While the Chinese luxury market saw a strong rebound in 2023 following the lifting of pandemic restrictions, it will face a tempered recovery in 2024 at mid-single digit growth. The slowdown will be brought on by the current economic climate and a return to overseas shopping, according to a new report by Bain and Company.
The luxury sector in 2023 grew at an estimated rate of 12 percent year-over-year, fuelled by beauty and fragrance sales, which grew at 8 percent. Leather goods and watches had the softest rebound, between 5 and 10 percent. Strong performance in the first half of the year can be attributed to lower-than-usual spending levels the year prior, due to lockdowns. This rebound, however, was counteracted by weaker growth in the second half of the year due to declines in consumer sentiment.
Tourist spending added a significant boost to the luxury market with growth in Hainan’s duty-free sales at 25 percent. Additionally, brands with a larger concentration of high-spending shoppers who are less likely to feel the blow from a shifting economic landscape showed greater resilience in the second half of 2023.
Bain and Company forecasts that these trends will shape the 2024 luxury landscape and expects slower growth in the region. Hainan, which is forecasted to be a duty-free island by 2025, will be most pivotal in 2024, as the market matures and luxury players continue to invest in the island.
Despite tempered estimated growth in 2024, the Chinese luxury market is expected to grow in the next decade, with luxury consumption in the country predicted to make up between 35 and 40 percent of global luxury spending by 2030.
Bain: Luxury Set for 5% to 12% Growth Amid Increased Performance Polarisation
Growth will largely come from a rebound in China, a strong Japan market and tourism to Europe. However, brands won’t feel the impact equally, said Bain partner Claudia D’Arpizio.