- Chinese consumers locked down at home have sent the global luxury goods market into a tailspin, but China’s domestic producers are reaping the benefits
- Chinese buyers are expected to make up more than half the entire luxury market by 2025, the same year digital sales are projected to overtake physical ones
- Experienced-based goods have fared better than pure experiences or goods since they can often be enjoyed alone or in small groups
As the global economy reels from COVID-19’s economic impact, the market for luxury goods is less straightforward. While overall sales have fallen, the market in mainland China is actually expected to grow into the world’s most populated nation by 2025. Projections for experienced-based goods are much rosier than those for goods or experiences alone, reports CNBC.
These shifts are fueled by Chinese tourists, who comprise roughly a third of the entire luxury market, according to Bain & Co.’s metrics. China’s COVID-19 lockdown has kept these consumers at home to spend in domestic markets.
The global luxury goods industry has suffered as a result, falling 23% in the first contraction since 2009.
“The overall [luxury] market has basically been shut down,” Federica Levato, a luxury goods partner at Bain, told CNBC. “And then the immediate consequence of it was no travel, basically. We’ve had 11 months of no intercontinental travel whatsoever.”
That trend has meant serious profits for China’s luxury producers. China’s domestic market is projected to be the only growth spot this year, expanding 45% to $52.21 billion. These trends are expected to continue after the pandemic with Chinese markets rebounding the fastest and Chinese consumers accounting for 50% of luxury consumption by 2025.
Meanwhile, vendors in Europe and the Americas are withering. Sales have contracted 27% to drive several department stores to bankruptcy. Lord and Taylor, the nation’s oldest high-end department store, will liquidate.
The pandemic has also boosted online sales’ already-growing share of the market. Digital purchases are expected to outpace physical ones by 2025.
It’s also driven disparities between different types of products.
Experience-based goods, defined by Bain as fine art, luxury cars, private jets and yachts, fine wines and spirits and gourmet food, haven’t shrunk as much as other luxury products and have better projections. They’ve seen a 10% dip rather than a 23% fall.
Pure experiences like high-end dining have obviously been ravaged by COVID-19 lockdowns, and non-experience goods like apparel have also declined precipitously. As it turns out, people are less eager to buy clothing and cosmetics when they’re just going to be sitting around the house during an economic downturn.