Strategies to Capture Asia’s Luxury Spending Beyond COVID-19 Recovery

March 2021

While the global luxury goods market contracted notably, Asia showed signs of recovery as early as Q2 2020, minimising the impact of the coronavirus (COVID-19) pandemic. This report analyses the background to the quick recovery of personal luxury goods in the region from macro and micro views, with a focus on seven key markets, and provides insights into strategies that help brands capture the demands of the affluent consumer base in the region.

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Key Findings

Personal luxury is resilient in Asia Pacific and is expected to maintain momentum, but risks remain

Personal luxury in Asia Pacific recorded the least contraction of all global regions in 2020, driven mainly by Greater China’s economic recovery, repatriated spending and pent-up demand from the resilience of the wealthy and affluent population. Over the forecast period, the reasonably favourable prospect of consumer group and income growth by 2030, especially from gen Z and gen alpha, will back the growth of high-value industries.

While travel flows remain heavily disrupted, local consumers will be the priority

Although vaccination rollout has started in Asia Pacific, travel restrictions are expected to remain until the vaccination rate is able to attain herd immunity. The impact on markets heavily reliant on international spending, such as Hong Kong, Singapore and Japan, remains significant. Stable incomes and expenditure by local consumers at these shopping destinations will be prioritised.

Personal luxury in Asia Pacific to fully recover in 2021

With China registering strong 28% current value growth in personal luxury, the leader in the region shifted from Japan to China in 2020. The minimal damage to demand among Chinese shoppers will benefit their own country, as well as its neighbours, with the Asia Pacific region expected to expand its share in global personal luxury to 41% by 2020.

Digital innovation will be used to best-serve the affluent to elevate the customer experience and maintain brand exclusivity

There is no doubt that digital innovation needs to accelerate in order for luxury retailers to stay competitive in the post-pandemic world. With careful planning and implementation, digital is a powerful tool for brand engagement and elevating personalisation across the customer journey. Technology and innovation will be fundamental to win, and the omnichannel experience must show zero friction to survive.

Effective approach to capturing value among Asian consumers is needed

As gen Z and millennials will lead the personal luxury market in Asia in the coming years, companies and retailers should understand the values and consumerism of these consumer segments. Products customised to local culture, collaboration with popular characters, as well as personalised products, will be effective ways to stimulate rebound consumption. Circular luxury is expected to add emotional value to consumption among affluent Asian consumers.

Introduction

Scope
Key events so far
Vaccination schedule in key Asia Pacific countries in 2021

State of Play

Asia Pacific leads global personal luxury sales
Key drivers shaping the resilient luxury goods market in Asia Pacific
Asia Pacific to maintain its recovery momentum over the forecast
Resilience of wealth in Asia Pacific driven by China and Taiwan
Inbound-dependent markets see increasing importance of domestic consumption
Could China’s repatriated spending offer hope of a silver lining?
While Asian countries expect tourists to return from China…….
….the rapidly-developed cross-border e-commerce is here to stay
Cross-border e-commerce and best-price search will expand in the region

Asia Pacific Personal Luxury Outlook

Personal luxury in Asia Pacific to see strong rebound in post-COVID-19 era
China: repatriated spending propels the market
Japan: stable high-income population backs-up the market
South Korea: resilient market without full lockdown
Hong Kong: luxury transitioning to target local affluent and wealthy
Singapore: new luxury hub of Asia Pacific?
India: localisation a key strategy to engage with consumers

Key Strategies for Personal Luxury in Asia Pacific

Key strategies for personal luxury beyond recovery in Asia Pacific
Products and services for self-branding attract young affluents in Asia
Timely launch of customised personal luxury further stimulates rebound
Consciousness, affordability and collectability drive circular luxury in APAC
Kering’s entry to circular luxury: how will Asian consumers react?
Greater importance of glocal than ever to engage with consumers in Asia Pacific
Strengthening the resonance between local markets and brand DNA
The need to take advantage of digitalisation yet maintain exclusivity
Online pop-up stores limit accessibility and protect brand exclusivity
Maximise the utility of social commerce with customised marketing
Livestreaming has a wider spread and enriched categories
Brands scramble to stay connected with young consumers with gamification
Omnichannel: the digital revolution of the customer journey (1)
Omnichannel: the digital revolution of the customer journey (2)

Key Takeaways

Key takeaways

Appendix

Recovery Index indicators and weights
Euromonitor Wealth Index
Global population: breakdown by generation
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