fr24news– Buyers of Milennials and Gen Z have helped China double its overall share of the global luxury market in 2020, with the market on track to become the world’s largest by 2025, even after the return of the global economy at pre-pandemic levels.
The Chinese luxury market will grow 48% this year to 346 billion yuan, despite the COVID-19 pandemic, according to a report by Tmall, the Alibaba BABA trading platform,
and consultancy firm Bain & Company, published December 16.
The global luxury market shrank by 23% in 2020, noted the report, titled “China’s unstoppable luxury market 2020.” However, China’s market share has almost doubled from around 11% last year to 20% in 2020.
Bruno Lannes, senior partner in Shanghai at Bain, identified four factors driving the rebound in the mainland Chinese market: continued repatriation, Gen Z and Gen Z buyers, continued digitization and duty free shops from Hainan. Sales of the latter increased by 98% compared to 2019, reaching 21 billion RMB by the end of October 2020.
Several international luxury goods groups have highlighted the growing importance of sales to China to offset dependence on tourism, amid an unprecedented collapse in global travel.
Gucci, the fashion brand of the French group Kering KER,
announced last week that it would open two flagship stores on Alibaba’s online luxury shopping platform, which has more than 750 million Chinese consumers.
The first store, selling fashion items, will open on December 21, while a second store focused on beauty products will launch in February 2021 and will be operated by Gucci’s licensing partner Coty COTY.
“Gucci has strategically invested and cultivated a ‘digital first’ approach on a global scale, including building a dedicated Chinese digital ecosystem over the past few years,” said Marco Bizzarri, President and CEO on Friday. General of Gucci, in a statement.
Kering shares, which have fallen nearly 7% so far this year, were more than 2% lower at the start of European trading on Monday.
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American jeweler Tiffany & Co TIF,
which is bought by the French luxury giant LVMH MC,
for $ 15.8 billion, in November exceeded Wall Street’s expectations for quarterly profit, as it benefited from a more than 70% increase in sales in China.
“One of the most exciting trends in the luxury market in 2020 has been how brands have actively developed and strengthened their relationships with consumers online and offline,” said Chris Tung, Chief Marketing Officer of Alibaba Group.
“Global luxury brands have embraced new digital tools such as live streaming for consumer education or product showcasing,” Tung added.
Further growth in the Chinese market is expected through 2025, as Gen Z – those born after 1995 – and Millennials – those born between 1980 and 1995 – continue to spend on luxury.
Almost 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 borders reopen,” the report notes, adding that, by Therefore, most luxury brands estimate that domestic growth will continue in 2021 at a level of around 30%.