After seeing a decline in the sales of luxury goods over the past few years, spending is up once again in China.
When President Xi Jinping's anti-corruption drive first took force, one of the major segments of Chinese industry to notice the change was within the luxury market. Now, five years after his initiative first came to light, China's luxury good segment is recording steady growth once again. This time around though, there look to be large differences in consumer behaviour.
One of the first differences to note is the type of spending that is taking place. With the rise of wealth within the middle classes and the anti-corruption laws affecting many of the super wealthy, the ever-growing newly affluent segment are setting the precedent when it comes to consumption and industry experts estimate that the middle classes look set to become the main engine for luxury growth by 2020.
The second main change to China's luxury market to note is just who is spending. Where in the past, goods have been thought to have been bought as business gifts, now women account for the main bulk of luxury spend, with handbags and expensive perfume being the markets most dramatically affected by this change. When talking about the increase in female spend, it is worth noting three of the main companies recording large growth. These are Burberry Group Plc, who site their brand exposure on WeChat, Kering who saw huge growth in sales from their brand Saint Laurent and LVMH Moet Hennessy Louis Vuitton SE, where sales of Hennessy Cognac for Chinese New Year have attributed to their growth.
While other factors such as increased consumer confidence and exchange rate fluctuations can also be attributed to the growth of this sector, market experts at HSBC Holdings PLC are so confident of this new wave that they have forecast a seven to ten percent growth for the luxury market by year end.