A Year of Contrasts for China’s

Growing Personal Luxury Market

International travel disruptions, duty-free
opportunities, and digitalization continue
to strengthen domestic spending in 2021.
Authors and acknowledgments

Bruno Lannes is a senior partner with Bain & Company’s Consumer Products and Retail practices,
and is based in Shanghai. You can contact him by email at bruno.lannes@bain.com.

Weiwei Xing is a partner with Bain & Company’s Consumer Products and Retail practices in Greater
China, and is based in Hong Kong. You can contact her by email at weiwei.xing@bain.com.

The authors extend gratitude to all who contributed to it, especially Kate Liu who is a senior manager
with Bain & Company’s Consumer Products and Retail practices in Greater China; Joe Wang, who is
a consultant in Bain’s Shanghai office and Weixin Lin, who is an associate consultant in Bain’s
Shanghai office.

Copyright © 2022 Bain & Company, Inc. All rights reserved.

 A Year of Contrasts for China’s Growing Personal Luxury Market

At a Glance

In 2021, China’s luxury market continued the double-digit growth trends of 2020, putting the
country on pace to become the world’s largest luxury market by 2025.

Sales are increasingly affected by Hainan duty-free shopping, digitalization, and repatriation.

We expect moderate growth in 2022 as travel restrictions continue to affect luxury goods
demand and shopping patterns.

Despite mounting global social and economic challenges, China’s luxury goods market finished
another year with double-digit growth overall, with some brands exceeding a 70% increase.

Even as the global luxury market regained 2019 levels, Chinese consumers continued to shop mostly
in the mainland, given limited international travel options. Following a 48% increase in 2020,
China’s domestic sale of personal luxury goods grew 36% in 2021, totaling nearly RMB 471 billion
(see Figure 1).

Figure 1: China’s personal luxury market grew an estimated 36% in 2021

Mainland China personal luxury sales (B RMB) CAGR

500 Growth varies significantly

across brands, from 10%
2011–16 to more than 70%
2%
400
Category growth rates differ
2016–19 widely, from 20% to 60%–70%
26%
300
Hainan duty-free increased
2019–20 in importance
48%
200
2020–21 Online channels continue
36% to outgrow the market

100
Millennials and Gen Z are still
playing a key growth role
0
2011 12 13 14 15 16 17 18 19 20 21E

Note: Hainan island’s duty-free sales are part of mainland China luxury sales
Source: Bain-Altagamma 2021 Worldwide Luxury Market Monitor; expert interview; Lit research; Bain analysis

1
 A Year of Contrasts for China’s Growing Personal Luxury Market

Also following 2020 trends, this growth varied significantly across brands (ranging from 10% to
more than 70%) and categories. Leather goods was the fastest growing category, at about a 60%
growth rate, followed by fashion and lifestyle, at about 40%. Jewelry spending increases were
lower than in 2020, but still managed a growth of about 35%, while high-end watch purchases
rose about 30%. Luxury beauty spending increased about 20%. These estimates include Hainan
duty-free sales.

Globally, mainland China’s share of the luxury market grew from about 20% in 2020 to
approximately 21% in 2021 (see Figure 2). We anticipate this growth to continue, putting
the country on track to become the world’s largest luxury goods market by 2025—regardless
of future international travel patterns.

Figure 2: Mainland China’s increasing share of the global personal luxury goods market has
put it on the path to becoming the biggest luxury market by 2025

Regional share of personal luxury goods market (%, B Euro) CAGR CAGR CAGR
(19–20) (20–21) (21–25F)

281 217 283 360–380 Total –23% 30% 7%

100%
Rest of world

Rest of Asia
80

Mainland 45% 36% 33%

China
60
Japan

40
Americas

20
Europe

0
2019 2020 2021E 2025F

Note: Mainland China 2019–20 growth rate 45% and 2020-21 growth rate 36% are in current exchange rate in 2020 and 2021 respectively
Source: Bain-Altagamma 2021 Worldwide Luxury Market Monitor; Bain analysis

