Luxury in China
By 2025, China is expected to spend RMB 1.2 trillion (US$169 billion) on high-end goods. This is 40% of the world’s total luxury spending. China presents an enticing prospect for businesses of a range of luxury products, from Haute fashion and jewelry, to premium beverages and food.
Brand preeminence is still the top buying factor across all categories. There is a rising demand for unique, custom made and limited-edition products. Most luxury purchases are from official channels, as online platforms have yet to take off. To attract younger shoppers, brands are increasingly using social media and tapping on influencers
Notable Trends in China’s Luxury Market
China’s luxury fashion market is worth US$8.3 million, with apparel as the largest segment. Consumers, particularly young women professionals, spend around US$15,000 US$50,000 for high-end clothes and accessories annually. While classic and timeless pieces remain popular, there is a growing preference for artful, personalized products.
Leather goods and handbags are poised for particularly strong growth. While the popularity of formalwear is weakening, luxurious casualwear is gaining. Meanwhile, eco-friendly apparel is becoming the latest priority of China’s high-end designers. There is a sincere effort to patronize sustainable or socially conscious brands among consumers.
Luxury watches, a predominantly male category in China, grew around 10% in 2018. The market is currently worth RMB 19.4 billion (US$2.7 billion), with most imports coming from Switzerland and Japan. Heritage brands continue to dominate the market, based on strong sales of Rolex, Piaget and Omega.
For Chinese consumers, luxury watches are great investment vehicles. Classic and elegant designs remain the preferred choice in purchases. At the same time, there is a rising interest in contemporary, distinctive designs. Special edition watches, like the zodiac-themed timepiece that Piaget released for 2017 Lunar New Year, are highly coveted by consumers.
High-end jewelry occupies an 8% share of China’s luxury goods market. In 2018, sales reached RMB 19.4 billion (US$2.7 billion), with 15.4% year-on-year growth. Demand for luxury jewelry is on the rise as more women take up employment and begin earning more. In recent years, demand for platinum is dwindling as more consumers prefer gold.
There is also a growing preference for jade, ruby and sapphire gemstone jewelry, particularly among the older generations. Meanwhile, diamonds remain the more popular choice for younger consumers. Bespoke jewelry has been gaining traction as more consumers look for exclusive pieces.
Wine & Spirits
In China, the consumption of luxury wines and spirits is being fueled by the boom in mid-sized cities. Consumers are easily influenced by luxury foreign brands. Imported top-shelf brands like Louis XIII and Johnny Walker Blue Label retain their popularity, based on stellar sales growth in the country.
There is a growing thirst for luxury whiskies, with young high-net-worth individuals often spending US$80 and upwards on a bottle. Sales of fine cognacs are growing 20% on average per year. Meanwhile, among fine wines, Italian, Spanish and French varieties are clear favorites by Chinese consumers.
By 2020, China is projected to consume 100 tons of caviar every year, accounting for one-third of the world’s total. Other high-end food products that have become popular are foie gras, black truffles, and artisan cheese. Chinese consumers are becoming adventurous in their food purchases. Eating has become a multi-sensory experience.
All the same, health and safety remain the top priority in food consumption. There is a great value placed on products coming from natural and trusted sources. Sales of organic food are booming, while low nutrition food products are gradually losing popularity.
Opportunities and Challenges for Luxury in China
China is the youngest luxury market in the world, with 80% of purchases coming from consumers below the age of 40. Opportunities abound for the world’s designer brands, but success can be hard to achieve. Brands have to become more innovative while satisfying the need of consumers for originality and authenticity.