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1、Mainland China and Hong Kong Luxury Market:April 2024Unlock infinite growth possibilities and sustainable value of luxurious lifestyleContentSustainable TransitionSEA Regions12Global:Be Creative to Pioneer as a VICTOR China:Be Bold to Take the No.1 SLOTKey Takeaways:Be the BEST Luxury Brand3VIC Serv

2、ices Exquisite Offerings3 Strategic Levers2 Operations1 TransformationVICTORSLOT2Global:Be Creative,Pioneer as a VICTOR 1Sustainable TransitionSEA RegionsVIC Services Exquisite OfferingsVICTOR217248283256290327364406464606Stable GrowthWealth transfer to next generationsPwC China Forecast:Global Luxu

3、ry Market Size,2017-2030E2)2017201820192020202120222023E2024E2025E2030E+14%+13%+13%+6%China is expected to be the No.1 personal luxury market by 2030Personal Luxury Market Size Scope in this Report1)Apparel and Footwear EyewearLeather GoodsJewellery and TimepiecesPremium Beauty and Personal CareWrit

4、ing Instruments and StationeryCovid outbreak globallyGrowing fast due to the increasing no.of HNWIs3)and popularity as tourist destinations3 Years of Recovery3 Years of ImpactLockdown in major Chinese citiesEconomic downturnGlobal Outlook:Major countries recovery+Chinese internal salesBefore 2020 Pr

5、osperityChina Hainan stimulationbillion USD4Source:PwC analysis14%16%9%9%19%25%27%23%27%23%4%2023E4%2030E100%USEuropeChinaJapanRest of Asia PacificRest of WorldNotes:1)PwC China forecast for market size covers 6 categories incl.Apparel and Footwear,Leather Goods,Premium Beauty and Personal Care,Jewe

6、llery and Timepieces,Eyewear and Writing Instruments and Stationery,but excludes service,lifestyle,furniture and home furnishing and art toys;2)The reason for the higher prediction for 2025 in this report compared with our 2023 Report(2025E is$444.7 billion)is mainly due to the latest dynamics we ha

7、ve observed incl.rise of the Hainan market in China,wealth transfer to younger generations,and emerging of the SEA markets;3)Hight Net Worth IndividualsThe global personal luxury market is recovering gradually and China is expected to become the top market by 2030PwC China Forecast:Luxury Market Sha

8、re&Forecast by RegionVIC|T|O|RVIC1)Services360 ultimate services:Prestigious and impeccable experiences throughout the entire consumer journeyVICExclusivity for the privilege:Private VIC boutiques with dedicated spaces,customised products and invitation-only accessNotes:1)VIC:Very important clients,

9、represent top 1-2%of total customers of a brand in terms of consumption;2)SEA:Southeast Asia;3)Including Europe,the US,China,etc.4)Ultra High Net Worth IndividualsSource:PwC analysis5Sustainable Transition Consumer mindset:Favour sustainable brand commitment with positive ESG attributes,willing to p

10、ay premiumTLuxury essentials:Be influencers to guide young VICs towards sustainable luxury lifestyle and expand tosustainable consumersExquisite OfferingsUltra-premium:Delicate craftmanship along the value chain,emphasising high value preservation,brand aesthetics and lifetime servicesOSEA2)RegionsM

11、arkets:Target Singapore,Malaysia,Thailand&Vietnam beyond traditional luxury markets3)due to rising HNWIs,tourists influx and foreign investmentRTactics:Focus on HNWIs/UHNWIs4)and tourists with clearly defined and differentiated strategyUltimate cultural attribution:Resonate individualism and self-ex

12、pressionGlobal Trends:Dedicate to VIC services,sustainable transition,exquisite offerings&SEA regions to achieve and lead global luxury triumphsVIC Services VICDeliver best quality&highest standard,more personalised&customised products and services with uttermost delights during the full consumer jo

13、urneyExceptional&Memorable Experience along the Entire VIC Consumption Journey1%Population43%Global32%US50%Asia48%Middle East47%EuropeVICs:Extremely important and younger VICs are emergingTop 1%wealthy people hold 43%of worlds financial assets4)Source:UBS,CNN,PwC analysisNotes:1)Global Wealth Report

14、 2023,UBS;2)Ultra High Net Worth Individuals:Wealth 50 million USD,UBS;3)Compound annual growth rate;4)CNN,2023;5)Haute Couture:is very rare marked by superior craftsmanship and is usually made by hand,by a team of artisans-each with his or her own specialty.One Haute Couture collection should have

15、more than 50 sets,and 25 of which should be completed by the Chief Designer.Most importantly,Haute Couture should be approved and certified by the French Fashion Association and the French Ministry of IndustryVIC FeaturesFast growing group with huge consumption powerConstant&comprehensive demand des

16、pite of economic fluctuationPursue scarcity,exclusivity&360services with highest expectations for luxurious lifestyleGucci Salon 20231stVIC store in US,provided the latest&limited items(40K EUR)with private services(1 customer at one time)Thom Browne 2023Launched 1stcollection of 58 sets Haute Coutu

17、re5),including a wedding dressTop 1%of wealthySpace:ExclusiveVIC stores and VIC roomProduct:Limited and premium edition,precisely customised products with design and tailor perfection,unprecedented technicsService:First-time order,dedicated sales,impeccablecarePre-sales(Awareness&Interest)360 Engagi

18、ngAfter-sales(Maintenance&Loyalty)Extreme Value CreationPurchase Irreplaceable Offerings0.2420220.372027EUHNWI2)5986No.of Global Millionaires1)million peopleSocial:VIC parties and events,interactions with brands senior management and designersConsumer caring:Festival/birthday/mental&spiritual need F

19、ashion Show+Travel Arrangement1-on-1 Video Promotion+SelectionMulti-activity engagement:Art exhibition,craftmanship experiencing etc.Hennessy 2023Exclusive private social dinner for Mr.Maurice Hennessy and VICs,and tasting Hennessys most exclusive limited-editionAlexander McQueen 2022Organised a mul

20、ti-day New York experience for US VICs,including runway show+luxury tourUS:$72.6 trillionUK:$6.9 trillionNew VICs:Wealthpassed to younger generations for the next 20-30 years7VIC:VIC Services|T|O|R+9%+8%(2023 US GDP$27.4 trillion)(2023 UK GDP$3.3 trillion)CAGR3)22-27ESustainable TransitionTConsumer

