BEIJING: A sustained boom in demand for high-end goods across China means the country has now overtaken the US to become the world's largest luxury market, Bain & Company has revealed.
The consultancy estimated that China yields roughly 27% of spending on luxury goods and services globally today, versus around 20% for the US. By 2015, the Asian nation is likely to deliver 33% of sales, the China Daily reports
The firm also forecast that luxury sales should grow by 7% year on year across mainland China in 2012, reaching US$18.1bn. This is the lowest annual growth recorded by the sector in China in five years, but still outpaces most major international markets.
When including purchases by Chinese shoppers overseas, the country's net luxury spend increases to $46.4bn, as travellers take advantage of the lower prices and broader choice available overseas.
The recent weakness of the euro has encouraged this trend among visitors to Europe. But the sector also faces economic and regulatory challenges which could trim sales growth over the longer term.
Most importantly, it is expected that GDP growth will reach just 7.5% in China during 2012, according to the latest Warc forecasts
. This would be the slowest pace of economic expansion in over a decade.
Meanwhile, Bruno Lannes, a partner at Bain & Company, suggested that new laws banning the purchase of luxury goods with public funds have also cooled domestic demand.
In evidence of this, the proportion of overall luxury sales generated by gift giving, a key category driver in China, is pegged to decline from 30% in 2011 to 25% in 2012.
Lannes also suggested that shifting tastes among Chinese shoppers are likely to wield an increasing influence on luxury product design, marketing and service provision over the years ahead.
"Changes in what Chinese shoppers want are now a central issue for the global luxury sector's largest brands," he said.
Data sourced from China Daily/South China Morning Post; additional content by Warc staff