China is set to Become the World’s Biggest Luxury Market

The new report helps to understand the impact of the coronavirus pandemic on the luxury market. It is not surprising that people around the world are trying to spend less money on luxury goods. However, China’s domestic market is still expected to grow. The country’s wealthy residents stayed close to home due to the coronavirus pandemic. They did not hesitate to spend money on jewelry, leather goods, and fine wine.

As a reminder, international travel used to drive luxury markets in Europe and the U.S. Chinese tourists played an important role in this market. However, the coronavirus pandemic changed the situation. According to the new report prepared by Bain & Co., affluent Chinese consumers are going to be doing much more of their spending locally for the next several years.

In 2020, mainland China is expected to be the only region to report year-over-year growth, with the country’s luxury market jumping 45% to reach $52.21 billion.

Based on the information taken from the report, sales of personal luxury goods, which includes clothes, jewelry, watches, beauty products, and accessories will contract in 2020, for the first time in more than a decade. Importantly, Bain & Co estimates sales will fall 23%, at current exchange rates, to hit $257.47 billion, the largest annual drop ever recorded by the firm.

Importantly, the overall luxury market encompasses luxury goods and experiences such as private jets, yachts, and fine wine. The market is expected to shrink at a similar pace year over year.

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The luxury market in 2020

It is worth mentioning that, in the Americas, consumers are not offsetting lost sales from global travelers. As a result, department store chains are struggling to deal with problems. Interestingly, through the busy holiday shopping season and beyond, Bain expects luxury sales to return at a different pace in each region.

For example, in China’s case, the firm expects the country to rebound at full speed. However, Asia on the whole, is still in “recovery” mode. Europe, as well as the U.S., are struggling to cope with rising coronavirus cases.

This, in part, will help China’s luxury market overtake both Europe and the Americas by 2025. By that time, Chinese consumers will account for almost half of the luxury spending.

Importantly, the firm expects the global luxury market to return to 2019 levels by the end of 2022 or early 2023. The demand for luxury goods in China will play a decisive role. It makes sense as China’s domestic market is important for companies that produce luxury goods.