China Luxury Market: Trends and Growth Opportunities

China and Chinese consumers have been playing a critical role in the global luxury goods industry. Although the recovery of the Chinese luxury market is slightly tempered by the economic climate and uncertainties regarding when consumer confidence will recover, growth opportunities await. In fact, experts believe that China remains a vital market for luxury goods, and industry figures support this outlook:

• Bain & Company estimates that Chinese luxury consumption could account for 35 to 40% of the global market by 2030.
• McKinsey’s research revealed that Chinese consumers are more likely to increase their spending on luxury fashion in 2024 than their counterparts in the US and Europe.

Meanwhile, analysts also view this as an opportunity for luxury brands to reinforce their footholds in China. However, a question remains: What are the opportunities that brands can seize within the Chinese market and how do brands effectively market to Chinese luxury consumers?

1. Enhancing In-Store Experience

A key area where brands are observed to be making strategic investments is the expansion and enhancement of retail spaces. Notably, the trend has been moving towards the optimisation of retail networks by consolidating marginal stores and upsizing the more successful ones into destination boutiques offering exclusive amenities, such as private lounges, for Very Important Customers (VICs).

In 2023 alone, luxury groups’ investments in retail properties reached over $6.5 billion. Due to increased demand and limited availability, rental rates have also risen sharply in popular locations like Bloor Street in Toronto and Madison Avenue.

Closer to home, data from Savills showed that luxury store openings in Asia Pacific (APAC) increased by 31%, with significant contributions from Tokyo and Singapore. This trend is also observed in prime locations like Canton Road in Hong Kong and Marina Bay Sands in Singapore, where brands have invested in larger, more visually impactful retail spaces. Meanwhile, industry giants like LVMH announced ongoing plans to expand their retail networks in China.

i. The Growing Importance of VICs

The value of Very Important Customers (VICs) is increasingly recognised, given their purchasing power and resilience to economic fluctuations. By redesigning luxury retail spaces to feature unique amenities and grand facades, luxury brands can foster a sense of exclusivity and privilege that appeals to this demographic while strengthening the bond between them and the brand. At the same time, these investments elevate the middle-class and aspirational consumers’ perception of and connection with the brand, contributing to overall brand equity.

ii. The Growing UHNWI Population in Asia

In particular, investing in retail expansion within Asia also positions brands to capitalise on the region’s increasing affluence. According to a Knight Frank report, Asia’s wealthy population is growing faster than any other region. Notably, the number of ultra-high-net-worth individuals (UHNWIs) is expected to rise by 35 per day from 2023 to 2028, particularly in UHNWIs’ favoured destinations like Singapore and Malaysia. By enhancing their storefronts and presence in these markets, brands are well-placed to tap into this expanding pool of affluent consumers and secure an advantage in the region.

iii: The Resurgence of Travel Retail

Beyond this, investing in retail spaces may also benefit brands as China sees an upturn in outbound tourism. In May’s Golden Week holiday alone, more than 1.5 million Chinese travellers ventured abroad, representing 87% of the outbound travel numbers seen in the same period in 2019. Among travellers, 52% of the Chinese luxury consumers polled by BCG between April 2023 and April 2024 also indicated that they purchased goods overseas in the first half of 2024.

Where: According to data from Global Blue, tourism spending in APAC increased 250% year-over-year (YoY) in May, led by a 272% surge from mainland Chinese consumers. BCG Intelligence data highlights that these luxury expenditures were primarily focused in specific regions:

• 32% in Japan and South Korea. Notably, the average spending per Chinese tourist in Japan reported by the Japan Tourism Agency was 293,100 yen in the first quarter of 2024—the highest among foreign tourists.
• 29% in Southeast Asia.
• 57% in Hong Kong and Macau SAR.

South Korea and Japan surpassed Southeast Asian markets to become the second-largest luxury shopping destinations, capturing 8% of the Chinese luxury spend.

Opportunities for Brands:

These trends underscore the emergence of physical retail spaces across Asia as critical battlegrounds for brands in the luxury industry. Within China itself, cities like Shenzhen, Wuhan, and Hangzhou are identified as promising growth markets. Savills’s recent research reported that these markets will match or even exceed the affluence of major Japanese cities like Osaka and Kyoto by 2028 and currently have relatively low luxury brand penetration.

