BEIJING: Shoppers from China are due to increase their spending on luxury goods to over RMB370bn ($59.2bn) in 2015, boosting companies at home and abroad, a study from McKinsey has predicted.
The consultancy estimated that Chinese buyers would spend RMB246bn on luxury lines like ready-to-wear fashion, shoes, handbags, watches and fine jewellery this year, up from RMB149bn in 2010.
Looking further ahead, the firm suggested category revenues derived from consumers living in the world's most populous nation should hit RMB374bn in 2015, covering both domestic and overseas purchases.
More broadly, the country's share of the global luxury market will come in at 34% in three years' time, compared with the total of just 19% recorded at the start of the decade.
Within the overall figure, the Mainland luxury segment is set to yield RMB127bn in returns during 2012 and RMB188bn in 2015, indicating the significant proportion of high-end purchases made abroad.
In 2012, the "mushrooming" upper middle class households, with disposable incomes of RMB50k to RMB250k a year, will supply 12% of the revenues generated on the Mainland, rising to 15% in 2015.
"China's Tier 2 cities are where many of these new entrants are likely to live," McKinsey said. "Although about 60% of luxury spending will continue to take place in the nation's 12 largest and wealthiest cities, faster-paced growth will likely occur in smaller metropolises."
Those homes described as being "very wealthy", or enjoying annual discretionary expenditure topping RMB1m, are also anticipated to witness an increase from 24% to 28% on the same measure.
By contrast, "wealthy" residences, worth between RMB550k and RMB1m per annum, will see their share fall from 36% to 32% on this metric, with the "mass affluent" segment down from 27% to 25%.
The number of luxury shoppers solely making acquisitions on the Mainland fell from 65% in 2010 to 38% in 2012, and the amount of consumers only buying items outside China rose from 9% to 13%.
However, exactly 50% of the Chinese luxury audience bought products both at home and overseas during 2012, nearly doubling the 27% logged in 2010, the analysis added.
"The financial motive to buy abroad is strong, mainly because taxes on luxury goods in China range around 20%-70%, depending on the category. The resulting disparities in retail prices can be stunning, especially after accounting for the exchange rate factor," McKinsey said.
Such a process looks set to continue in the future, as Chinese consumers make 94m outbound trips in 2015, versus 70m in 2011 and 57m in 2010.
As only 20% of 1,000 category shoppers polled by McKinsey "preferred" products with a local influence, Western styles may remain dominant. Another 66% favoured "low-key and understated" purchases.
Data sourced from McKinsey; additional content by Warc staff