21、Mindset:Pay increasing attention to sustainable consumption,40%+consumers are willing to pay up to 10%above the average price for products and services with positive ESG attributes globally47%46%45%45%44%44%43%above average price consumers would pay for a product that is1）21%23%26%25%24%24%17%25%25%

22、25%24%25%22%20%22%21%20%21%19%21%23%16%15%15%14%15%15%19%10%10%9%10%10%10%12%7%7%6%6%6%7%8%Produced/sourced locally to you(e.g.from a local farmers market)Made from recycled,sustainable or eco-friendly materialsProduced with a lower supply chain/carbon footprintTraceable and/or transparent with its

23、origin(e.g.fair trade)Biodegradable and can be disposed of at homeProduced by a company with a reputation for ethical practices(e.g.supporting human rights)Bespoke or custom madeI would not pay above average priceUp to 5%6-10%11-20%21-30%More than 30%Millennials and Gen Z appear most willing to pay

24、above average prices%of respondents willing to pay up to 10%more than the average price for ESG features9Notes:1)Based on PwC Global Consumer Insights Survey FY23 Pulse 6 resultsSource:PwC Global Consumer Insights Survey-Pulse 6,base:All respondents(8,975)VIC|T:Sustainable Transition|O|RVietnamMalay

25、siaCanadaSpainUSABrazilEgyptPhilippinesIndonesiaHong KongJapanFranceGlobalUAESouth AfricaQatarSaudi ArabiaThailandSingaporeIndiaChinese mainlandAustraliaSouth KoreaMexicoGermanyIrelandConsumer Mindset:among global regions,consumers in most MEA&SEA regions,India and China are willing to pay 20%above

26、average especially for trustworthy products made from recycled,sustainable or eco-friendly materialsMiddle East and Africa(MEA)SEAAsia PacificAmericasWestern EuropeWilling to pay up to 20%above average price for ESG features1）Bespoke or custom madeProduced by a company with a reputation for ethical

27、practices e.g.supporting human rightsMade from recycled,sustainable or eco-friendly materialsProduced/sourced locally to you(e.g.from a local farmers market)Biodegradable and can be disposed of at homeTraceable and/or transparent with its origin(e.g.fair trade)Produced with a lower supply chain/carb

28、on footprintMean%spend above average price10Source:PwC Global Consumer Insights Survey-Pulse 6,base:All respondents(8,975)Notes:1)Based on PwC Global Consumer Insights Survey FY23 Pulse 6 Results,including 8,975 respondents who were at least 18 years old and were required to have shopped online at l

29、east once in the previous year across 25 territoriesIncreasing willingness to pay above an average price the darker the yellow,the greater the likelihood of paying 20%+above the average priceVIC|T:Sustainable Transition|O|R20%44%26%28%27%23%29%34%18%22%21%10%27%28%17%12%13%12%27%19%19%13%16%15%15%16

30、%17%38%29%25%25%20%34%29%21%21%20%6%31%22%9%9%13%5%23%19%17%10%11%11%11%10%17%31%31%22%24%14%33%28%15%26%16%8%31%21%10%9%7%6%22%17%16%10%11%12%12%10%17%30%28%26%21%20%36%28%22%18%18%7%27%22%12%9%7%6%20%18%15%11%16%12%12%10%16%34%20%18%26%16%32%28%15%24%20%8%30%20%11%7%9%5%22%17%19%9%13%13%11%11%16%3

31、2%25%21%22%24%25%29%18%23%21%8%28%20%10%11%10%6%21%16%15%7%12%10%9%10%15%30%25%19%21%21%25%23%15%15%16%7%26%19%10%11%7%6%18%15%15%8%12%10%8%10%9.77 15.3 13.2 11.76 13.471114.59 14.32 10.12 12.13 11.28 6.84 14.13 11.79 7.65 8.04 7.63 5.07 11.41 9.41 10.08 6.69 8.34 7.81 7.34 7.53Luxury Groups Sustain

32、able Transition:From Eco-design,Materials to End-of-life RecycleKey Takeaway33%24%31%32%29%28%29%28%14%22%23%32%19%17%36%9%9%14%Buy as few fashion item as possibleBuy more secondhandfashion itemsPrefer local stores to online storesRepair broken fashion items instead of replacingMake sure that they d

33、ont contain animal productsRent/exchange fashion items instead of buyingConsumer Shopping Preferences for Sustainable Fashion1)USUKChinaExplore innovative raw and package materials,waste reuse and recycle,secondhand platform,fine and long-lasting design and manufacturing,repair workforce,and rental

34、programmedevelopment etc.Consumer Shopping Sustainability-related Criteria for Apparel and Footwear2)Environmentally friendly packagingEthically sourced/tradedAnimal welfareSecondhand itemsBrands with a commitment to sustainabilityNo environmentally harmful raw materialsProducts with a take-back or

35、recycling programRegional/local productsOrganic or sustainable materialsResource-saving productionQuality seal,product certificationUSUKChina27%27%25%23%22%31%27%22%26%21%40%37%35%38%39%Source:Statista Consumer Insights Sustainable Consumption Survey,PwC analysisBased on the survey results of consum

36、er preference and sustainability mindset,Luxury groups should be The activist-Global headquarter(HQ):Actively innovate across the industrial value chain to bolster brand reputation and business valueRegional branches:Support HQ initiatives and targets while localising and implementingsustainable pra

37、ctices with uniqueness across diverse regionsThe influencer-Consumer impact and engagement:To embrace sustainable lifestyles through visualised marketing,online and offline immersive experience,tangible rewards and recognition among young VICsTop 5 CriteriaNotes:1)&2)Based on Statista Consumer Insig

38、hts Sustainable Consumption Survey in June 2023,covering 1,035 respondents in US(16-83 years old),1,033 respondents in UK(16-90 years old)and 1,043 respondents in China(16-84 years old)VIC|T:Sustainable Transition|O|R11Luxury Essentials:Luxury groups should take the role as Activist&Influencer to pr

39、omote sustainable luxury and expand consumer base for new revenue streamExquisite OfferingsOUltra-premium and Cultural Attribution:Luxury giants vie for ultra-luxury or culturally distinctive features resonate individualism in premium fragrances Premium fragrance is growing fast in major global luxu

40、ry markets2.954.074.60201920222023US Premium Fragrance Market Size1)billion USD5.344.535.73201920222023EU Premium Fragrance Market Size2)billion USD1.2520191.8420222.252023China Premium Fragrance Market Size3)billion USDLuxury brands step forward into ultra-premium and niche fragrance in beauty sect

