Why this is important to Wisconsin businesses: Purchases by Chinese consumers constitute more than one-quarter of all purchases worldwide in this category.
In the past several months, due to the pandemic, the global luxury goods market has been severely shocked, with global demand falling to a record low. However, China’s luxury goods market was the exception, and was expected to be the only luxury goods market in the world with positive growth for 2020.
Chinese consumers are a driving force in the global luxury goods market, accounting for a growing share of global spending, and China’s luxury goods market had been booming before the pandemic. In terms of market scale, China’s domestic luxury goods market reached ¥142 billion in 2017. In 2018, the market scale reached ¥170 billion with a 19% year-over-year increase. In 2019, China’s luxury goods market reached ¥213 billion, and in 2020, after a difficult opening, the market is expected to grow by 48% and reach ¥346 billion ($52.9 billion USD) even despite the pandemic.
Considering personal consumption by nationality, in 2019, Chinese consumers accounted for 35% of the world's total personal luxury goods consumption, with a total share increase of 2% from 2018, ranking first in the world. Consumers from the U.S. ranked second, accounting for 22% this year. European consumers ranked third, accounting for 17%. In 2020, Chinese consumers are expected to account for 27% to 29%, still ranking first, but with a slight decrease in percentage due to travel bans and the resulting decrease in overseas consumption. By 2025, Chinese consumers are expected to make up nearly 50% of luxury goods purchases globally.
According to the consultancy Bain & Co., China’s luxury goods market is expected to continue to thrive due to four major driving forces: (1) returning growth in consumption, (2) the rise of a new generation of consumers, (3) digitization and (4) duty-free shopping on the offshore island of Hainan, which has played a crucial role in the current year's growth. Duty-free sales in Hainan soared 98% in the first 10 months of 2020, compared with the same period the prior year, to reach ¥21 billion. Price comparisons show a 10% to 25% gap between regular retail prices and duty-free prices in Hainan for fashion and household goods, and a gap of 25% to 40% for the luxury beauty sector.