China's "new normal" of slower growth and continuing anti-corruption campaign notwithstanding, its luxury market continues to surge ahead, thanks to its exploding affluent middle-class. Click here This is sustained by rapid transformation from export dependency to consumer explosion, underpinned by robust economic fundamentals.
In an earlier report (2011), McKinsey expected that the very wealthy (over RMB 10 million in household income or assets) and the wealthy (RMB 300,000 to 10 million range) would account for 70% of China's luxury goods consumption in 2015. In a 2013 report, the consultancy estimated that by 2022, China's urban households would comprise 63% upper middle class (2010 real annual income of US$16,000 - $34,000) and above. The affluent are becoming a majority.
According to study of 29 May, 2017 by Bain & Co., a consultancy, China's luxury consumption is increasingly driven by diversification, extending to a wider range of categories, including luxury cars, fine arts, fine foods, cruises, hospitality, wellness, and educational services, not necessarily limited to the ultra-expensive.
Over three-quarters of China's luxury goods consists of watches, cosmetics, bags and jewelry. Most are driven by shopping overseas. This is due to price differentials, confidence in authenticity, and combined tourism experience. Now, thanks to narrowing pricing policies, lower RMB exchange rates and taste diversification, some overseas luxury consumption is returning to the home market. (Financial Times and South China Morning Post). If this trend continues, massive business opportunities will be created for much greater sales of luxury foreign brands in China, if consumer protection confidence can be sufficiently safeguarded.
I have incorporated the above trends into the following PowerPoint presentation.
Download Chinese luxury market trends 2017 - A synopsis (PowerPoint presentation)
More details and analyses can be found in the following reports -
Download McKinsey Report August 2017 - Chinese Luxury Consumers -1-trillion-renminbi opportunity
Download Deloitte Report - Global Powers of Luxury Goods 2017
Comments