China’s luxury market boosted this year by 48%, even though we are going through a pandemic. The ban on international travel has also influenced this increase of luxury goods sales inside China’s mainland. The Millenials and Gen Z are becoming the predominant luxury shoppers in the world. What items were sold the most and how is the rest of the world doing you can read in this article.
The “revenge spending” results
Mainland China is one of the big winners this year. Even though it was a tough year for luxury companies – and not only – in China, things are rather different. According to an in-depth report by Bain & Company, a global consultancy firm, and Tmall Luxury Division, part of Alibaba, China‘s luxury market boosted by 48%. But how is it possible? We will explain right away.
Even though the beginning of the year was showing a rocky start for the luxury market due to the lockdown – which happened in January/February in China – from April on, the industry has recovered almost unexpectedly. Shops started to open, but traveling was still restricted. Here it is where happened the so-called “revenge spending”, which specialists refer to as the urge that people may be feeling after a period of confinement and restrictive circulation.
The international travel ban influenced the growth
Thus, the domestic sale of luxury goods recovered rapidly right after the lockdown and throughout the year it almost doubled. Moreover, the ban on international travel “obliged” the wealthy Chinese to do their shopping inside the country. So large sums of money that were being spent in the big international bargain hubs in Europe or America stayed this time within China. As a result, the luxury market in mainland China will most likely achieve a growth of 48%.
The same decrease in travel has led to a decrease of 35% of the Chinese consumers’ total luxury spend. The big domestic increase does not compensate for the overall Chinese consumption, at the same level as in the past years. The specialists predict that, even after the restrictions will be lifted, China has big chances to become the world’s leading luxury market by 2025.
Leather Goods and Jewelry, growth by 70-80%
If you were curious about what exactly were the Chinese looking for when buying luxury goods, well the answer might surprise you. In the first place, the leather goods industry and the jewelry industry reported an increase between 70 to 80%. In the second place, we have an increase of 50% in the shoe industry and the ready-to-wear collections saw an increase of 40%. The luxury beauty items were more sought after by 25% than last year. And high-end watch sales increased by 20% in 2020.
Millennials and Generation Z, the new luxury shoppers
The surprise of this year is definitely the change of the Chinese clientele. A big part of the big spenders are surprisingly people born between 1980 and 1995, the so-called Millennials. And in China, there are about 320 million of them. Next in line, we have the representatives of Generation Z, born after 1995, who make up for 80 million. Part of the reason they are such big luxury lovers is that they are also linked to a powerful influence on increased digitalization.
Regarding Gen Z, most of the young people purchase their very first luxury item at age 20, according to the study. Furthermore, they are more interested in fashion than the older generations and they are more likely inclined to buy designer editions and cross-band collaborations, rather than the “classics” of the big brands. As a result, the limited editions and customized products grew by 300-400% between January and October. According to the predictions, Gen Z and Millennials will become the predominant luxury shoppers in the world, a trend that has been going on globally for some years.
How is the rest of the world?
The rest of the world does not do that well. Because of lockdowns and travel restrictions all over the world, the global luxury market has seen a loss of 23%. Each company has a different percentage of decrease and many relied upon online sales this year. That is why a lot of luxury fashion brands had to reinvent themselves and they changed the catwalk into digital fashion shows or video games. The Chinese border will open gradually and by the second half of 2021, most of the Asian markets should be open. Nevertheless, the Chinese consumer will most likely be reluctant when it comes to traveling abroad and spending money, so specialists predict that the domestic growth will continue in 2021. When does everything go back to normal? No sooner than 2022 or even 2023, say the luxury industry experts.