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If China’s economic growth is slowing, its rising middle-class is forecast to continue buying luxury goods.
According to a recent report released by global management consulting, Bain & Co, luxury brands “can expect a promising year ahead in China”. Luxury sales are forecast to remain healthy, “though they are unlikely to keep pace with 20% growth”, according to Bain, which says growth in the low-to-mid teens seems more probable in 2019.
While Chinese millennials are expected to continue with an appetite for luxury goods, seems they are not so much ‘brand loyal’ and Chinese consumers are said to be increasingly “discerning”. The millennials tend to buy what they think is ‘cool’, rely on social media and “freely share their opinions online”, with women buying more luxury goods than men. Online luxury sales in China are reported to have increased +27% in 2018 to reach 10% of total luxury sales but, according to Bain, this growth is still driven by cosmetics, while online penetration in other categories remains very low. Considering the top 20 luxury fashion and lifestyle brands by revenue, Bain says that for every brand that grew by more than +25% in 2018, there were two brands that grew by less than 10%. The winning brands are said to be those that “strive to enhance their access to consumers through digital and influencer marketing, often attracting millennials with younger and more casual collections”.
A recent UBS survey is reported to have found that 71% of millennials have a positive financial outlook, and 81% expect their income to increase. Meanwhile, Bain forecasts China’s middle class to continue to expand. The Chinese government is expected to maintain its adjustment of import duties to encourage domestic consumption, as well as to reduce the VAT rate. It is also likely to continue imposing strict control over passengers and parcels at customs, and to more carefully supervise the army of “daigou agents”, who purchase overseas for local consumers. And brands will continue to narrow the price gap with overseas markets, according to Bain.