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Recovery in China’s Luxury Market Unveils Fresh Avenues for Growth, Analysts Report

China’s luxury market is bouncing back. Analysts say these are new areas of opportunity

China’s luxury sales are on the rebound, although they haven’t yet reached the levels seen in 2021. According to industry analysts and financial reports from major brands, there are emerging growth opportunities compared to pre-pandemic trends.

LVMH, the luxury giant, recently announced its 2023 results, revealing over 30% growth in fashion and leather goods sales in China for December. Despite some revival in overseas travel, a notable trend is the increasing number of Chinese consumers purchasing luxury products domestically.

Bernard Arnault, Chairman and CEO of LVMH, highlighted the significant growth in domestic purchases in China, with twice as many Chinese customers compared to 2019. The mainland China personal luxury market grew by approximately 12% in the past year, reaching over 400 billion yuan ($56.43 billion), according to Bain & Company.

While not yet back to 2021 levels due to consumer sentiment and the partial resumption of overseas luxury shopping, the domestic luxury market is expected to continue growing in the coming years.

Last year, luxury purchases in mainland China constituted about 16% of the global market, a figure anticipated to rise to at least 20% by 2030, according to Weiwei Xing, a partner at Bain’s consumer products and retail practices in Greater China.

Recovery in China's Luxury Market Unveils Fresh Avenues for Growth, Analysts Report

Recovery in China’s Luxury Market Unveils Fresh Avenues for Growth, Analysts Report (Credits: Retail Merchandiser)

Richemont, the parent company of Cartier, reported a 25% growth in sales in mainland China, Hong Kong, and Macao for the three months ending Dec. 31. The company described the Chinese business as “rebuilding,” especially in the context of a prolonged real estate slump and the slow recovery of overseas tourism by Chinese shoppers.

In recent years, Chinese consumers have been hesitant to spend due to economic uncertainties and a broader slowdown in economic growth. Luxury brands have adapted by increasing their focus on online channels to maintain customer engagement. Brands that performed well in 2023 were those offering luxury goods deemed investible, possessing iconic aspects that stand the test of time.

According to Bain’s report, approximately half of the leading brands and several niche brands have rebounded to 2021 sales levels. Niche brands that consistently invested in building brand desirability over multiple years experienced success.

As companies compete for a share of the Chinese consumer market, a rising segment is bedding and fine linen. At least four investment deals have occurred in this category in the last 18 months. The acquisition of Italian luxury bedding company Frette in August by investors, including Ding Shizhong, the chairman of Chinese sportswear company Anta, was the latest transaction.

Consumer attitudes toward bedding products are evolving, with more willingness to pay for high-quality bedding. There is a growing emphasis on product quality, functionality, and additional services, noted Ashley Dudarenok, founder of ChoZan, a China marketing consultancy.

While the potential market is relatively untapped, domestic home textile brands in China have been actively pursuing technological innovations and exploring the high-end bedding market to meet consumer demands.

Despite the positive trends, estimates from ZWC Partners, a Beijing-based consumer research institute and venture capital firm, suggest that Chinese consumers currently only account for about 5% or less of the global market for high-end bed and bath textiles, with the luxury and affordable luxury segment being approximately $700 million in 2023, a small fraction of the $10 billion domestic bedding market.

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