41、orUltra-premium:Pursue the entire value chain luxury,incorporating exquisite details from formula innovation,bottle design(famous designer or architect)&materials to sales(pricing&target clients)Cultural attribution:Emphasise all-around distinctiveness from product to packaging resonate individualis

42、m,self-expression and personal identityUltra-premiumFragranceCulturally AttributedFragranceBrandFormulaPackagingSpecialtyPrice(RMB)Maison Psych by Rmy Cointreau(2022)39K/100mlLes Extraitsby Louis Vuitton(2022)Top VVIC only by offerBaccarat crystal decorated with gold,diamonds Best ingredients worldw

43、ide4)are brewed in oak barrels4.3K/100ml375K/set6)n.a.Sculptural hand-polished caps showcase LVMH Foundation building5)Apply precious ebony agarwood,customisedrose essential oil,etc.Melt Season Invested by ELCs NIV7)(2023)DocumentInvested by LOrals China fund(2022)1K1.9K/30mlIntegrate Zen culture1.2

44、8K/100mlLimited 300 sets/monthOriental&Unisex,adding Chinese flavourse.g.Dahongpao,Sichuan peppercorns,etc.n.a.Chinese scents and ingredients:Wormwood,ginger,fennel,etc.Chinese classical mortise&tenon design13Source:Euromonitor,Statista,PwC analysisNotes:1)The data accessible to the NPD group only i

45、ncluded the first 10 months;2)&3)Statista-the whole year data;fragrance includes perfume and eau de toilette;4)Best ingredients scoured from the earth:Alexanor(bergamot from Calabria),Belle-Dame(roses from Grasse),Alcyone(Indian Jasminum grandiflorum),Hamadryas(Madagascar bourbon vanilla)and Nymphal

46、is(patchouli from Indonesia);5)Designed by Frank Gehry,a famous architect;6)Include Flaconnier des Extraits designed by Frank Gehry and all five bottles in Les Extraits Collection;7)New Incubation VenturesVIC|T|O:Exquisite Offerings|R+56%+81%+22%+7%+27%+13%High and Sustainable Luxury:Highly investab

47、le and sustainably crafted jewellery is reshaping the luxury jewellery market,propelling new growthHigh value-preservation&appreciation jewelleryis growing fast globally,especially in ChinaLuxury brands actively enrich portfolio of high jewellery4)&sustainable jewelleryHigh jewellery:Serve more HNWI

48、/UHNWI customers and provide highest standard of lifetime servicesSustainable jewellery:Improve ESG performance and meet demand from sustainable consumers to stimulate new revenue streamsMens jewellery:Gender-neutral and mens KOL preferences consequently drive the growth potential of He economyColla

49、borated with Jacob&Co.18K white gold&1536ct hand-set diamonds tailored to street style(Graffiti art)4 limited editions,offered offline onlyFirst high jewellery collectionGold,diamonds&other precious materialsCollection-level jewellery23.2824.2726.593.547.668.99Balenciaga 2023Saint Laurent 2023Prada

50、2022Boucheron 202214Jack de Boucheron collection with CofalitCofalit:Industrial waste(include asbestos)vitrified,heated to 1400C to make the material inertEternal Gold:1stluxury jewellerycollection using 100%certified6)recycled goldTraceability for diamonds&gold from mining to retail on websiteSourc

51、e:Euromonitor,Statista,PwC analysisNotes:1)Statista;2)&3)Euromonitor;4)Most luxurious jewellery that is non-repeatable,original and avant-garde;5)Sustainable Jewellery:jewellery has a lesser impact on the environment and/or the workers who produce it;6)Certified Recycled Gold:meeting Chain of Custod

52、y standards set by the Responsible Jewellery CouncilLV 2024Launched 1stmens high jewellerycollection Les Gastons Vuitton16 items incl.rings,necklaces,earrings,bracelets,etc.RichemontHigh JewellerySustainable Jewellery5)Mens JewelleryEnrich portfolio with brand aestheticsResponsible practice capture

53、new consumerBoost the popularity of mens jewelleryCartier,Piaget,and Van Cleef&Arpels,etc.launched mens jewelleryQuite popular among male starsVIC|T|O:Exquisite Offerings|R201920222023Global Luxury Jewellery Market Size1)billion USD201920222023US Luxury Jewellery Market Size2)billion USD201920222023

54、China Luxury Jewellery Market Size3)billion USD+14%+154%+17%+42%+7%+10%11.0814.7915.76SEA RegionsRSEA is the next high potential destination beyond traditional luxury markets1)and major brands are actively deploying and promoting sales and branding Demand:High growth potential is foreseen in major S

55、EA countriesSupply:Luxury groups are actively deploying and expanding in SEA regionsKHTHSGIDVNPH85%78%73%72%68%64%Singapore Malaysia Thailand Vietnam Indonesia Philippines13.0%4.3%2.0%1.0%0.9%0.6%Thailand:Andaz(opened in 2023),Six Senses Samui(upgraded in 2023),Four Seasons Tented Camp Golden Triang

56、le(20K RMB/day)etc.HNWIs IncreaseLuxurious Tourism BoomLuxury Groups Glocalisation%of Travel Recovery,Jan.Nov.,20234)(Compared to 2019)Vietnam:Accor and Inter-Continental will be doubledbefore 2027;Wyndham will be tripled(reach 20)by 2024Travel recovery&luxury hotels open stimulate travel economy an

57、d luxury consumptionLouis Vuitton 2023Yayoi Kusamas Dancing Pumpkins exhibited in Siam Paragon,ThailandBulgari 2022-23High jewellery trunk show in Singapore,Thailandand Malaysia%of Millionaires in Top 6 SEA countries by 20303)By 2030Singapore:The highest%of millionaires2)in Asia PacificVietnam:2 mil

58、lion adults will hold$500,000 wealth,even more than that of SingaporeHigh-income groups are increasing fast,especially in Singapore,Malaysia,Thailand and VietnamMainly target HNWIs/UHNWIs and tourists with clearly defined and differentiated strategyMultiple Brands Entered Van Cleef&Arpels 1ststore i

59、n Vietnam 2023Loewe 1ststore in Vietnam 2023Acne Studios 1ststore in SEA 2023 Rich luxury hotel portfolio with new luxury hotels enteringSingapore:Mandarin oriental(upgraded in 2023),Edition(opened in 2023),etc.165）Notes:1)Including Europe,the US,China,etc.;2)&3)Holding wealth 1 million USD,HSBC;4)A

