Mainland China’s luxury market is forecast to grow to RMB630bn ($94.1bn) in 2022, according to the 2021 Tencent x BCG China Digital Luxury Report.
A better local shopping environment and changing spending habits are set to drive the 23%-25% forecasted increase in mainland China’s luxury market in 2021, according to A New Generation of Chinese Consumers Reshaping the Luxury Market: 2021 Tencent X BCG China Digital Luxury Report. The market is set to be worth RMB520bn ($81.6bn) this year, with this figure forecast to rise 21% to RMB630bn ($94.1bn) in 2022.
Luxury consumers may be getting younger, but the post-90s generation who are now in their thirties are also set to be a major driver of market growth, says the report. Contributing 46% of luxury sales, consumers born between 1990 and 2000 make up 50% of luxury consumers. In the coming year, their spending is predicted to grow by 25%-30%. These consumers are interested by celebrity marketing, creative content and novel offline experiences, the report notes, and tends to focus on “self-reward” and “brand service/experience”. Luxury consumers in general tend to be less brand-loyal, according to the study. Fewer than 40% claim to stick with specific brands, and more than 80% have tested new brands in the past two years.
Heavy spending consumers - those spending upwards of RMB 300,000 or $47,000 annually - represent 40% of luxury sales while accounting for just 11% of the total consumer base. Increased demand for personalization and exclusivity reigns among this demographic, whose spending is also expected to grow by 25% to 30% in 2022, boosted by better brand service and increase in resale value.
Online on the up
While offline remains the most important channel for luxury purchases, digital is predicted to continue to grow in importance: market share of online channels is forecast to reach 22% in 2021, up from 20% in 2020.
For brands looking to target China’s booming luxury market with its new generation of consumers, the report highlights the importance of social commerce and exclusive online service, among others, as well as flexible online channels. It emphasizes the power of WeChat Mini Program, which has been leveraged by brands including Louis Vuitton and Hermès.