2
 A Year of Contrasts for China’s Growing Personal Luxury Market

However, it is important to note that growth in 2021 did not follow a steady incline. Rather, all
categories saw strong YOY increases (from 40% to 100%) in the first half of the year, while growth
throughout the second half of 2021 dipped to an estimated 0%–25% YOY (see Figure 3), according to
evidence gathered from a representative sample of brands. Several factors contributed to this
change in trajectory:

• The high comparable base achieved in the latter half of 2020

• Sporadic Covid-19 outbreaks in cities across China

• A more conservative consumer sentiment following a cooldown of the stock and real
estate markets

• New regulation of key opinion leaders (KOLs) and celebrity influencers, which led to reduced
marketing spend across many luxury brands

Figure 3: Four key factors contributed to slowing growth across the second half of 2021

Mainland China personal luxury market YOY growth by category (%)

100% High comparable

YOY base

80 Sporadic Covid-19
outbreaks in several cities

60
Dampened consumer
sentiment resulting from
cool-down of stock and real
40
estate markets

20 Suppressed brand media

and marketing investments
related to restrictions on KOL
0 and celebrity influencers
Leather Fashion Jewelry Watches Beauty
goods and lifestyle

2021 1H 2021 2H estimated

Note: Half-year growth using a selection of brands only

Sources: Lit search; expert interview; Bain analysis

3
 A Year of Contrasts for China’s Growing Personal Luxury Market

Another factor that has been mentioned by several luxury players is the return of Chinese students
to their international campuses as they re-opened, after having spent a year or so in China following
the closure of their campuses since the summer 2020.

This year, our research identified three major trends that we expect to shape the luxury market for
years to come. Primarily an acceleration of several of the growth engines we noted in 2020, these
trends indicate even stronger implications for personal luxury brands in the future.

Trend # 1: Hainan offshore duty-free shopping

Hainan’s duty-free stores emerged as a new, sizable luxury hub last year, with sales there growing by
more than 120% in 2020. In 2021, these sales increased about 85%, reaching RMB 60 billion and
contributing about 5% to China’s overall luxury goods market growth (see Figure 4). Personal luxury
makes up ~95% of Hainan sales, with luxury beauty accounting for more than 50% of that number.

Figure 4: Hainan duty-free store sales increased ~85% in 2021, contributing ~5% of overall growth
of the China personal luxury market

Mainland China personal luxury sales (B RMB) CAGR CAGR CAGR

(18–19) (19–20) (20–21E)

471 37% 48% 36% Total duty-free store sales

were about RMB 60 billion
in 2021, about 50B RMB
from duty-free sale
346

37% 43% 31% Personal luxury comprises

234
about 95% of Hainan
170 duty-free store sales

Luxury beauty comprises

about 50% of Hainan
43% 122% 85% duty-free store sales

18 19 20 21E
Hainan duty-free
store sales as
share of total 6% 6% 9% 13%
market
Hainan duty-free stores Other

Source: Bain-Altagamma 2021 Worldwide Luxury Market Monitor; expert interview; WIND; lit research; Bain analysis

4
 A Year of Contrasts for China’s Growing Personal Luxury Market

The biggest promoter of Hainan success has been its aggressive pricing. For many brands, the
advantages go well beyond mere tax benefits. For example, we conducted store checks across many
beauty brands during the Christmas season. Our research shows that Hainan unit prices (RMB/ml)
can be 30% to 55% lower than brands’ official listed prices (see Figure 5). As a result, Hainan luxury
beauty sales represented almost 25% of the sales in China’s official channels (both online and
offline) in this category. This significant price gap also disrupted the luxury beauty market’s price
system, contributing to slow growth in other channels.