60、ccording to arrivals of January-November in 2023,which was updated recently on 13th Jan.,2024,Outbox;5)KH:Cambodia,TH:Thailand,SG:Singapore,ID:Indonesia,VN:Vietnam,PH:PhilippinesSource:HSBC,Outbox,PwC analysisVIC|T|O|R:SEA Regions2 Operations3 Strategic Levers1 TransformationSLOTChina:Be Bold,Take t

61、he No.1 SLOT2China Outlook:Chinas personal luxury market is growing steadily post-pandemic and is expected to be revitalised by 2025 Hainan seal-off policiesPwC China Forecast:China Personal Luxury Market Size,2017-2030E 253141506461697790148201720182019202020212022 2023E 2024E 2025E2030EKey Drivers

62、11%13%14%19%22%19%19%20%25%Before 2020:Booming Chinese luxury marketFluctuation3 Years of RecoveryHainans encouraging policies will empower the Chinese luxury market from late 2024Massive Intergenerational Wealth Transfer3 trillion USD wealth will be passed to younger generations in 10 years1),creat

63、ing significant spending power and immense demand for luxury products&servicesNew Sub-segments BoomingExperiential and luxurious lifestyle is pursued especially by young HNWIs&UHNWIs and sustainable luxury is evolvingOnline Services Further ImprovedOnline channels are optimised and better leveraged

64、for accurate marketing and sales conversion based on its characteristicsHigh Growth Potential in HainanMore preferential policies are being launched,especially after 2025,creating greater high-value opportunities for tourist products&servicesConsumerChannelExperienceNew Customers ExplorationDemand f

65、rom new/special customer groups remains unfulfilled,e.g.children,pregnancy,PWI2),etc.Lockdown in major Tier 1 citiesCovid outbrokeInternational travel recovery&economic downturn19%Domestics luxury consumption returnsGrowth Opportunities Driven by Hainanbillion USD18Notes:1)2022 Chinese Family Office

66、 Industry Trends Report,Hurun;2)PWI:People with impairmentSource:PwC analysis+28%+10%+13%+14%+10%of Global marketOffline Channel ExpansionPenetration increase in lower-tier cities by integrating city uniqueness and culture heritage,premium luxury and trendy dynamicsChina Trends:Embrace 3 strategic l

67、evers,enhance 2 channels and establish 1 foundation to take the No.1 SLOT in China and enter a new era of luxury universeOperationsStrategic Levers32Transformation1Exceptional Experience of Luxurious LifestyleOutdoor sports&high-end travelExhibition,entertainment&art toyPromising Consumers of Sustai

68、nable Luxury2ndgeneration of HNWIs(quiet luxury)Sustainable consumers(sustainable luxury)Special consumers:Children,pregnancies,PWIs1)etc.(caring luxury)Growing Categories with Value Preservation&Spiritual CapitalLuxury jewelleryPremium beauty&personal careUpscale home furnishingHainan Duty-free Mar

69、ketNew model post-seal-off:General store duty-freeReinforce segments:Cosmetics,jewellery and timepiecesPotential segments:Yachting,surfing and cruisesTraditional ChannelsOnline:Differentiated and accurate deploymentOffline:Lower-tier cities and culture tourism destinations HK:Experience-combined fin

70、e livingSustainable Supply Chain TRACE PrincipleStrategic Values:Trusted Resilience Agile Circular Eco-friendlyKey success factors for sustainable supply chain at each stageSource:PwC analysisS L|O|TNotes:1)PWI:People with impairment193 Strategic LeversSL2ndgeneration of HNWIs:Will inherit vast weal

71、th,favouring sustainable values,quiet luxury1)&a desire for upscale social experiences resonating with elite classFeatures and Preferences of 2ndGeneration of HNWIs1201261601642019202020212022trillion RMBHNWIs Wealth in Chinese mainlandAffluent BackgroundGrow up richInternational&technological educa

72、tion and mindset2ndgenerations of HNWIs in China will succeed substantial wealthWealth passing to the 2ndgeneration of HNWIs72%of HNWIs completed or plan for wealth succession6.4 years average year to begin wealth succession1831432022-2032E2032E-2042E2042E-2052Etrillion RMBOccupied ParentsBusy with

73、business and work since childhoodSocial ActivistInfluenced by family business,aspiring to enrich personal connectionsESG EmbracerFocus on legacy and impact(e.g.sustainable investing,philanthropy)Luxurious Lifestyle Prefer luxury assets such as private jet and superyachtsGenuine ServiceTo fulfill emo

74、tional needs and cultural capitalSocial SatisfactionDisplay status&elite class in social occasionsQuiet LuxuryNo flash,no logosSustainable and meaningful aligned with their valuesFeaturesPreferencesLuxury brands should enhanceESG integrated brand legacy:Embed the concept of utmost care,sympathy for

75、the planet and the whole societyTimeless and minimalist style:Emphasise eternal staples with spectacular design and impeccable quality,e.g.classic trench coats,finest cashmere,etc.Upscale social experiences:Craft unparalleled high-end occasions(e.g.curated vineyard tours)to resonate elite social cla

76、ss and desire for extraordinarySL:Promising Consumers of Sustainable Luxury|O|T21Source:UBS,Hurun Report,PwC analysisNotes:1)Quiet luxury is a reinterpretation of minimalism,emphasising investment-worthy items,exquisite craftsmanship and high-quality materials,but almost without exaggerated design o

77、r prominent logo+11%2ndgenerations of HNWIsSustainable Consumers:Is a unique group who cherish healthy lifestyle and meaningful sustainable features,and are willing to pay higher price premiumBespokeEthical companySustainablematerialsProduced/sourced locallyEasily disposedTraceable&transparentLower

78、CarbonfootprintWilling to Pay up to 20%Above Average Price for the ESG Feature,20232)Millennials and Gen Z appear most willing to pay for favourableESG productsLeading luxury brands are actively innovating ESG products by eco-system partnership to attract more sustainable consumersGlobalChinaKeringP

79、artner with VitrolabsDevelop 1stcow-free lab-grown leather from cell culturesGucci 1st 100%Carbon-captured Alcohol Fragrance Launched in Singapore&China,2023ChanelN1 DE CHANEL:1steco-friendly collection,including perfume,cosmetics,skin care productsStella McCartney Worlds first-ever garments made fr