In terms of engaging with the Chinese consumer segment, consumer behaviour insights from Roland Berger highlight key trends that are crucial for brands to consider:

• 50% of Chinese consumers will approach luxury purchases more cautiously in 2024, preferring to research extensively before making a purchase.
• 76% feel that online channels cannot fully replace the offline experience.
• After conducting their research, 58% of consumers prefer to physically try products before purchase. Meanwhile, only 29% add items to their shopping cart or continue to follow brand updates, and just 13% complete their purchases online.

These findings highlight the importance of a robust retail presence and underscore the need for an integrated approach between online and offline channels. By facilitating seamless transitions from online research to in-store experiences, brands can maintain visibility during potential customers’ decision-making process and enhance the “last mile” conversion from online engagement to in-store purchases.

2. Unique Experiences and Marketing Localised for China

Beyond boosting the travel retail scene, the expansion of overseas travel over the last three decades has also significantly broadened the horizons of Chinese consumers. As the market transitions from an era marked by limited choices to one rich with options, consumer focus has shifted from basic consumption to the pursuit of personal experiences and brands that align with their lifestyles and philosophies.

This shift has, consequently, expanded the competitive landscape within the luxury industry to include not just traditional players but also emerging designer brands and high-end sportswear labels. Interestingly, luxury brands are also facing heightened competition from other high-end markets. A study by BCG noted that light (annual spending below RMB 50,000) and medium (annual spending between RMB 50,000 and RMB 300,000) luxury consumers in China are shifting their budgets towards experiential consumption.

These findings underscore the growing importance of establishing a strong emotional connection with Chinese shoppers and emphasising brand distinctiveness and individuality. Against this backdrop, trends indicate that brands are increasingly looking to engage with consumers by offering exclusive, “money-can’t-buy” experiences that resonate with consumer desires and values.

How Brands Are Setting Themselves Apart

In recent months, Shanghai has already experienced an uptick in “glocal” events and pop-ups that merge product offerings with unique dining, cultural activities, and interactive experiences. Some prime examples include Miuccia Prada and Raf Simons’ launch of the second Pradasphere in Shanghai and Cartier’s special event on the Great Wall for its Le Voyage Recommencé exhibition at Beijing’s Prince Jun’s Mansion. More recently, Chanel also restaged its Cruise 2024 show in Shenzhen, and these events generated considerable buzz on Chinese social media before and after the occurrence.

Notably, localisation efforts have also evolved from simply incorporating Chinese elements to aligning brand value propositions with the broader Chinese cultural context. For example:

• Louis Vuitton has transitioned from promoting brand loyalty to becoming a cultural authority in China, highlighted by events such as the “Louis Vuitton Shanghai City Guide,” which quickly became a popular weekend activity in Shanghai.

• During the Lunar New Year, luxury watchmaker Jaeger-LeCoultre unveiled a short film titled “The Best Is Yet to Come, Right on Time.” The film highlights the achievements of the Chinese actor and Jaeger-LeCoultre global ambassador Jackson Yee in the past year. The topic resonates with contemporary individuals pursuing their personal endeavours, allowing the brand to foster a meaningful dialogue with Chinese consumers.

• Bottega Veneta tapped into China’s growing bookstore movement and made its fanzine available in its stores across China as well as select global bookstores. These include those affiliated with Wallpaper*, such as Juanzong Books in Beijing, Ananya in Xiamen, and Tsutaya Bookstore in Shanghai, which are popular with young urbanites who value cultural experiences and a thoughtful lifestyle. In doing so, they provide an ideal setting for Bottega Veneta to market its brand ethos and inspire aspirations through its unique perspective on art, fashion, and culture.

This refined marketing and branding approach consistently introduces fresh and engaging concepts to consumers. In doing so, it not only fosters deeper connections with prospective customers but also meets the increasingly sophisticated expectations of Chinese consumers.

Enter New Markets and Localise Your Brand with the Right Talent

As the market and consumer behaviour evolve, effectively localising and engaging Chinese consumers will require brands to be helmed by professionals with a nuanced understanding of the Chinese market.

At JC Consulting, our luxury recruitment consultants have years of experience helping brands link up with the right mid-to-senior-level talent to take their business further. Our luxury desk comprises consultants with rich experience in the Chinese, European and US markets. Our nuanced understanding of the Eastern and Western cultures enables us to precisely identify the right talent to help your brand expand into diverse new markets with the right local knowledge.

With a strong presence in Singapore and China, we’re also your perfect gateway to penetrate the Chinese and APAC markets. Connect with us today to learn more about how our executive search firms in China and Singapore can support your hiring needs.

Image Sources:

• Jaeger-LeCoultre