Chinese luxury fashion and beauty is on the road to recovery, with sales forecast to surpass pre-pandemic levels in the years ahead, reaching $131 billion by 2027. This data is part of research from Dynamic Journeys: China’s Luxury Shoppers at Home and Abroad, a new report from BoF Insights, the data and analysis think tank at The Business of Fashion (BoF).
The new report forecasts a reversal of domestic and international patterns — with two-thirds of luxury purchases being made in mainland China, by 2027, compared with one-third before the pandemic. China’s luxury shoppers are budgeting to spend at least $1,000 on luxury fashion and beauty on upcoming international trips over the coming year. Apparel, shoes and bags and small leather goods are the categories they most expect to increase spend on overall.
Post pandemic repatriation of spend boosts luxury sales in China
Of the approximately $131 billion of sales expected to be generated by Chinese luxury shoppers by 2027, $89 billion will take place in mainland China. The majority of these purchases (86%) will be in-store, cementing the role of physical retail as a key driver of spend, customer loyalty and brand interaction.
During the pandemic, limits on foreign travel meant Chinese citizens looked closer to home to purchase luxury items and capitalised on public holidays to explore the country and enjoy domestic shopping opportunities. The spending power of these shoppers is evident with 85% of Chinese high-net-worth individuals (HNWIs) having spent over $7,000 on luxury fashion in the last year, while 76% spent over $1,200 on luxury beauty products.
More customers are embracing local brands and contemporary interpretations of traditional Chinese fashion. This move towards experiences and style that honour their culture represents a change for global brands that must increasingly use local influencers and key opinion leaders (KOLs) to attract luxury shoppers translating a more local perspective into the way they shop.
Appetite for foreign travel spurred by attractive price differences
Despite the popularity of domestic travel, one of the more enduring attractions of shopping abroad is the notable price differences. BoF Insights’ proprietary analysis shows Chinese shoppers find significantly lower prices in European destinations like France — even before taking into account VAT refunds — making popular heritage brands such as Prada, Versace and Gucci more attractive when abroad.
More than two-thirds of surveyed Chinese general consumers and almost all HNWIs plan to travel domestically for leisure in the next 12 months. Surveyed shoppers cited Hainan island, a haven for duty-free retail, as their top local leisure destination in the months ahead. Expanding shopping infrastructure at home, alongside investment by global brands and retailers to improve service, means many customers will deprioritise shopping abroad.
Japan tops the global wish list, with other popular destinations such as the US also expected to benefit from China’s opening of international borders.
Global players must strike an appropriate balance between having a strong presence on WeChat, Douyin and other Chinese digital platforms used for inspiration and discovery, and building excitement and loyalty with unique, in-store experiences and personalised shopping. Focusing on physical retail and neglecting digital channels can diminish a brand’s ability to connect with their customers once they return home.
Diana Lee, Director of Research and Analysis, The Business of Fashion said: “The pandemic had a longer lasting effect on China than perhaps any other part of the world. Our analysis forecasts that global luxury fashion sales made by Chinese customers will surpass pre-pandemic levels in a few years but there is a much greater emphasis on domestic travel and shopping within China. Luxury players must update their China strategies and develop deeper customer relationships both at home and abroad.”
Dynamic Journeys: China’s Luxury Shoppers at Home and Abroad is a new report published by BoF Insights, the data and analysis think tank at The Business of Fashion. The report features proprietary research surveying both nationally representative and HNWI Chinese consumers, alongside interviews with founders, CEOs, and senior executives from luxury brands. The report also features insights and case studies from brands such as Bottega Veneta, Burberry, Chanel, Dior, Dolce & Gabbana and Farfetch among others.
