Luxury market poised for swift rebound in 2023

F.P. Report

HAIKOU: Recent reports suggest that China’s luxury market is expected to usher in a rapid recovery in 2023, fueled by factors including a surge in offshore duty-free shopping.

According to the global management consulting firm Bain & Company, personal luxury sales in China shrank 10 percent year on year in 2022, ending its five-year streak of exponential growth, but positive conditions are expected to return before the end of the first quarter of 2023.

Xing Weiwei, partner with Bain & Company, said luxury consumption in China is expected to bounce back as the COVID-19 pandemic recedes, foot traffic in malls increases, and consumer confidence improves. “We expect to see 2021 sales levels sometime between the first and second half of 2023.”

A report by PricewaterhouseCoopers suggests that China will continue to release growth potential as a main driving force of the global luxury market.

The PwC report estimated that China’s luxury market will reach 816 billion yuan (about 119 billion US dollars) in 2025, accounting for about a quarter of the global luxury market share.

Younger generation, Chinese traditions, increasing internet penetration and the development of the duty-free market are future trends for China’s luxury market, the report added.

Duty-free shopping, with the island province of Hainan being the main channel, is breaking new ground in China’s luxury market. The impact of this trend is so significant that the PwC report described Hainan as being “strategically important for luxury brands to speed up expansion in China.”

Hainan’s offshore duty-free sales reached 49.5 billion yuan in 2021, taking up about 13 percent of China’s luxury market, according to the report. It projects the compound annual growth rate of the Hainan duty-free market to hit 32.8 percent from 2023 to 2026.

Duty-free shopping has become a key attraction of Hainan, with its scenic beaches drawing tourists from across the world. Wu Lan, a tourist from northwest China’s Xi’an, purchased many skin care products and cosmetics from duty-free shops in Haikou and Sanya during the Spring Festival.

“The beauty (of Hainan duty-free shopping) is the lower price and a wide range of brands for me to choose from,” she said.

Since the beginning of this year, as tourism boomed after the ease of epidemic control measures, Hainan’s duty-free shopping has seen a strong recovery, marking a good start for China’s luxury market.

Hainan reported a total of 1.56 billion yuan in offshore duty-free sales during the Spring Festival holiday, a year-on-year increase of 5.88 percent, according to Haikou Customs.

The number of shoppers for duty-free products in Hainan during the week-long holiday totaled 157,000, up 9.51 percent from the same period last year, with each shopper spending an average of nearly 10,000 yuan.

Since 2011, the island has seen its annual duty-free sales grow by nearly 50 times, with an average annual growth of 44.6 percent, according to the provincial department of commerce. Hainan will strive to boost consumer demand and raise its offshore duty-free sales to over 80 billion yuan in 2023, according to the province’s government work report. (APP)