Figure 5: Significant discounts vs domestic official listed price contributed to Hainan’s growing
penetration in luxury beauty

Listed luxury beauty duty-free unit prices (RMB/ml) on Hainan Hainan duty-free stores’ luxury
duty-free can be 30% to 55% lower than brands’ official listed prices beauty sales represented 25% of
sales in China official channel*

25%
30%~55%

Brands’ official listed prices

Hainan duty-free prices

Additional 20%–35% TR retailer promotion for certain brands

Note: Price comparison is based on ~40 hero SKUs across ~10 luxury beauty brands; official channel price is based on Brand Tmall flagship stores
and Hainan duty-free price is based on cdfgsanya.com;
*China official channels include official non-TR online and offline channels,, and does not include Daigou or any other uncontrolled channels
Source: Lit search; Expert interview; Bain analysis

5
 A Year of Contrasts for China’s Growing Personal Luxury Market

As anticipated in last year’s report, four additional duty-free operators joined China Duty Free
Group, previously the only operator in Hainan, in 2021. As more operators arrive, we expect retail
shopping opportunities on the island to continue expanding. With more options for buyers, price
competition is likely to become more intense.

Hainan is just one pricing disruptor that has affected shopping habits in China, especially the
beauty market. As discussed in last year’s report, daigou agents, fueled by other travel retail
operators, played an increasing role in 2021.

As a result of these pricing disruptions, we anticipate major risks for category repricing and negative
impacts on brand image and equity, as prestige becomes masstige and masstige becomes mass
market: A US market scenario in the making?

Trend # 2: Further digitalization

Digitalization in China is high and increasing, and the trend has further accelerated due to the
pandemic prompting even longer screen time. As a result, much of the marketing and consumer
engagement activities have moved online, even as offline stores remain the primary channel for
brand building and purchase conversion. It is not surprising that online luxury sales grew faster
than offline across all categories. We estimate that online personal luxury sales grew almost 56%
(with offline sales growing at 30%).

As in 2020, online sales penetration varied widely across categories (see Figure 6), although all
categories saw similar increases in 2021:

• Luxury beauty e-commerce sales grew 20% to 25% YTD as of November, with the highest online
sales penetration (excluding duty-free) of all luxury categories, increasing from approximately
38% in 2020 to 41% in 2021.

• Online sales penetration for leather goods grew from about 8% to an estimated 12% last year.

• The luxury fashion and lifestyle category grew online nearly 80% YTD as of November, yet
online penetration reached only about 10%.

• Jewelry saw the highest online growth, with penetration approaching 10%.

• Luxury watch penetration in online channels remains low, holding steady at less than 5%.

6
 A Year of Contrasts for China’s Growing Personal Luxury Market

Figure 6: Online penetration remains low except for luxury beauty and duty-free sales

Except for luxury beauty, all other personal luxury categories’ Luxury duty-free store sales
online penetration remain at single to low double digit online penetration around 50%

Mainland China personal luxury sales online penetration by category

(Official channels excluding duty-free sales)
~41%
50%

~12%
~10% ~10%
~5%

Beauty Leather Fashion and Jewelry Watches

goods lifestyle
2020 online
~38% ~8% ~7% ~7% ~5%
penetration

Note: Duty-free sales online penetration remains ~50%; category online penetration shown does not include duty-free sales
Source: Bain-Altagamma 2021 Worldwide Luxury Market Monitor; Expert interview; Lit research; Taoshuju; Bain analysis

Personal luxury duty-free sales online penetration remains at about 50%, similar to 2020. These
sales represent the “ship to home” opportunities that most travel retail operators offer to consumers.

In summary, luxury online penetration reached about 19% total in 2021, excluding duty-free
shopping. With duty-free penetration included, total luxury online penetration in China reached
approximately 26% of sales.

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 A Year of Contrasts for China’s Growing Personal Luxury Market

Trend # 3: Continued repatriation

In 2020, Covid-19-related travel restrictions led mainland China’s portion of Chinese global luxury
purchases to peak at about 70% to 75%. In 2021, continued repatriation contributed to this share
growing to more than 90% (see Figure 7).

