing waning demand from Chinese consumers as the main reason. Earlier, American premium jewelry brand Tiffany & Co. also said lower-than-expected sales attributed to Chinese tourists in the United States were responsible for sluggish revenue growth for the most recent quarter as the company trimmed its forecast for next quarter.
The luxury world's reliance on China has become substantial. BCG’s research concluded that, by 2024, 40 percent of luxury goods consumption is expected to be made by Chinese consumers, which will account for 70 percent of the sales growth in the period.
“[The] luxury market today moves from a global market, where people used to travel abroad to purchase products, to one that is now much more local and regional,” noted Barton. This shift makes luxury brands’ reliance on the Chinese market and consumers much more absolute, and, therefore, more vulnerable to a potential drop in consumer demand.
During the keynote speech, Barton also revealed a number of consumer trends that will shape global luxury markets, including luxury casualwear, new luxury values, collaborations with streetwear brands/artists, as well as influencers. The findings were based on surveys of 12,000 true-luxury consumers who at least made two to four purchases in the past 12 months.
“Luxury casualwear is the new normal, driven by formal saturation and comfort for older generations, and by coolness [demanded] by the younger generation,” said Barton. Before, casualization, as evidenced by the popularity of categories in sneakers, T-shirts, and jeans, was thought as a trend only for millennial luxury shoppers. But the global aging population has come into play, Barton said, and she addressed them as the “forever young” generations who embrace the trend.
Traditional luxury values such as status, wealth and exclusivity still dominate why consumers purchase luxury goods, Barton noted, but China and millennials are giving birth to new sets of luxury values, including extravagant and fun, belonging and understanding, identity statements, resilient idealism (in the face of the current geopolitical environment), etc.
“Luxury collaborations with streetwear and artists are proven to have a positive impact on young generations [in their perception of brands],” she said. “And influencers have become top trusted sources among them today.”
China's economic future will remain to be an uncertain factor for luxury brands, but they can all learn from these trends to identify more targeted and efficient strategies to better serve luxury consumers.