Milennials and Gen Z buyers have helped China double its global share of the global luxury market in 2020, with the market becoming the largest in the world by 2025, even after the world economy returns to pre-pandemic levels.
China’s luxury market will grow 48% this year to 346 billion yuan, despite the COVID-19 pandemic, according to a report by Tmall, Alibaba BABA’s shopping platform,
and consulting firm Bain & Company, published Dec. 16.
The global luxury market fell by 23% in 2020, the report, entitled “China’s 2020 Unstoppable Luxury Market,” said. However, China’s market share has almost doubled, rising from about 11% last year to 20% in 2020.
Bruno Lannes, Shanghai’s senior partner at Bain, identified four factors that led to a return to the mainland Chinese market: subsequent repatriation, millennial and Gen Z buyers, continued digitization, and Hainan duty-free stores. The latter’s sales increased by 98% compared to 2019, reaching RMB 21 billion by the end of October 2020.
Several international luxury goods groups have highlighted the growing importance of sales in China to offset tourism dependence amid an unprecedented collapse in global travel.
Gucci, the fashion brand owned by the French group Kering KER,
announced last week that it will open two flagship stores on Alibaba’s online luxury shopping platform, which has more than 750 million Chinese consumers.
The first store, which sells fashion items, will open on December 21, while a second store focused on beauty products will be launched in February 2021 and will be operated by licensing partner Gucci Coty COTY.
“Gucci has invested strategically and cultivated a ‘digital first’ approach globally, including the establishment of a dedicated Chinese digital ecosystem in recent years,” Marco Bizzarri, President and CEO of Gucci, said in a statement on Friday.
Shares in Kering, which have fallen by almost 7% so far this year, were more than 2% lower in early European trading on Monday.
Read: Burberry sales are back on the rise, but the recovery of luxury goods may stop
American Jewelry Tiffany & Co. TIF,
which is bought by the French luxury giant LVMH MC,
for $ 15.8 billion, it exceeded Wall Street’s quarterly profit expectations in November as it benefited from a 70% increase in sales in China.
“One of the most exciting trends to emerge from the luxury market in 2020 has been the way brands have actively developed and strengthened their connections with consumers both online and offline,” said Chris Tung, Director of Alibaba Group marketing.
“Global luxury brands have embraced new digital tools, such as live streaming for consumer education or product presentation,” Tung added.
Further growth in China’s market is expected by 2025, as Gen Z – those born after 1995 – and millennials – those born between 1980 and 1995 – continue to spend on luxury.
Nearly three-quarters of existing consumers in these cohorts said they would increase or maintain their luxury spending in 2021.
However, global conditions are unlikely to return to normal before 2022 or even 2023. “Chinese consumers are also likely to remain cautious about international travel even after the reopening of borders,” the report added. that, as a result, most luxury brands believe that domestic growth will continue in 2021 at a level of about 30%.