From Quantity To Quality: Fashion 'Demand Deepening' Begins In China, BCG Report

What happened China's luxury market is entering a new era marked by rising affluence and rapidly evolving tastes that will see fashion demand deepening, according to American consulting firm Boston Consulting Group (BCG). The country's post-Covid-19 luxury spending rebound is set to continue over the next decade, according to BCG's latest Chinese-language report. The Chinese market for footwear and fashion apparel will continue to grow in terms of quality as well as volume, propelling the total market size to approximately $424.7 billion (3 trillion RMB) over the next 10 years. Chinese demand for luxury products and services will continue to rise over the next decade, albeit at a slower rate than in previous eras, as consumers become more willing to fork out for higher quality products and services, according to BCG. The report adds that China’s fashion and luxury market has room to mature, given that the nation’s per capita clothing consumption is between only a third to a sixth of that of developed nations like the US and Japan. The Jing Take China's entering a fashion 'demand deepening period,' according to the report. This means that luxury and fashion industries will experience a shift in consumption patterns – similar to that of other developed countries, as consumers “deepen” their demand for high-quality products. The number of affluent consumers in the nation will continue to expand, while the upper-middle classes become “more picky" as they become more discerning about their fashion and luxury needs, Li Yang, partner and managing director at BCG, writes in the report. “The dual impact of upward demand and economic pressure” will contribute to the accelerated growth, the report says. Despite a rise in unemployment among China’s younger generations, the nation’s middle-class population is set to double and reach 500 million by 2030, according to a recent report by management consulting firm Bain & Company. And in 2025, a total of 7.6 million Chinese households are forecast to spend $145 billion (1 trillion RMB) in total on luxury products — double 2016’s level of spending, according to management consulting firm McKinsey. The fashion market will grow steadily alongside upper and middle-class consumers’ rising incomes. According to BCG, the upward mobility of China’s affluent and middle classes will also fuel the expansion of mid to high-end brands as the trend of American-style premiumization continues. Meanwhile, an increasing emphasis on quality will lead to more discerning purchasing patterns, as consumers adopt more refined tastes and seek fewer, but higher quality products and experiences — similar to Japan’s “rational” and minimalist buying mindsets. China’s luxury market will become a fusion of "American premiumization" and "Japanese rationalism” buying trends, according to BCG. Luxury brands can better equip themselves to navigate the coming changes by honing key aspects of their brand identities, stories and messaging via more nuanced positioning, strengthening supply chains, and by employing targeted digital marketing strategies. For instance, brands should understand that China’s middle class now seeks “less but better,” and that they will need to cater to these evolving values. Meanwhile, the ability to quickly improve upon and refine existing products according to changing tastes will depend on brands’ abilities to bolster their supply chain capabilities. Finally, brands will need to build up their digital marketing outreach to connect with China’s increasingly diverse groups of consumers. 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.

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From Quantity To Quality: Fashion 'Demand Deepening' Begins In China, BCG Report