Customers purchase bags at a duty-free shop in Haikou, Hainan province, on Oct 1, 2021. (PHOTO / IC)
China's personal luxury sector is likely to enjoy low double-digit growth in 2022 after the market nearly doubled in size over the past two years, according to a latest projection by consultancy Bain & Co.
Domestic spending in the luxury market will be further strengthened by duty-free opportunities, digitalization and the continued repatriation trend owing to COVID-19-related international travel restrictions, the consultancy said in its China luxury report released on Thursday.
China's share of the luxury market has grown to 21 percent of the world's total last year, putting the country on track to becoming the top global market by 2025, regardless of future international travel patterns, said Bruno Lannes, partner at Bain & Co, also co-author of the report.
"While luxury spending isn't significant in absolute terms for total consumer spending, it shows that consumers are feeling good about themselves, the environment and their own perspectives of development," Lannes said. "So it contributed in another way by reflecting consumer confidence and optimism."
Individual luxury spending surged 36 percent in 2021 to nearly 471 billion yuan ($73.59 billion), with some brands gaining a 70 percent odd year-on-year sales increase. Leather goods were labeled as the fastest-growing category with about a 60 percent growth rate, followed by fashion and lifestyle at around 40 percent.
While luxury beauty spending increased just around 20 percent, it is the category that accounted for more than half of personal luxury expenditure in Hainan province's duty-free shopping zone. The report estimated Hainan already represents one-quarter of the luxury beauty market through official channels in China.
Weiwei Xing, partner of Bain and another co-author of the report, identified the diverging perception of Hainan among industry players.
"The story is a little bit different for the luxury beauty sector and the rest of luxury products. For beauty, there is indeed a risk of pricing re-set for the luxury market, a 'threat' not only to pricing stability but to overall brand equity," she said.
But the remaining segments in the luxury realm see Hainan as a clear opportunity with favorable policies, so brands are willing to adjust their footprints and cater to consumer behaviors, she added.
Last year, COVID-19-related travel restrictions led the Chinese mainland's portion of the nation's global luxury purchases to rise to over 90 percent. The study found that online luxury sales grew faster than offline across all categories, with online personal luxury sales rising almost 56 percent and offline sales 30 percent.
Lannes said a string of tightened regulations on celebrities and internet influencers might impact the allocation of marketing budgets, but the influence remains limited.
"Luxury brands, like all consumer brands, have been updating marketing approaches and embracing particularly the digital wave," he said. "Now brands will need to make adaptions one more time. It's not a big step, but an evolution of what they constantly do."
