The growth will almost double mainland China’s overall share of the global industry from 11% last year to 20% in 2020, the firms said.
“Mainland China is the only major luxury market to grow in 2020,” Bruno Lannes, a partner with Bain’s consumer products and retail practices, told CNN Business. “China’s luxury market is now bigger than ever.”
“Mainland China’s portion of Chinese global luxury purchases this year reached a peak,” the report said. “[But] the growth in mainland China does not compensate for the Chinese consumption lost overseas.”
Bain and Alibaba project that the global luxury market will shrink by 23% in 2020, as the pandemic continues to limit travel and shopping in many places.
A changing market
Retailers have taken note of the changing market dynamics.
“From a demand viewpoint, we have no particular worry, and we are very pleased with the response,” said Chief Financial Officer Jean-Jacques Guiony. “But for the time being, there are serious constraints as to [customers’] ability to shop outside China, and this is obviously a weight on the growth for coming quarters.”
The pandemic has also accelerated several long-term trends.
The habit will likely stick. Nearly 40% of Chinese consumers plan to do more luxury shopping online over the next few years, while another 40% expected to maintain their current activity, according to Bain and Alibaba.
“We believe Chinese luxury consumers’ online shopping behavior has permanently changed,” the firms wrote.
Next year, China’s growth is expected to continue, albeit not at the same pace. Most brands believe the market will expand by roughly 30% as international borders start to reopen, according to the report. Over the next five years, the share of domestic spending will likely also “subside” as things gradually return to normal, it said.
But the Chinese market will have boomed in the meantime. In five years, China is expected to become the world’s biggest luxury market — even after the world “returns to pre-Covid-19 levels,” Bain consultants wrote.