SHANGHAI: Sales in China’s luxury goods sector surged ahead in 2017, growing six times faster than in 2016, driven in large part by the spending habits of millennials, according to a new report from Bain.
“It’s essentially been a flattish market for the last five years,” said Bruno Lannes, Shanghai-based partner at consulting firm Bain. “Now 2017 is plus 20% – that’s an amazing rebound.”
Sales of luxury goods on the mainland jumped 21.4% to 142bn yuan (US$22bn), compared to just 3.5% in 2016; this marked the first significant increase since 2011, when a crackdown on corruption began and economic growth slowed, Reuters noted.
But this market growth is not being fuelled by the same consumers or categories as before. “This is a new China coming in as opposed to the old China coming back,” said Lannes.
“A new China is emerging with new consumers that were not there five years ago that have different profiles, different expectations and different tastes.”
The study highlighted millennials’ spending on ready-to-wear attire, as this age group prefers luxury casual wear and sportswear to more traditional design; cosmetics and jewellery were also fast-growing sectors.
The average age of mainland spenders on luxury goods is about 35, which is ten years younger than those in developed economies, the study said; and 93% of millennials will tend to buy more luxury goods in the next three years.
Marketing spend has shifted accordingly, with more being directed into digital channels. Bain reported that digital spending now accounts for around half of all spending by luxury brands in China compared to just over a third two years ago.
Other factors that have affected the luxury market include government policies to encourage domestic consumption, restrictions on dai gou services and the pricing strategies of brands themselves.
Sourced from Reuters, South China Morning Post, Caixin; additional content by WARC staff