China’s GDP grew 4.9% year-on-year in the third quarter as it continues to bounce back from the coronavirus pandemic, figures from the country’s National Bureau of Statistics show, yet recovery in retail consumption has been slower. The luxury market, however, is holding strong, according to a report from Boston Consulting Group and Tencent.
The GDP growth seen in the third quarter of 2020 is a marked recovery on the 6.8% year-on-year decline reported for the first three months of this year. It brings China's’s GDP growth for the first three quarters to 0.7%, marking a shift from negative to positive growth.
While total retail sales of consumer goods were down 7.2% year-on-year in the first three quarters, sales increased 0.9% in the third quarter—the first positive quarterly growth this year—and rose by 3.3% in September. Retail sales of cosmetics were up by 4.5% in the first three quarters. E-commerce appears to be a bright spot, with online retail sales up 9.7% year-on-year for the first nine months of the year. Specifically, online retail sales of physical consumer goods rose by 15.3%.
In the luxury space, China stands out from the rest of the world. While the global luxury market is forecast to contract between 25% and 45% this year, China has benefitted from domestic control of the pandemic and is now leading recovery in a depressed global market, according to the BCG x Tencent Digital Luxury Report.
Indeed, China’s luxury market is predicted to grow between 20% and 30% for the full year, and online in particular is boosting the market. “The luxury market in China was the first to recover from the impact of COVID-19, and is seeing an increasing rebound in local consumption and online channel adoption. The share of pure online purchases has increased to 30%, indicating a shift towards an omnichannel journey,” comments Crystal Hao, Managing Director & Partner of BCG.
Luxury brands, BCG highlights, need to look at better leveraging digital to respond to consumer needs, and combine experience and service in developing an omnichannel offer, aspects where many luxury brands continue to lag behind compared to other sectors.
“In the post-COVID era, luxury brands need to re-consider the key characteristics of Chinese consumers, think about how to better leverage digitalization enablers to understand and cater to consumers’ needs, and develop a truly omnichannel shopping experience that takes into account both service and experience,” Hao concludes.