Global Luxury Growth Is Sluggish In 2019? Chinese Consumers Are Still Growth Points

In July 30th, Bain combined with the Italy luxury goods association FondazioneAltagamma released the spring edition of the 2019 global luxury industry research report. Following the strong growth in 2017 and 2018, the global luxury market has entered a "new normal". According to the constant exchange rate, global luxury goods sales increased by 6% in 2018 to 260 billion euros, and it is expected to grow by 4%-6% in 2019, reaching 2710-2760 billion euros.

Global luxury growth depends on who still depends on Chinese consumers?

Chinese consumers are still growth engines.

Bain also pointed out that the main driving force for growth is accelerated growth in domestic consumption by mainland Chinese consumers and the growth of tourism in Europe. In the future, the Chinese mainland market will continue to dominate the global luxury market. With the price adjustment of luxury brands, the consumer centered strategy and government measures, Chinese consumers are increasingly inclined to purchase luxury goods at home, thus promoting consumption reflow. Stable consumer confidence and willingness to buy, especially for the younger generation, are expected to push China to achieve the same annual growth rate of 18-20% (at constant exchange rate).

Bain, global partner of BrunoLannes, said: "this year, the global luxury industry will continue to grow in the" new normal ", and China will continue to dominate the world in. In other areas, geopolitical uncertainty will have a certain impact on tourism consumption patterns, which may lead to the return of Chinese consumers and increase the frequency of consumption in China. Overall, we see that most markets have seen steady growth. "

The reports of various consulting companies tell us that Chinese consumers have dominated the global luxury market for several years.

In March 19th, Bain released the annual "China luxury market research". In 2018, the overall sales of China's luxury goods market continued to record a record growth in 2017, and the growth rate reached 20% in second consecutive years.

At the same time, Chinese consumers are spending more money on luxury goods, and their tastes are becoming more picky. Successful luxury brands are better at catching and catering to the needs of consumers, leading to polarization between different brands.

The growth engine includes the increasing consumption power of the millennial generation, as well as the continuous penetration of global luxury brands through digital marketing and social media Reds marketing. "Compared with other countries in the world, the average age of Chinese luxury consumers is even lower. The millennial generation is still the driving force for the development of China's luxury market. Bruno added.

The millennial generation refers to consumers aged 23 to 38 who not only have a desire to consume luxury goods, but also have enough spending power. China's millennial generation has a housing ownership rate of 70%, two times that of the United States. He also knows a lot about luxury goods, and the trend of cross border cooperation between high fashion and sportswear. In the millennial generation, women spend more money on luxuries than men, which is the same as other ages. In 2018, cosmetics, a traditional female category, grew by more than 25%, while the category of watches dominated by male consumers increased by less than 10%.

The Chinese market also has a large number of "Li Jiaqi", the digital interaction with consumers and the substantial development of online sales, so that brands continue to bet on KOL sales. Although the online penetration of many cosmetics is still low, sales are accelerating. In 2018, online channel luxury sales increased by 27%. Digital marketing activities continue to increase, accounting for more than 50% of China's luxury brand marketing budget.

In 2018, luxury goods in the field of e-commerce were also very active, including three new luxury online ecosystem, including: the ecosystem built around the brand official website, the ecosystem composed by Jingdong /Toplife/Farfetch/ Temple library, and the ecosystem composed of Alibaba / Tmall luxury Channel LuxuryPavilion/YNAP (Yoox Net-a-Porter) / glamour.

Weak other markets

Globally, the US luxury market continued to grow steadily in 2018. The new US tax reform policy has brought short-term uncertainty to consumers and has had a negative impact on the consumption of local luxury goods. At the same time, the flow of shopping malls and department stores continued to decline, while specialty stores maintained a positive growth trend. Bain predicts that the US luxury market will grow by 2-4% in 2019. Although the number of Chinese tourists to the United States has decreased, the domestic consumption of full price stores in the United States is expected to grow.

Compared with the world's major currencies, the weaker euro undoubtedly strengthened European attractiveness to international tourists and led to a positive growth in the European luxury market in 2018. The future social and political uncertainty and the downward trend of macro economy will continue to pose a threat to European luxury consumption. At constant exchange rate, the consumption of European luxury goods in 2019 is expected to increase by 1-3%.

For luxury brands, Japan is still an attractive and unique market, and is expected to grow by 2-4% in 2019. With the approaching of the 2020 Tokyo Olympic Games, the consumption of Japanese tourists is expected to increase.

Bain predicts that the luxury market in other parts of Asia will grow by 10-12%. With the continuous increase of disposable income, the expansion of the middle class has promoted the growth of Indonesia, Philippines and Vietnam, while the sustained growth of the Korean market is the role of local consumers and tourism.

Luxury consumption in other parts of the world is expected to remain flat or slightly down by 2%, while growth in the Middle East is still stagnant, as domestic consumer spending begins to flow beyond the Middle East.

Bain predicts that the global luxury market will grow steadily in 2019. But in the new normal, the future of the luxury industry will be affected by five major trends, including China's Z generation; luxury leasing; sustainable development and social responsibility; the impact of digitalization on the overall value chain; the luxury experience rather than the product; and the consumer network as a new value indicator.

Bain also gave some trends: luxury brands are now eyeing China's Z generation. They are keen on buying, buying, and buying, and they will become the main force of luxury consumption in the future. The consumption pattern will change, and consumers will prefer to "use" rather than "have" luxury goods, such as leasing, second-hand market and so on.

Under the new vision of environmental protection, animal protection and labor rights protection, sustainable development, social responsibility and zero waste fashion will become a new slogan.

Digitalization will subvert the value chain of luxury goods. Luxury brands must redesign the technology ecosystem in an all-round way, paying more attention to luxury experience rather than products.

Sales volume and price are no longer a value indicator. The consumer network will surpass products and brands and become a new indicator of value.

Bruno said, "the brand of new life will play an important role in the luxury industry. They will challenge the status of the big brand, and use the innovative methods beyond the product itself and the various aspects of the industry to truly promote the transformation of consumption patterns, and finally form a more direct and frequent dialogue with consumers."