Figure 7: “Official” overseas luxury purchases declined by about 30 billion Euro in 2021,
compared with 2019

Geographic breakdown for Chinese luxury goods spending (%, B Euro)

76 85 94 59–63 59–65
100%

80

Oversea
60 purchase
Mainland
China sales
40

20

0
2015 18 19 20 21E

Mainland China
23% 27% 32% 70%–75% 94–98%
spending share

Source: Bain-Altagamma 2021 Worldwide Luxury Market Monitor; Bain analysis

8
 A Year of Contrasts for China’s Growing Personal Luxury Market

Although an advantage for mainland China’s share of spending on personal luxury goods, travel
disruptions reduced Chinese overseas purchases by about 30 billion euros in 2021, compared to
2019. Consumers who primarily tied personal luxury purchases to the opportunity of a trip abroad—
including group travelers (who represented about 40% of Chinese travelers pre-20201)—stopped
making such purchases. However, many of those purchases abroad have likely been replaced by
purchases through parallel channels, including through daigous.

The purchase of overseas products through various daigou channels is recorded as overseas sales.
For example, international travelers to South Korea’s duty-free stores declined by 83% in 2021 (after
dropping 78% in 2020), from about 15 million in 2019 to 3 million in 2020 and .5 million in 2021.
However, duty-free sales in 2021 increased by 17% YOY, reaching RMB 76 billion in the first 10
months of the year. This discrepancy suggests more vigorous parallel import and daigou activity
(see Figure 8). The market has also seen the emergence of new daigou formats, such as Dewu, also
known as Poizon. This budding e-commerce platform enables both individuals and brands to
register and sell overseas luxury products to Chinese consumers. Monthly active users of Dewu
grew from 12 million in 2019 to 35 million in 2021.2

Figure 8: Discrepancy between declining visits to South Korea duty-free stores and increases
in duty-free sales suggests stronger parallel with import activity

International travelers # visiting South Korea duty-free South Korea duty-free sales to international travelers
(Jan-Oct 2019-2021, M) (Jan-Oct 2019-2021, B RMB)

–78%
–37%
~15M
~103

+17%

~76

~65

2019

–83% 2021
2020
~3M

~0.5M

Number of foreigners Sales to foreigners

Note: About 90% of international travelers who purchase duty-free products in South Korea are daigou operators and mainly for mainland China
Source: Korea Duty Free Shops Association; Analyst reports; Lit research; Bain analysis

1 Ministry of Culture and Tourism of the People’s Republic of China

2 Questmobile

9
 A Year of Contrasts for China’s Growing Personal Luxury Market

Looking ahead

What does the influence of these factors mean for China’s personal luxury goods market?
After two years of extraordinary growth in mainland China, we expect 2022 to produce more
moderate growth.

First, we must recognize that the fundamentals of consumption in China are still in place,
and that China remains the best consumer story in the world:

• The middle class is growing, and the country’s common-prosperity strategy will positively
affect this category of consumers.

• The average increase of disposable income remains higher than inflation.

• Urbanization continues.

• Government policies favor consumption as a promoter of GDP growth.

• Repatriation of consumption will continue as long as restrictions prevent travel outside

China (most personal luxury players do not assume any reopening of international travel
at scale in 2022).

Second, sporadic localized Covid-19 outbreaks will likely continue throughout the year.
We expect a corresponding negative impact on shopping-mall traffic in affected cities.

Third, there are increasing differences between Chinese luxury consumers and luxury consumers
elsewhere. These disparities include demographics, digitalization, retail environment, cultural
references, and relationship to luxury brands. Therefore, the luxury goods market in China will
likely be increasingly influenced by its own dynamics.

Beyond 2022, brands should anticipate the progressive reopening of international travel, with
implications on pricing harmonization across geographies. But in the short term, we expect that
2022 will produce low double-digit growth for personal luxury overall. This growth might be slow for
the first half of the year with stronger increases in the latter half, factoring in 2021 comparables.

Overall, we expect Chinese consumers’ personal luxury purchases to recover to pre-Covid levels
between the end of 2022 and the first half of 2023, supported by continuous repatriation of spending
and boosted by the gradual reopening of international travel, first in Asia and then globally.

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