Chinese consumers are set to become the most important demographic segment in the global personal luxury goods market, making up 35 to 40 percent of the total market by 2030, according to Bain & Co. and Altagamma.
Americans and Europeans will take the number two and three spots, with an estimated 22 to 24 percent and 16 to 18 percent of market share, respectively, Bain stated in its latest luxury market report.
Overall, the global personal luxury goods market, comprising apparel, cosmetics, jewelry, and watches, is predicted to have a promising future, growing approximately 2.5 times its 2020 size to reach an estimated 540 billion euros to 580 billion euros (approximately 586 billion to 629 billion) in 2030.
Two-thirds of the entire market will be driven by online and monobrand channels by 2030.
Breaking down the age demographics, millennials will dominate the personal luxury goods market with a share between 50 and 55 percent. Gen Z will comprise 20 to 25 percent, while Gen Alpha will claim about 5 percent.
But looking at the near future, slow growth is predicted for the luxury sector in 2024, with just a 1 to 4 percent rise at constant exchange rates over 2023, which is less than half of the 8 percent year-on-year growth expected to be seen by the end of 2023.
The Jing Take
: According to Bain, China is expected to contribute up to 40 percent of worldwide luxury spending by 2030, up from 33 percent in 2019.
The report also predicts that buying habits will shift geographically toward mainland China. In 2019, the mainland’s shopping hubs drove only 11 percent of the personal luxury goods market sales, while the US and European regions contributed 62 percent of sales.
By 2030, mainland China stores will attract up to 27 percent of luxury sales, catalyzed by Hainan’s transformation into a duty-free island by 2025. Although the US and Europe will maintain their status as key global shopping centers, their collective geographical market share may drop to 46 to 50 percent.
After reopening its borders this year, mainland China showed promising indications of recovery with a strong Q1 for the luxury sector. However, waning consumer confidence due to macroeconomic issues such as turbulent real estate markets, the rising youth unemployment rate, and the migration of wealth abroad have caused slower-than-expected growth, the report indicates. Q4 is estimated to take China on a positive trajectory.
In 2023, China’s reopening has proved to be more beneficial for Asian countries, with 65 percent of Chinese tourist spending concentrated in Asia compared with 40 percent in Europe. Spending in Asia was driven by wealthy Chinese customers, while Gen Z and millennials preferred Europe. In Asia, Japan in particular enjoyed a boom in luxury sales throughout the year as it attracted Chinese tourists due to a weak yen.
By the end of 2023, the global luxury market, including the personal luxury goods sector, is expected to reach 1.5 trillion euros (1.63 trillion), growing 8 to 10 percent over 2022.
Mainland China’s personal luxury goods market size is estimated to reach 56 billion euros (60.73 billion) by the end of 2023, 12 percent above 2022 at constant currency. In comparison, Europe will close the year as the global market leader with a market size of 102 billion euros (110.76 billion).
For 2024, the forecast indicates an encouraging growth in local consumption in the mainland as the real GDP growth may grow by 4.2 percent YoY. Other key markets like Europe and the US may see a much smaller GDP growth of 1.4 percent and 1.5 percent, respectively.
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.