80、om vegan,lab-grown Mylo mushroom leatherGlobalChinaBespokeEthical companySustainablematerialsProduced/sourced locallyEasily disposedTraceable&transparentLower carbonfootprint83%92%76%83%77%83%79%84%76%84%75%85%74%86%Likelihood of Paying Premium for the ESG Feature,20231)20%28%17%22%17%21%17%22%16%20

81、%16%20%15%19%Sustainable ConsumerHigh expectations on and willingness to pay for meaningful ESG attributes,e.g.eco-friendly design,product safety&quality,authenticity&transparency(natural material,ingredients)and brands social responsibility and reputation22Notes:1)&2)Based on PwC Global Consumer In

82、sights Survey FY23 Pulse 6 Results,including 8,975 respondents who were at least 18 years old and were required to have shopped online at least once in the previous year across 25 territoriesSource:PwC Global Consumer Insights Survey-Pulse 6,base:All respondents(8,975),PwC analysisSL:Promising Consu

83、mers of Sustainable Luxury|O|T20%Special Consumers:Explore new consumers and capture high demand potential from children,pregnancy and PWI1)with special needs for caring luxury2)160851,300 China(2050)China(2023)Global(2023)1 in 61 in 91 in 162x30.542.420202023E+12%Children:Target A&F3)and premium be

84、auty productsPregnancy:Target light sports and premium beauty productsUnique product features:Emphasise natural,safety,quality and non-irritationChinese Children5)Market SizebillionRMB29.140.020202023EBeauty6)Premium A&F7)67%Walking65%Skincare44%Aerobics38%Photoshoot31%MakeupChinese Pregnancy Advanc

85、ed Lifestyle Choices9)Differentiated competitiveness:Demonstrate safety,self-pleasure,professionalism,extreme comfort and care80%4%Brands Offer Adaptive Products12)PWI Favour of Makeup11)PWI:Target tech-driven tools and value creation servicesSeize growth opportunities by:New products:Skincare/cosme

86、tic products for scars&birthmark,packaging innovation for convenience,etc.Dedicated service&tool:Voice assistance,high-tech tools(AI makeup),value-added training&customer careLOral worlds 1stAI makeup applicator13)%A&FBeautyA&FA&F,BeautyBeautyArt extracurricular activity:Lead to demand for cosmetics

87、Stylish Post-90s parents:Focus on childrens health&individualism,with lower price sensitivity&higher quality expectationYoung parents(interviewed)plan to increase consumption of luxury,especially for children in 20224)70%Niche but booming:Fast growing group has accessible needs&triggered business op

88、portunitiesHuge potential with limited fulfillment:Inadequate products,auxiliary tool or dedicated service offeringsPopulation with impairments10)Exquisite pregnancy:Boost spending from pregnancy preparation stage and onwardsFocus on health and beauty:A&F and beauty demand keep increasing63%63%respo

89、ndents increased expense in pregnancy preparedness in China in 20238)StableDecreaseIncreasemillionpeople23Notes:1)PWI:People with Impairment;2)Caring Luxury:Originated from ESG concept which emphasises on sustainability and social responsibility 3)A&F:Apparel&Footwear;4)Young parents surveyed(no.of

90、respondents are 10,000)refer to the post-90s parents;5)Children:Under 11 year old,according to Euromonitors definition;6)Euromonitor;7)Huaon;8)Iimedia,Respondents interviewed=3,102,survey conducted in Nov.,2023;9)Alibaba,in 2023;10)Data is from WHO(World Health Organisation)and the State Council of

91、China;11)Cosmetics business;12)P&G;13)LOral worlds first handheld,ultra-precise computerised makeup applicator,called HAPTASource:Euromonitor,WWD,Iimedia,Huaon,Alibaba,WHO,PwC analysisSL:Promising Consumers of Sustainable Luxury|O|T30.542.420202023E+11%+12%Luxury Jewellery:With attributes of rarity,

92、enduring worth and appreciation potential,holds promising expansion prospects in China marketScarcity&Social AttributesIndividualismIdentity expression Scarcity shoppingFlagship products promote purchasing enthusiasm among HNWIsImpactful co-branding&cultural expression products promote increasing pe

93、netration among young generationsLuxury Jewellery:Exquisite Masterpiece and Service Perfection China Luxury Market CAGR2)Value Preservation&IncrementCultural LegacyResist economic fluctuationSecondhand market boomingDemonstrate brand value&culture capitalHighlight Chinese&trendy culture%of Chinese Y

94、oung People Purchasing Gold4)2018202316%59%25-34 age group has become the mainstream consumers of jewelleryFocus on Luxury Jewellery&Premium B&PC1)25%16%22%14%14%2%2023-2028E15%14%9%6%10%0%123.5420197.6620228.992023China Luxury Jewellery Market Size3)billion USDGrowth RateTASAKI 20222018-2023Luxury

95、JewelleryPremium B&PCLuxury Leather GoodsLuxury A&FLuxury TimepiecesLuxury Eyewear24Notes:1)Premium B&PC:Premium Beauty and Personal Care,premium B&PC refers to aggregation of premium color cosmetics,premium fragrances,premium skin care and other premium beauty and personal care.;2)&3)Euromonitor;4)

96、The 2023 Gold Jewelry Industry Insight ReportSource:Euromonitor,PwC analysisSL:Growing Categories with Value Preservation&Spiritual Capital|O|TCo-branded with anime Chain-saw Man and launched new collections with sharp teeth1154%17%Premium B&PC1):Incorporate Chinese elements,rapid innovation,and res

97、ponsible marketing strategies to capitalise the favourable outlook of the B&PC market2018 2019 2020 2021 2022 2023364957706674+16%billion RMBChinese Premium B&PC2)Market SizeChinese brands have cannibalised the market share of foreign brandsChina Became the Worlds 2ndLargest Beauty Market3)Incorpora

98、te Chinese elements:Leverage Chinese art/medicine/cultures as unique strategy to compete with Chinese local B&PC brands under prevailing China-chicRapid innovation:Build up early advantages through rapid innovation to compete for voice and attention Responsible marketing:Avoid misleading or exaggera

99、ted advertisement/promotion to comply with Chinese stricter industry regulations20122014201620182020201320152017201920217%93%9%91%11%89%15%85%18%82%20%80%28%72%37%63%40%60%42%58%Chinese brandForeign brandMarket Share of Key players in Chinese Skin Care MarketThe supervision&penalty of Chinese B&PC p

