China Gears Up To Be Global Luxury Spending Leader By 2025
China accounted for over half of the world's luxury spending from 2012 to 2018 and industry analysts said young Chinese consumers are paving the way for the country to becoming a global leader in the segment by 2025.
According to China Daily, the 2019 McKinsey & Company China Luxury Report indicated that the country will make up for 65 percent of the world's spending in five years. The report added that young Chinese consumers will help drive the world's second-largest economy to almost double its luxury spending by 2025 to $178 billion.
"Consequently, opportunity abounds as brands seek to engage the attention of consumers in the world's most lucrative and fastest-growing luxury market," the report said.
Since majority of young Chinese consumers are new to the market, the report suggested that this calls for a huge opportunity for brands to keep their products up-to-date. Almost 17 million of luxury buyers in China were born in the 1980s and 1990s.
Earlier this month, the Financial Times reported that wealthy Chinese consumers have shown immunity despite a decline in macroeconomic activities in the country over the past few months.
Growth and immunity in luxury spending was largely supported by "new wealthy female consumers in their 20s who are purchasing for the first time," industry analyst at HSBC, Erwan Rambourg, noted.
It was further revealed that China's wealthiest are still willing to splurge on luxury brands amid worries about the Chinese market's slowdown. This statement was proven true by Gucci owner Kering, who stated that organic sales in China saw a hike of 23 percent in Q4 2018.
According to KrAsia, the latest McKinsey report further shows indicates how big luxury brands can make in the Chinese market as the middle class people of China rises. The outlet said pointed out that this is an opportunity for e-commerce giants to leverage on.
While e-commerce sales will continue to expand over the coming years, the McKinsey China report estimated that offline sales of luxury goods will still play a larger role in the luxury market's overall growth.
Industry analysts noted that while Chinese consumers can splurge on luxury goods, it is vital for brands to consider the power of Instagram influencers. Many Chinese-speaking buyers are likely to purchase a brand their favorite celebrities and influencers showcase on the social media platform, Jing Daily reported.
In China, influencers are called KOLs and these celebrities could open opportunities for luxury brands to penetrate the market. On the other hand, analysts noted that collaborative ventures with KOLs should always be culturally sensitive and authentic as this is what Chinese consumers want.