China Luxury Sales Rebound as Millennials Spend
$LVMUY, $PPRUY, $BBRYF
- China’s luxury goods market is back in fashion
A new China is emerging with new consumers that were not there 5 years ago that have different profiles, different expectations and different tastes.
Domestic sales of Gucci handbags to Chanel cosmetics, sluggish in China for years, rose at the fastest pace in over 5 years last year and are poised to consolidate the gains in Y 2018, according to consultancy Bain & Co.
That could provide a major boost for brands targeting the world’s top luxury spenders, though who benefits most will depend on which brands are able to lure in China’s big-spending youth, now the driving force in the market.
Sales of luxury goods in China hit $22.07-B last year, up around 20% from the year before, Bain & Co said in a report Wednesday. That is the sharpest growth since Y 2011, when luxury sales started to be hit by slower economic growth and a fierce crackdown on corruption.
China’s shoppers are the biggest spenders worldwide on luxury products, making up 32% of the $308-B global market last year and propelling France’s LVMH (LVMH.PA), Burberry (BRBY.L) and Gucci owner Kering (PRTP.PA).
China’s domestic market makes up 8% of global luxury sales, according to Bain & Company, and despite fast growth at home Chinese shoppers still make 75% of their luxury purchases overseas.
Bain & Company say China’s luxury market should see robust growth this year “fueled by millennials and ready to wear” attire, though the growth rate would likely slow down to “low-mid teen” levels given the fast growth in Y 2017.
The revival is being driven by China’s tech-savvy millennial generation aged between 20 to 34, who generally prefer ready-to-wear and fast fashion over more traditional design, helping propel new areas like luxury casual wear and sports wear.
This is a New China coming in as opposed to the old China coming back.
That shift creates a challenge for more traditional brands like Prada (1913.HK), which is having to play catch up with newer rivals like Coach.
Others like Hermes (HRMS.PA), France’s LVMH and Kering are seeing revived appetite from China, helping boost their global sales last year.
A gain, a new China is emerging with new consumers that were not there 5 years ago that have different profiles, different expectations and different tastes.
Have a terrific weekend
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