China's Luxury Market Faces Challenges: What to Expect in 2025
The Business Of Fashion2 months ago
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China's Luxury Market Faces Challenges: What to Expect in 2025

Industry Insights
luxury
china
bain
retail
markettrends
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Summary:

  • China’s luxury market declined by 18 to 20 percent in 2024.

  • Sales expected to remain flat in 2025.

  • Consumer confidence remains low due to economic challenges.

  • Richemont reports 10 percent revenue growth but warns of challenges in China.

  • Sales in Hainan fell by 29 percent due to competition and pricing issues.

Decline in Luxury Sales

China’s luxury market experienced a decline of 18 to 20 percent in 2024, marking the end of a period of exponential growth. According to Bain and Company’s latest ‘China Luxury Report’, sales are expected to remain flat this year.

Factors Affecting Luxury Goods

Discretionary items, particularly personal luxury goods, have been significantly impacted, as China accounts for about one-third of global luxury goods sales. Consumer confidence remains low due to a prolonged property crisis and concerns over employment security.

Insights from Bain & Company

Bruno Lannes, a partner at Bain & Company, remarked, “[Last year] was, of course, a big setback compared to expectations.” However, he anticipates that 2025 should show improvement, with the second half expected to perform better despite a negative first half.

Earnings Reports and Market Response

In a recent earnings report, Richemont, the owner of Cartier, exceeded expectations with 10 percent revenue growth, but noted the challenging situation in China, where third-quarter sales fell 18 percent.

Global Sales Dynamics

Bain’s report indicated that the decline in China was partially offset by overseas sales, particularly in Japan, where currency differences favored Chinese luxury shoppers. Nonetheless, overall global sales to Chinese consumers saw a 7 percent decline.

Duty-Free Sales and E-commerce Competition

Sales in China’s duty-free paradise of Hainan suffered a 29 percent drop, as shoppers opted for other tax-free destinations. Additionally, competitive pricing on platforms like Alibaba’s Tmall and ByteDance’s Douyin diminished Hainan’s price advantages.

Government Stimulus and Future Outlook

Stimulus measures introduced by Chinese authorities in late 2024 provided some relief, improving sales in the final quarter. There are longer-term positives to consider, as luxury goods penetration remains low among a large segment of the population.

Key Demographics

Bain analysts emphasize that top-level luxury consumers in China are crucial for brands, accounting for 45% of sales last year, a figure expected to rise in the upcoming year.

By Casey Hall

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