China is poised to dominate the global luxury market growth by 2025, with a projected 40% share of the global expenditure on personal luxury goods. This exponential growth is anticipated to be driven primarily by the increasing spending power of China’s burgeoning middle class. According to McKinsey, China is expected to account for a whopping 65% of the world market’s growth from 2018 to 2025, with Chinese consumers projected to shell out an impressive €159 billion (CNY 1.2 trillion) on personal luxury goods by 2025.
A key component fueling this surge in luxury consumption is the generational shift taking place within the market. The generation born in the 1980s has emerged as a pivotal force in the Chinese luxury goods market, consisting of 10.2 million luxury goods purchasers who splash out an average of €5,500 per year on luxury items to flaunt their newfound economic prosperity. Following closely behind, the generation born in the 1990s is poised to be the next growth catalyst for the Chinese luxury sector, comprising 6.7 million luxury goods consumers who spend an average of €3,330 annually on luxury goods.
Though many consumers from the 90s generation have relied on financial support from their parents, McKinsey predicts that they will gradually wield more influence in the market as time progresses. As they increasingly express interest in luxury purchases, the study suggests that brands able to pivot their communication strategies to appeal to these emerging consumers will enjoy a significant edge.
Furthermore, the research underscores the rapid pace at which consumers born in the 80s and 90s make purchasing decisions, driven by the interactive nature of social media. These consumers tend to make buying choices at a much faster clip than their predecessors, with 60% pulling the trigger within six days of discovering a new luxury product. Indeed, McKinsey anticipates that online purchases will represent 12% of all luxury goods transactions by 2025, underscoring the growing influence of e-commerce in this high-end market.
As Western brands find themselves grappling with mounting competition from Chinese counterparts in the Chinese market, the study underscores the imperative for brands to adapt and innovate to safeguard their market share. The victors in the Chinese luxury landscape will undoubtedly be the brands that can resonate with the evolving preferences and purchasing behaviors of Chinese consumers across different generational cohorts.
For further insights into the dynamic and ever-evolving luxury market in China, you can visit the following links:
1. McKinsey Report on Luxury Goods and the China Opportunity
2. Brand Insights to Market to China’s Luxury Generation
