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Is China The Ideal Destination For International Brands?



Despite the overall decline in China's retail sales since the pandemic began, luxury sales are still up 36% year-on-year in 2020, hitting 471 billion yuan (73.59 billion USD) in 2021. This is more than twice compared to 234 billion yuan in 2019. The data reflects the growth of China's domestic market as an ideal destination for international brands.  

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Despite the overall decline in China's retail sales since the pandemic began, luxury sales are still up 36% year-on-year in 2020, hitting 471 billion yuan (73.59 billion USD) in 2021. This is more than twice compared to 234 billion yuan in 2019. The data reflects the growth of China's domestic market as an ideal destination for international brands.  

Is China The Ideal Destination For International Brands? Is China The Ideal Destination For International Brands? / ph: [email protected]

Consulting firm Bain & Company predicts this growth will continue into the future, making China the largest luxury goods market in the world by 2025, regardless of how future international travel patterns would be.  In China, the middle class is growing and the average increase in disposable income is still higher than inflation.

According to a report from Bain, leather sales grew by about 60% and were the fastest growing category, followed by fashion and lifestyle with a growth of around 40%. 

The main driver of the domestic luxury goods market is the growth of duty-free shops in Hainan, an island province in southern China.  In the last two years, new government policies have cut taxes and introduced other business-friendly measures to turn the region into a free-trade port and international consumer hub.

According to Bain, sales of luxury goods at duty-free stores in Hainan will grow by 85% year-on-year in 2021 (to 60 billion yuan), up 122% year-on-year.  These goods account for 13% of China's personal luxury goods market.

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Analysts at The Economist Intelligence Unit expect the government's new tax-free policy to nearly quadruple China's domestic market to 258 billion yuan between 2021-2025, by opening new duty-free shops in major Chinese cities as Beijing, Tianjin and Shanghai.

However, the duty-free market in Hainan still lags behind in product range and price competitiveness especially for mid- to high-end products.  Meanwhile, Chinese consumers prefer to combine shopping with travel to experience foreign cultures and environments.

Is China The Ideal Destination For International Brands?

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