The most telling data about China’s luxury market in 2024

The year 2024 presented an inflection point for China’s luxury market as economic pressures, shifting consumer behaviors, and growing arbitrage dynamics highlighted structural weaknesses in what was once the most promising growth engine for global luxury brands. The slowdown was underscored by a weakened economy, a persistent real estate crisis, and a discerning younger generation exercising restraint in discretionary spending. China’s economic growth decelerated to 4.5% this year, down from 5.2% in 2023, reflecting broader macroeconomic uncertainty. The property sector, which contributes approximately 30% of China’s GDP, saw a 15% drop in investment. This contraction resulted in a negative wealth effect, eroding discretionary income among affluent households and leading to a significant shift in purchasing behavior. Mainland sales of personal luxury goods dropped by 1-3% in the first quarter of the year, according to Bain-Altagamma’s Luxury Goods Worldwide Market Study. Analysts at HSBC revised their luxury market growth forecast downward, predicting just 2.8% growth in 2024, compared to their earlier estimate of 5.5%. Price sensitivity among Chinese consumers drove a resurgence in outbound shopping, as favorable exchange rates and tax-free opportunities in destinations like Japan and Hainan made luxury purchases significantly cheaper. Japan’s weak yen reduced prices for luxury goods by 30-40%, attracting a steady stream of Chinese shoppers. Meanwhile, Hainan’s duty-free market reported a 15% YoY growth in sales, benefiting from its competitive pricing and accessibility. Approximately 52% of affluent Chinese consumers made overseas luxury purchases in the first half of 2024, up 16% from the previous year, despite outbound travel levels still recovering to pre-pandemic norms. Luxury pricing strategies added to the pressures, with repeated price hikes of 15-50% since 2021 alienating aspirational consumers. Outrage over price discrepancies with international markets gained traction on social media, further encouraging Chinese shoppers to shift their purchases abroad. At the same time, structural economic challenges disproportionately impacted China’s youth, traditionally a key driver of luxury spending. Youth unemployment exceeded 20% in 2024, a record high, and surveys revealed a corresponding decline in discretionary spending among those aged 16 to 24. This demographic is increasingly prioritizing travel, entertainment, and wellness experiences over material goods. Still, secondhand luxury platforms maintained momentum, with revenue growing around 20% this year as younger consumers embraced more affordable and sustainable options. Western luxury brands faced mounting challenges amid these trends. TD Securities’ consumer survey revealed that one in four Chinese shoppers found Western brands less appealing in 2024, underscoring the growing influence of domestic competitors. Mao Geping Cosmetics, for example, achieved a market valuation exceeding $3 billion after an 87% share price surge at its IPO this year, reflecting strong demand for culturally resonant luxury alternatives. In contrast, luxury houses like LVMH and Richemont reported lower sales in the region, with LVMH’s third-quarter revenue in Asia (excluding Japan) dropping 16% compared to 2023 levels. The changing tastes of China’s younger generations further reshaped the luxury landscape. Millennials and Gen Z gravitated toward brands with cultural relevance, authenticity, and sustainability while rejecting overt displays of wealth. This shift in consumer behavior aligns with Xi Jinping’s ongoing campaign against “luxury shame,” which discourages ostentatious consumption and curbs the prominence of wealth influencers on social media. The outlook for China’s luxury market remains uncertain. Bain forecasts continued sluggishness through 2024, with structural issues such as weak consumer confidence, a pressured middle class, and rising economic inequality curbing growth. Brands hoping to recover must prioritize localized offerings, pricing stability, and deeper engagement with culturally conscious, value-driven consumers. By the end of 2024, the lesson for global luxury brands is clear: unchecked growth is no longer guaranteed, and the ability to adapt will determine success in China’s evolving market.

The most telling data about China’s luxury market in 2024

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Published December 28, 2024

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The most telling data about China’s luxury market in 2024