China has emerged as the economic winner of the COVID-19 pandemic, and analysts predict that gains made in 2020 — when it was the only major economy to record growth — have set it on a path to become the world’s largest luxury market by 2025. At that point, Chinese consumers are predicted to make up nearly 50 percent of all luxury purchases globally, according to a November report from Bain & Co.
But could anything slow the runaway train that is China’s economy? Is there anything that would not make this a reality? “I don’t see many reasons that would prevent Chinese consumers from representing a larger portion of the luxury goods market in five years,” says Luca Solca, the senior research analyst of global luxury goods at Bernstein. “One would have to imagine low probability events hitting China, specifically. [Something] like a confidence crisis in the Chinese leadership or a new policy like [China’s] anti-corruption policy from 2012.”
And while those events don’t seem likely, Bain & Co’s prediction isn’t the only one out there. In fact, one of Bain’s rivals, McKinsey & Company, has settled on a lower figure. “Chinese consumers have been contributing a growing share of global luxury spending,” says Dr. Daniel Zipser, the senior partner and leader of the McKinsey Consumer & Retail Practice, Greater China. “We anticipate this share to reach 40 percent by 2025.”
But there are challenges. “Chinese consumers traditionally have been purchasing large parts of their luxury goods during their outbound travels,” adds Zipser. “In the absence of travel, luxury brands will need to create new occasions to grow domestic luxury spending.”
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