China’s Luxury Goods Market Set To Remain ‘Stable’ In 2025, Says Bain & Company

While China is doing everything it can to regain its former economic growth following last year's sharp fall in consumption, Bain & Company's latest report predicts a relatively stable overall trend for the luxury goods market in 2025. According to the forecasts, a difficult first half and an improving second should enable the luxury market to enter a ‘new normal’ in mainland China.

In the face of the country's economic slowdown throughout 2024, driven by falling consumer confidence and a resumption of overseas shopping, luxury spending in the country has fallen by between 18% and 20% over the past year, the US firm reports. All luxury goods categories were impacted, with many brands, such as Burberry and Gucci, reporting lower sales as a result, particularly in the third quarter. The hardest hit sector was jewelry and watches, where consumers showed a lack of interest in other products and experiences with more long-term value.

‘The market is going through a period of turbulence and uncertainty, where widespread underperformance could become the norm, with only a few brands emerging as winners. Most brands will probably have to focus on consolidating their presence and on measures to improve their performance rather than on expansion and price increases,’ said Bruno Lannes, senior partner based in Greater China at Bain & Company, in a statement.

Last autumn, in a bid to revive the economy and boost purchasing power, the Chinese central bank announced the country's most significant stimulus plan since the pandemic, injecting $150 billion and cutting several interest rates. Three months after these initial support measures, the office of the Chinese Communist Party announced even firmer support for its economy for 2025, including a ‘moderately flexible’ monetary policy and a ‘more proactive’ fiscal policy. This has breathed new optimism into economists but has not convinced consumers to buy luxury goods.

For the time being, Hainan's duty-free market continues to face competition, with sales falling by around 29% in 2024. This is due to the recovery in global tourism, particularly to nearby destinations such as Japan and Southeast Asia, and intense competition from digital and other new duty-free shops in the city center and neighboring destinations.

Price disparities between luxury goods in mainland China and other markets, such as Japan, have made overseas luxury purchases even more attractive, particularly in favorable exchange rate conditions. At the yen's lowest point against the RMB, the price differential with domestic prices was as high as 30%. According to the report, ensuring global price consistency while remaining ultra-responsive should be a top priority for luxury brands in the year ahead.