Search
Member login

McKinsey | China to account for 40 percent of world’s luxury spending by 2025

Global management consulting firm McKinsey & Company’s Apparel, Fashion and Luxury Group have released its latest report: “China Luxury Report 2019 : How young Chinese consumers are reshaping global luxury.” The report reveals that Chinese consumers are set to account for more than half of global growth in luxury spending to 2025, powered by a young generation for whom luxury is a form of social capital…

by The AFC

30 May 2019

McKinsey | China to account for 40 percent of world’s luxury spending by 2025

Global management consulting firm McKinsey & Company’s Apparel, Fashion and Luxury Group have released its latest report: “China Luxury Report 2019: How young Chinese consumers are reshaping global luxury.” The report reveals that Chinese consumers are set to account for more than half of global growth in luxury spending to 2025, powered by a young generation for whom luxury is a form of social capital.

WORDS | VIA MCKINSEY & COMPANY


Screen Shot 2019-05-30 at 3.14.22 pm.png

_

YOUNG CHINESE CONSUMERS DRIVING GLOBAL GROWTH OF THE LUXURY MARKET

As the world watches China for signs of an economic slowdown, and the impacts this might have on the country’s consumer market, this report offers data-driven insights into how young Chinese consumers are driving global growth of the luxury market.

Some key findings include;

  • In 2018, Chinese consumers at home and abroad accounted for $115 billion, or 32 percent of a global market for high-end shoes, bags, fashion, jewellery, and watches worth $358 billion.

  • By 2025, that outlay is expected to increase to 1.2 trillion RMB ($180 billion), accounting for 65 percent of global growth, and taking Chinese consumers’ share of worldwide spending to 40 percent. 

  • China’s young consumers are new to luxury. Only 13 percent of post-’80s/’90s luxury spenders said they grew up in a family familiar with the finer things in life, while half of post-’90s, and 31 percent of post-’80s consumers, only made their first luxury purchase in the last year.

  • Offline channels accounted for 92 percent of Chinese luxury spending in 2018; brick and mortar purchase will still account for 88 percent of the market in 2025. Meanwhile, online sales are expected to more than double at a compound annual growth rate of 12 percent.

_

INFLUENCED BY A RICH DIGITAL ECOSYSTEM

Based on in-depth interviews with 1,000 consumers, the China Luxury Report 2019 uncovers how for many of them luxury is a relative novelty – 31 percent of the 10.2 million Chinese luxury consumers born in the 1980s only made their first luxury purchase in the last year, for example.

While brand remains the most important factor in influencing their purchases, our research reveals the younger demographic are less influenced by legacy reputations, and more by what is happening now in China’s rich digital ecosystem. 

They view luxury as a form of social capital that helps them stand out in an increasingly chic crowd of urban go-getters, and as a gateway to a shared social experience and lifestyle, one that is constantly being updated via an ever-fresh stream of digital content.

“Brands can foster the newness and exclusivity that appeals to China’s young consumers through launching limited editions, collaborations with key opinion leaders (KOLs) and influencers, and hosting an annual calendar of special events, particularly around art and fashion,” said Aimee Kim, Senior Partner and Leader of McKinsey’s Apparel, Fashion, and Luxury Group in Asia.

 Willingness to try new brands is a consistent theme across generations, but particularly for the post-‘90s consumers, providing scope for savvy brands with an astute digital strategy to claim market share.

“China’s young luxury consumers are more interested in aspiration than heritage, making it imperative for brands to modernize their stories and deliver them through digital channels,” said Lan Luan, Partner and Leader of McKinsey’s Apparel, Fashion, and Luxury Group in Greater China. “Savvy brands should design an integrated marketing strategy that satisfies young Chinese consumers’ appetite for consuming media at every available touchpoint, whether they are online or offline, and whether they are travelling or staying in China.”

_

THE ONLINE / OFFLINE EXPERIENCE, PERSONALISATION & KOLS

All 1,000 consumers McKinsey interviewed for the report said they consulted a mix of online and offline channels during the three to five hours per week spent perusing information sources. Apart from brands’ official channels, word of mouth and KOLs are the most common source of information about new luxury brands and products.

The report shows how successful brands adopt a portfolio approach to managing KOLs, some of whom command audiences larger than the most prestigious European fashion houses, engaging a pyramid topped by global celebrities, and supported by a network of social media influencers who help localize luxury products in hundreds of Chinese cities. 

McKinsey’s analysis also found considerable differentiation in China’s online luxury sales environment, with major players active in brand-owned channels, while participation in mainstream B2C e-commerce and luxury verticals is still low.

“Reaching young Chinese consumers requires a considered approach to e-commerce, one which cultivates a rich and consistent brand image on owned platforms, while making sharp choices over whether or not to reach for the traffic on mainstream e-commerce platforms,” Kim said.

Since the majority of luxury purchases are made offline, and in-store experience remains a leading driver of purchase for 90 percent of our respondents, brands should also reimagine the in-store experience. Catering to young consumers’ desire for personalisation—to feel different and valued—is key, as is doubling down on the concept of the store as its own media channel.

“Brands would be wise to invest in highly trained staff capable of maintaining one-to-one relationships with customers in and beyond store, in effect becoming their personal stylists, backed by customised narratives and personalised product recommendations powered by AI,” said Lan.

“As young consumers blur the line between engagement and purchase, domestic and overseas, and online and offline, the new battleground for luxury brands requires fundamental organisational transformation,” said Daniel Zipser, Senior Partner and Leader of McKinsey’s Consumer and Retail Practice in Greater China. “This requires not only winning in digital, but also more seamlessly integrating business units across brands, functions, and regions…Perhaps the most exciting aspect of China’s young luxury market is the scope of opportunity for digitally savvy brands to capture its ever-shifting zeitgeist, and the imperatives this provides for more established brands to stay on top of their game.”

_

 ABOUT THE MCKINSEY CHINA LUXURY REPORT 2019

McKinsey’s study combined a comprehensive survey of Chinese luxury consumers, ethnographic research of representative young Chinese luxury consumers, and market research of global luxury companies. The survey and analysis were conducted from October 2018 to January 2019, and is part of a series of surveys McKinsey conducts on China’s luxury market every other year.

To download a copy of the report, visit the McKinsey website via the link below:

 

 

Copy and Images via www.mckinsey.com


You may also like

Victoria Revealed as Australia’s $1 Billion Fashion Manufacturing Capital
“Victoria can be a global leader in advanced, sustainable manufacturing while boosting jobs and developing skills."
Recycling Textile Waste into Yarn: Get to know Guy Dempster
"No effort is too small. Start where you can. Even a goliath ocean liner needs a small, nimble tugboat to guide it into harbour."
International Women’s Day Focuses on a more equal future
The AFC is committed to championing equality within the fashion industry and paving the way for a more equitable future.
1 2 3 87
Stay in touch
Subscribe

© 2024 AUSTRALIAN FASHION COUNCIL  All Rights Reserved

usercrossmenuchevron-down