100、olicies is becoming stricterPolicy NameRegulations on the Supervision&Administration of CosmeticsEffective DateIssuerKey PointsJan 2021 State Council of ChinaThe evidence for functional claims shall be published on the website appointed by NMPA4)The Measures for the Administration of Cosmetics Label

101、ingMay 2022 NMPA4)Regulate the standard labeling of cosmetic ingredients&prohibited functional contentsEnterprises to implement the provisions for the supervision and management of the main responsibility for the quality&safety of cosmeticsMar 2023 NMPA4)Cosmetics company shall appoint a person in c

102、harge of quality&safety with at least 5 years of related experience,before the products GTM5)25Notes:1)B&PC:Beauty and Personal Care;2)Euromonitor,premium B&PC refers to aggregation of premium colour cosmetics,premium fragrances,premium skin care and other premium beauty and personal care;3)General

103、Administration of Customs;4)National Medical Products Administration;5)Go to marketSource:Euromonitor,PwC analysisSL:Growing Categories with Value Preservation&Spiritual Capital|O|T2Upscale Home Furnishing:Revitalise adaptable design,circular business model and immersive showroom-based marketing to

104、promote deluxe livingEmerging segment urges healthy and spiritual furniture244220202031Ebillion USDGlobal Luxury Home FurnishingMarket Size1)Asia Pacific is at the top of the consumption list and will continue to grow rapidlyDemonstrate brand aesthetic&living attitudeDemonstrate brand value and indi

105、vidualismFocus on safety,comfort and best qualityProvide genuine care and spiritual capital,soothing and self-healingHealth&Safety10 xStar anti-bacteria and anti-formaldehyde product growth up to 10 times2)in 202210 xWabi-sabi home growthArt prints growth in 20223)20 xDesign upgrade:Adaptable and na

106、tural inspired LV furnitureBring consumers back to nature,e.g.cloud,flower,cocoon shapedBusiness innovation:Second-hand resale and rental modelWilliam SonomaPartnership with Charish4)for vintage furniture resaleWest ElmPartner with rent the runway to rent out upscale home decorsLifestyle showroom co

107、mmunication:E-sports and ChildrenLOVESACFurniture LEGO(e.g.upgradable and changeable)for lifelong companionCircuMagical and fantasy-themed childrens furniture inspired by animals and fairy tales26Notes:1)Allied Market Research;2)&3)JD,2022;4)A popular secondhand platform in the US with 100K+active u

108、sers Source:Euromonitor,PwC analysisLiving Style Group(from Fung Group)E-sports room featuring ergonomic living to maximise physical wellnessSL:Growing Categories with Value Preservation&Spiritual Capital|O|T+5.3%Spiritual DesignOutdoor Sports&High-end travel:Emphasise professionalism in skiing and

109、cycling,while expanding multi-sensorial ultra-luxe travel in diverse scenariosExpand luxury universe:Multi-sensorial scenarios:Provide high-end travel experience by extending cuisine,hospitality and relaxation services for unparalleled luxury lifestylesExquisite&diverse forms:Restaurant,cafs and tea

110、houses for cuisine;Spas,salon,gyms&entertainment for hospitality;lounges and cruises for trip&relaxation servicesWill increase no.of future trips4)89%71%82%Travel budget has increased in 2023 compared to 20195)Have an urgent and strong desire to travel3)Willing to Pay for High-end Travel Experiences

111、,China 2023LV 2023Will open its 1sthotel with an iconicmonogram trunk facade,at Champs-lyses in ParisDior 20231stCaf DIOR in Chinese mainland,echoing 1940s French chic style of the Montaigne flagship store in ParisCuisineLV 2023Worlds 1stVIP lounge at Qatar Airport to expand luxurious travel and lei

112、sure servicesRelaxation servicesHospitalityHigh-end Travel:Multi-sensorial scenarios in exquisite and diverse formsHikingOutdoor Sports:Prioritise skiing&cycling Major Outdoor Sports Markets1)EquipmentClothingVenue TicketsCampingCyclingFrisbeeSkiing47%36%33%25%21%2,1103,3234,0333,0004,910Market entr

113、y:Products:R&D/collaborate on/acquire outstandingly professional&fashionable apparel,footwear,equipment&accessoriesExperience:Pop-up stores at skiing venues,art show&exhibitions,online exclusive&offline flagship stores with most proficient guidance&training servicesArc teryx 2022Opened Academy Store

114、 in Beidahu offering professional skiing tutorial by fully certified trainersDior 2023Collaborated with professional sports brands(POC,AK SKI&DESCENTE)on skiing gear,skis and sportswear etc.Conversion Rate2)(2023)Consumption ProductsAnnual Per Capita Expense(RMB)Focus27Notes:1)2023 Outdoor Living Tr

115、ends Report,Little Red Book;2)Conversion rate:Interest-participation conversion;3)&4)&5)TMI(2023 Tencent Marketing Insight)Source:Little Red Book,TMI,PwC analysisJ Hotel 2021(Jin Jiang)Ultra-premium luxury ESG brand crafts authentic Chinese flair and art in the cloudsSL:Exceptional Experience of Lux

116、urious Lifestyle|O|TExhibition,Entertainment and Art Toy:Are dominated and favoured by younger generations.Luxury brands may actively leverage these art forms to attract target and extremely high-value consumers like young HNWIsArt&Entertainment:Target theater,exhibitions,trendy destinationsMarket e

117、xpansion:Luxury groups with rich cultural and artistic heritage canLeverage art,exhibition,entertainment for traffic attraction&brand value promotionPartner with theatres,exhibitions,trendy destinations,museums to market new products,limited editions and expand brand impact etc.Art Toy:Prioritise hi

118、gh-end,limited edition and collection-levelMarket entry:Luxury brands may considerCollaborating with celebrated partners/designers/architects etc.to pioneer luxurious art toys along the entire value chain,from design,material,packaging,to pricingTailoring to next generations of wealthy consumers eve

119、r-changing tastes,e.g.young HNWIs and UHNWIs2535476111020202021202220232026E+35%+22%billion RMBChinese Art Toy Market Size3)Burgeoning market:Mainstream consumers including Millennials,Gen Z&ACollection-level:Shifting to high-end collections,limited editions,co-branding etc.178467243202120222023H1+1

120、62%Pop Mart High-end Series Revenue4)Pop Mart Burning Fire auction price reached RMB 230,000millionRMBDrama and exhibitionTrendy destination(e.g.caf)Cultural venue11120192023EQ1-Q3million peopleCumulative audience of commercial performances1)Increasing demand:From a large pool of active young consum

