Bain & Company: Trends in the Chinese luxury market by 2025

Bain & Company recently published a report on the luxury market by 2025. The market is expected to reach a new record of €260 billion in 2018. If chinese customers now account for 33% of purchases of bags, watches, jewellery and luxury ready-to-wear, what will happen in 2025?


picture: GMA

Bain & Company, the international management consulting firm, in collaboration with Altagamma, the association of Italian fashion manufacturers, conducted their 17th annual study on the future of the luxury market.

The market is expected to increase further by 6% in 2018 at constant exchange rates, as in 2017, but is expected to slow down to around 3%- 5% per year by 2025, according to the latest study published on Thursday by the consulting firm.

Last year, we saw the global luxury market return to healthy growth, although more moderate than in the past,” said Claudia D’Arpizio, a Bain partner and lead author of the study.

But in the coming years, “growth will be less strong, even if the fundamentals are very strong, as the market enters a phase of maturity,” said to Reuters, Federica Levato, Bain’s partner and co-author of the study. While recent concerns about Chinese demand have not been reflected in the quarterly figures of LVMH, Kering, Hermès or Moncler, the market could, however, according to Bain, experience ups and downs.

In particular, investors continue to look very closely, the evolution of Chinese growth and the possible repercussions of the Sino-American trade war.


A more flexible policy

Chinese consumers are leading the positive trend of growth worldwide. Between 2015 and 2018, their purchases in mainland China contributed to growth twice as much as their spending abroad. Their share of global spending has steadily increased (now estimated at 33% of global luxury spending, up from 32% in 2017), while the share of mainland China has also increased to 9% (from 8% in 2017). In mainland China, sales of luxury goods increased by 18% at current exchange rates to €32 billion (20% at constant exchange rates), driven by increased demand rather than higher prices.

By 2025, Chinese customers will account for 46% of a market that is estimated to reach between 320 and 365 billion euros, and will make 50% of their purchases in their country, compared to 24% in 2018, Bain predicts.

This development in the Chinese market is explained by the reduction in price differentials between China and Europe since 2015 (from 70% to 25-30% in 2018) and by Beijing’s measures to promote domestic consumption. The Chinese government has lowered customs duties on luxury goods and tightened border controls to limit imports of products purchased abroad and resold on Chinese websites, as retailers keep the price difference.


The development of e-commerce

In this context, the major luxury brands, which have largely stabilized their store networks in China, are now relying on e-commerce to expand their customer base, particularly in small and medium-sized cities. They open their own e-commerce platform or start collaborating with Alibaba or JD.Com. For example, Richemont recently joined forces with the e-commerce giant Alibaba.

In total, after having risen by nearly 25% in one year to reach 10% of global luxury sales today, e-commerce is expected to account for 25% of the market by 2025.

In the rest of Asia, retail sales increased by 7% at current exchange rates to €39 billion, driven by dynamic growth in South Korea, facing strong local consumption. Strong growth in other Asian countries – Singapore, Thailand and Taiwan – also contributed. Hong Kong and Macao benefited from Chinese purchases.




Picture of The editorial team
The editorial team
Thanks to its extensive knowledge of these sectors, the Luxus + editorial team deciphers for its readers the main economic and technological stakes in fashion, watchmaking, jewelry, gastronomy, perfumes and cosmetics, hotels, and prestigious real estate.

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