Chinese share of luxury market declines
After two years of recession, China’s luxury market growth is again moving into positive territory, but 2016 marks the first time that Chinese consumers contributed less to global luxury sales than the year before, according to a report by Bain & Company.
China’s overall contribution to the global market declined to 30 percent in 2016, a drop of 1 percentage point from the year before, said the consultancy’s annual Bain Luxury Study.
Brands can no longer rely on lowhanging fruit.” Claudia D’Arpizio, Bain & Co partner
Bain reported a 2 percent decline in 2015 for China’s luxury market, as consumers mostly spent their money on luxury products overseas. The new report says that this market is growing again after Bain reported in May this year that it would be up 2 percent.
Over the longer term, Bain said it still thinks of China as a leading contributor to global personal luxury goods consumption, due in large part to its growing middle class.
China’s luxury market has reached a maturation point, said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study.
“We are already starting to see clear polarization when it comes to performance with winners and losers emerging across product categories and segments,” she added. “Brands can no longer rely on low-hanging fruit. Instead, they really need to implement differentiating strategies to succeed going forward.”
Chinese consumers’ overseas purchasing power remains highly significant to many countries, said the report, with countries such as South Korea, Singapore, Thailand and Malaysia expected to benefit greatly from the flow of Chinese tourists. But the Hong Kong and Macau markets will decline 15 percent at constant exchange rates as mainland shoppers continue to shun tourism there.
The European luxury market also has felt the impact of a decrease in buying overseas by Chinese, along with geopolitical uncertainty and terrorism, with the market hitting 1 percent growth on the rebound of local spending, the report said.
Meanwhile, a survey of Asian millennials who are living with their parents because they can’t afford to move found that the money not going to their housing is being spent on shopping and entertainment.
According to CBRE’s 2016 Asia Pacific millenial survey of 5,000 Asia-Pacific millennials — out of 13,000 globally — between the ages of 22 and 29, including 1,000 from mainland China, 63 percent of millennials from across Asia are still living with their parents. With more than 60 percent of mainland Chinese millennials living with their parents, they have the third-highest rate of doing so in Asia after Hong Kong and India, which are both around 80 percent, the survey said.
This is due to both cultural norms and high property prices in Chinese cities that make buying real estate unaffordable for the young consumers, according to the report.