121、ers with great consumption power and expenditures are growing rapidly,with socialising purposeTop 3 most favourable culture experience2)Post-90sfemales dominateValentino 2023Partnered with Sleep No More to promote its 2023AW collectionsLouis Vuitton 2023Opened three temporary bookstores in Shanghai,

122、showcase LV travel-themed books and offer coffeeBalmain 2024Partnered with Pop Mart unveiled a exclusive New Years Mega Space Molly(RMB5,999/699 pieces only)Gucci 20232ndcollaboration with Marsper,a collection inspired by Gucci Cosmos(RMB8,000-18,000）28Notes:1)China Association of Performing Art;2)C

123、hina Tourism Academy;3)Frost&Sullivan;4)Pop Mart Annual ReportSource:PwC analysisSL:Exceptional Experience of Luxurious Lifestyle|O|T2 OperationsOOnline:Deliver best services and accurate offerings along consumer journey based on differentiated channel characteristics and deployment strategy Rich pr

124、oduct offerings and responsive customer services enhance shelf featureLeverage AI to interact with consumers and empower pre-sale experience and improve 1-on-1&after-sale service4)High stickiness,private domainInteractive and China-specific membership operation&engagementEnhance video account and hi

125、gh-quality content to better realise conversion from public to private domainStrong traffic,interest-orientedMemorable experience&constant sharing,e.g.fashion week/celebrity livestreamStrengthen interest-to-sale conversion,improve customer service,&ensure authenticity&traceabilityOnline channel pene

126、tration rate keeps increasingStrengthen channel features and seize growth opportunities by enhancing consumer interest-consumption-loyalty journey and greatly increase sales conversion rate in each step7%15%11%15%7%11%4%5%71%202254%2023Q1OfficialWeb/AppDomesticE-commerceCross-border E-commerceOfflin

127、e StoreMake Up For Ever partnered with AYAYI,Chinas first Meta-human virtual influencer,to enhance consumer interactionIntegrated E-commerceContent PlatformWeChatSales-oriented,with shelf featuresCompetitive differentiationGrowth OpportunitiesHerms official account on Little Red Bookpromoting brand

128、culture&craftsmanshipDior Beauty is 1stluxury brand to start livestream on official Tiktok accountCartier displayed Into the Wildlivestream in Moments ads,and realised10 millionexposuresDouble 11:1st hour2)no.of people ordered on Tmall LuxuryLA MER launched interactive app to engage consumers in low

129、-carbon travel,by offering testers/samples etc.Luxury Consumption Channel Distribution in 20231)Policies encourage development of e-commerce channelsMinistry of Commerce(2024)Promote digital consumption and support healthy development of livestream E-commerce,instant retail and other new business mo

130、del1.5xvs.202220 Brands1sthour Tmall GMV exceeded whole day revenue in 20223)300%Luxury A&F:highest GMV&fastest growth rate(300%)5)186%Luxury timepieces growth rate6)30Notes:1)Tencent Marketing Insight(TMI),2023;2)&3)Oct.31st,2023;4)After-sale service including refund,exchange,repair&maintenance etc

131、.;5)&6)TikTok shop luxury categorys GMV and YoY growth in 2023Source:PwC analysisLittle Red Book as prioritised platform for event communication,e.g.Fendi x HeyteaSL|O:Traditional Channels|TMini-programme/Sales WeChat74%Offline:Expand lower-tier cities by entering high-end shopping malls or cultural

132、 districts with distinct features and trendiness to increase growth and trafficTrend,culture&individual expressionChina City Distribution of New Luxury Stores Opening1)Cities Rank that Launched the Most Luxury Brand First Store in 20232)1 Lanzhou 2 Shenzhen 3 Zhengzhou 4 Hefei5 SanyaHigh-end Shoppin

133、g MallsHigh-end Cultural TourismSuzhou Renhengcang:Suzhou garden style street district Chengdu Citanggai:Historical district focus on art and culture4)2ndwealthy generation12%10%46%50%42%40%Tier-2&BelowAverage18-2930-4142-55Design&Interaction:Highlight city features and fashion trends to satisfy you

134、ng consumersSiting&City Culture:Select high-end shopping centres,especially in cultural&tourist destinationChina Luxury Consumer Age Distribution in 20235)Store DesignCity LimitedCartier:Taikoo Li,ChengduDecorated with hand-painted Ba Shu landscape and Chengdu city treeRegional FeaturesHerms:Deji Pl

135、aza,NanjingStore decoration materials including bamboo,wicker and Yuhua stone Origins:Deji Plaza,NanjingOne of the 1stbatch of sustainable pilot stores(6 Estee Lauder stores worldwide in the 1stbatch)SustainabilityMarni Market TourPop-up stores link cities in various provinces and launch limited edi

136、tion in each city56%202164%20222023Tier-1NonTier-121319127713121176No.of Stores Name of Shopping MallMixcMixcDavidPlazaMixcCDF Mall II3)Focus more on non Tier-1 citiesNon Tier-1 City31Notes:1)&2)Luxe.Co;3)Haitang Bay CDF Shopping Mall II;4)Citang Street memorised the art and culture history of Cheng

137、du,which used to be a bookstore street and had the Sichuan Art Club,etc.cultural and historical building;5)TMISource:Luxe.Co,PwC analysisSL|O:Traditional Channels|TOffline-Case:Zhang Yuan adaptive design and K11 MUSEA incorporated ESG concepts and perfectly combined arts&culture with commercialisati

138、onLuxuryShopping Cultural CentrePerforming Art Centre Relax&ExperienceBoutique HotelsHigh-end OfficeApart-mentFashionableDistrictMoMA Design Store 20191sttime launched in GC6),as most forward-thinking and discerning design store7)Shanghai Zhangyuan-Fengshengli(Opened in 2022)Hong Kong K11 MUSEA(Open

139、ed in 2019)Art&Culture FocusSustainable LifestyleFulfill both younger generations and HNWIsLouis Vuitton 2022World 1stdedicated furniture and homeware store(appointment-only),also including fragrance salon,caf and barDior 2022-23Multiple designer collections limited-time stores with ever-changing ho

140、t themesUrban Revival Revitalised the NeighbourhoodCulture,style,and high-end:Simultaneously satisfy luxury,fashionable,experiential demandRespect history&culture,in-situ&conservation development182024FY21 FY22 FY23+14.4%No.of Visits5)millionMan-timeNature Discovery ParkHK 1sturban biodiversity natu

