Young Chinese shoppers fuelling luxury goods pick-up - Bain

China Materials 7 June 2018 15:41 (UTC +04:00)

China will cement its status as the sweet spot for luxury goods companies in 2018, with younger Chinese shoppers in particular set to power industry growth, a study showed on Thursday, Reuters reports.

After increasing 6 percent in 2017, global sales of personal luxury goods such as shoes, handbags and clothing should rise by 6 to 8 percent at constant currency rates this year, according to the report by consultancy Bain.

That would put the market at between 276 billion and 281 billion euros ($331 billion).

Chinese consumers drawn to branded goods and becoming increasingly discerning about designers are underpinning much of that growth, already accounting for just under a third of spending on luxury goods worldwide.

Sales in mainland China could grow by 20 to 22 percent this year, far outpacing other markets like Europe where growth rates may not exceed 4 percent and where a strong euro is putting off tourists from spending in high-end stores, Bain said.

“The Chinese are buying more in China, but they have not stopped buying,” Federica Levato, a partner at Bain and co-author of the report said, adding in relation to the global outlook: “We are very positive about both 2018 growth overall and also for the years to come.”

An expanding middle class in China as well as younger shoppers are behind the pick-up, after luxury spending stuttered when Chinese authorities clamped down on expensive gift-giving in 2012, hitting watchmakers and high-end liquor brands hard.

Online sales - a small but fast-growing part of the luxury world estimated to have made up around 8 percent of business globally last year - are also particularly buoyant in China.

Millennials, or consumers aged between 20 and 35, may not be the wealthiest targets for luxury brands, but many young Chinese are often unafraid to spend their earnings on premium goods, sometimes bankrolled by parents or grandparents.

“There is a new generation coming, young Chinese are very willing to spend their money in fashion and luxury goods,” Levato added.

The backdrop in some other regions was also improving, Bain said. In the United States, a weaker dollar is making purchases more attractive for foreigners, and tourist spending is on the up in cities like New York and Miami.

Local U.S. consumers are also contributing to the turnaround, Bain said, though often choosing to shop online, meaning department stores were still struggling to benefit.

Bain’s Levato said that while growth in the luxury goods industry worldwide was healthy - fueled by volumes rather than price increases - some firms were benefiting more than others.

“Not all the brands are winning,” she said.

Fashion labels have been ploughing into streetwear like sneakers as they fight it out to capture a younger clientele; others have switched designers or expanded their social media marketing to catch buyers’ attention.

Sales at some of the world’s biggest fashion and handbag brands like France’s Louis Vuitton, owned by LVMH and Italy’s Gucci, from the Kering conglomerate, have jumped in recent quarters.

Some labels like U.S. jeweler Tiffany & Co are starting to benefit after introducing cheaper items aimed at young buyers; others like Italy’s Salvatore Ferragamo are still in turnaround mode and yet to jumpstart faltering sales.