Overall luxury market
Michael Cheng, PwC Asia Pacific, Mainland China and Hong Kong Consumer Markets Leader said, “The world’s wealthiest 1% control 43% of the world’s financial assets. These Very Important Clients (VICs) are growing rapidly and have strong spending power. It is crucial for luxury groups to better meet their all-round needs. In addition, driven by the growth of (ultra) high-net-worth individuals, boom in luxury tourism and surge of foreign investment, Southeast Asia will become the next high potential destination, after traditional luxury markets – with countries such as Singapore, Thailand, Vietnam and Malaysia showing particularly strong growth. Major brands are actively deploying and promoting sales and branding to enhance their influence and highlight their advantages, especially targeting (ultra) high-net-worth individuals.”
Sustainable consumption has become a global focus: more than 40% of global consumers are willing to pay a 10% premium for products and services that incorporate ESG values. In addition, consumers in most parts of the Middle East, Africa, India and China are willing to pay a 20% premium for recyclable, sustainable and environmentally friendly raw materials, as well as trustworthy ESG products. Luxury groups should seize the growing opportunities for sustainable consumption and encourage the younger generation of super VICs to embrace a sustainable luxury lifestyle. While leading the industry’s sustainable development, they should further expand their customer base and bring in new income.
China luxury market
Steven Zhong, PwC Mainland China Lead Partner, ESG Strategy & Sustainable Value Chain Advisory said, “In the next 30 years, China’s wealth of RMB 92 trillion will be passed down to the second generation of high-net-worth individuals. In order to grasp the core customer base, luxury groups should focus on exploring the demands of young high-net-worth people, further integrate ESG concepts into brand culture, deepen the timeless, minimalist and understated luxury style, and plan upscale social experiences to satisfy the elites’ desire for the extraordinary. Luxury groups also need to pay attention to the potential needs of sustainable consumers and special consumer groups (such as children, expectant mothers and people with disabilities). They should innovate in the ESG product space through eco-system partnerships that attract more sustainable consumers (such as light apparel & footwear, premium beauty products and cosmetic tools). By providing a healthy and sustainable lifestyle, they can demonstrate their brand’s social responsibility and reputation.”
According to the report, consumer attitudes among the younger generation focus on ‘treating yourself’ and ‘rationality’. This encompasses luxury jewellery’s retention of value, meticulous craftsmanship, and perfect service in the realm of luxury jewellery. High-end beauty and personal care products that incorporate Chinese elements, as well as rapid innovation, responsible marketing strategies and adaptive design are other key areas. Recycled and high-end furniture with great emotional resonance bring new opportunities to luxury groups.
With the strong recovery in sports and cultural tourism, outdoor sports, high-end travel, and culture & entertainment have become new trends. Luxury groups can focus on areas such as skiing and cycling accessories and expand ultra-luxe travel experiences to provide an unparalleled luxury lifestyle. Art exhibitions and limited-edition collectables can also cater to the young generation’ ever-changing tastes.
Hong Kong luxury market
Hong Kong’s personal luxury market is recovering slowly, while opening high-profile stores with superior services and seasonal decor have helped traditional categories. PwC China forecasts a compound annual growth rate (CAGR) of 4.5% in Hong Kong’s personal luxury market from 2023 to 2030, reaching HKD 125.8 billion by 2030. This will be powered by three categories: leather goods, jewellery and timepieces.
Stable economic growth is forecast over this period in Hong Kong, driven by policy stimulus. The optimised ‘multi-entry permits’ policy (under discussion) and consumption incentives (e.g. real estate, promotional air tickets, visitor consumption vouchers, etc.) will facilitate the development of the luxury market. Hong Kong’s luxury brands are concentrated in the city centre, and other tourist hotspots and luxury brand cluster. Many stores feature striking exteriors and service innovations. More luxury brands have started to embrace Hong Kong’s experience economy in areas of culture, entertainment, food and lifestyle. From culture heritage, concert & show, trendy destination, Michelin cuisine, traditional flavour, shooting location, and art & exhibition, various consumption patterns show that travellers to Hong Kong prioritise experience first.
Michael Cheng concluded, “In 2024, Hong Kong is still facing a number of challenges. There is less of a price advantage due to continuous strength of HKD/USD against RMB resulting a narrower price gap, as well as intensified competition from Hainan and Shenzhen. Luxury Groups should aspire to be best-in-class in their offerings, management and operations so as to dominate the rapidly evolving market in the next decade. Luxury groups should target VICs and the next generation of (ultra-) high-net-worth individuals as their core customers, fulfilling their wish for next-level services, luxurious lifestyle, wellbeing, art and culture.”