141、re museum with the sustainability themeArt AreaOpera Theatre art installation,Design Republic street art,and K11 Art House film&performancesGreen Building 50K sq.ft.green wall,indoor green plant windows,rooftop farms Overall sales and premium brands sales soared 120%&260%,compared with before 20204)

142、Traffic,fashion,and rejuvenation:Diverse stores meet all-time demands,and most popular brand matrix offer novel experiences and the latest fashionGuccis art wallLancome DRAMA pop-upBakery&coffee,unique restaurant,fashion market,live house&bar High-end boutiqueFashion buyers shop,lifestyle stores,etc

143、.HNWIs：Younger generation：32Notes:1)&2)&3)2023,Eastmoney;4)As of August 2023,China Daily;5)Annual Report;6)GC:Greater China;7)Only 5 MoMA Design stores worldwideSource:PwC analysisAverage daily flow1)Maximise daily flow2)Traffic increase on weekend&holiday3)30K people80K people40%SL|O:Traditional Ch

144、annels|THong Kong:Is recovering slowly,while opening high-profile stores with superior services and seasonal striking exteriors have become a breakthrough for traditional categories0.50.30.40.40.40.41.30.80.91.01.21.410.05.66.97.09.713.816.98.39.611.912.515.79.711.611.015.714.5Slow growth estimated

145、in 2023-30 driven by policy stimulation:Optimised multi-entry permits policy(in discussion)and consumption incentives(e.g.promotional air ticket,coupons,etc.)But HK is still facing major challenges:Less price advantage due to HKD appreciation against RMB and narrower global price gap,as well as inte

146、nsified competition from Hainan and ShenzhenHK personal luxury market has gradually recovered22.327.344.8202321.132.12022125.819.422.0202138.216.3202021.567.256.917.62019105.72030E18.120.872.892.6+4.5%CAGR23-30Ebillion HKDGradual recoveryBefore 2020Slow growthFeatures of Newly Upgraded Luxury Stores

147、 in HK Location:Centralised in Harbour City,emphasising the city centre,tourist gathering spots and luxury brand cluster 11%55%11%11%4%4%4%2022-2023 Luxury Stores Distribution&UpgradesStore Features:Striking exterior and service upgradeOverall MarketDeBeers 2023Special facade radiating with the bril

148、liance of a natural diamondLV 2023 Eye-catching Yayoi Kusama themed decorsChanel 20235)Asias 1strepair&experience centre offers ultimate care,repair and alteration serviceHerms 2023VIC-only holiday decoration DIYWI&S2)Eyewear+4.9%+3.8%+5.2%+3.3%+5.2%+2.8%-0.3%Jewellery6)PB&PC1)Leather Goods6)Apparel

149、 and FootwearTimepieces6)IFC3)StreetPacific PalaceInternational AirportHarbour cityWTC4)K1133Notes:1)PB&PC:Premium B&PC refers to aggregation of premium color cosmetics,premium fragrances,premium skin care and other premium beauty and personal care;2)Writing instruments and stationery;3)IFC:Internat

150、ional Finance Center;4)WTC:World Trade Center;5)in Henley Building at Prime Central CDB district,and consumers can participate in the repair process for better experience and communication;6)Combined total of Timepieces,Leather Goods and Jewellery categories in this chart:approximate Total of Jewell

151、ery,watches and clocks,and valuable gifts per HK Census and StatisticsSource:PwC analysisPwC China Forecast:HK Personal Luxury Market Size,2019-2030E SL|O:Traditional Channels|T+4.5%-46.2%+17.6%.Hong Kong:More luxury brands have changed directions,embracing HKs experience economy in areas of culture

152、,entertainment,delicacy and fine livingNew TravelersLuxury brands are elaborating experiential economy,combing entertainment,culture,and delicacyLuxury x Entertainment&CultureLuxury x CuisineConcert&ShowCulture HeritageTrendy DestinationArt&ExhibitionTraditional FlavourMichelin CuisineShooting Locat

153、ionShopping FirstExperience FirstURBTIX Ticket Revenue1)1344891,0612020/2021 2021/2022 2022/2023+181%millionHKD3447691552020202120222023+65.8%Luxury Foodservice Revenuemillion HKDLouis Vuitton 20231stHong Kong fashion show at the art and culture centre,Tsim Sha TsuiEntertainmentCultureCartier 2023Pr

154、esented exhibition-cartier and women jewelry showcase in Hong Kong Palace MuseumHerms 2023Poetic and cinematic performance show to immerse the audience in an imaginary universeChanel 2023First-ever partnership with cultural institution(M+cinema)to restore 9 classic HK moviesBaccarat 2023Collaborated

155、 with Michelin chef to create a restaurant2)that incorporates Baccarat crystals into its designLouis Vuitton 2024Opened a pop-up store and cafe showcasing 2024SS collection and partnered with Michelin restaurant to offer a unique menu at Harbour City34Notes:1)URBTIX(Urban Ticketing System)provides o

156、ne-stop ticketing services mainly for hirers or event presenters and audiences of the Leisure and Cultural Services Department performance venues;2)Cristal Room Restaurant,at the LandmarkSource:Euromonitor,PwC analysisSL|O:Traditional Channels|THainan Market Summary:As the 2025 seal-off policy is ap

157、proaching,Hainan will become the 3rddomestic offshore area after Hong Kong and Macau,offer various tax incentives and generate enormous business opportunitiesNotes:1)1st Line:between Hainan and overseas beyond the customs territories of PRC;2)2nd Line:between Hainan and the other regions within the

158、customs territories of the PRC;3)The 4-category list includes:production equipment imported by enterprises for own use,ships/aircrafts/yachts imported to for transportation and tourism,raw and auxiliary material and imported goods consumed by the island residents;4)Companies listed in the Industrial

159、 Structure Adjustment Guidance Catalogue 2024,Encouraged Foreign Investment Industries Catalogue 2022,Catalogue of Encouraged Industries in Hainan Free Trade Port 2024;5)Talents listed in Qiong2022No.31 Policy;6)General stores refer to the stores in Hainan that do not have duty-free licensesSource:H

160、ainan Development and Reform Commission,PwC analysisOther areas of Chinese mainlandControl at the 2ndline2):Goods and articles will be subject to customs supervision and taxationHainan Liberalisationon the islandCompany/InstitutionAccurate and efficient supervision with low-interference0 tariff good

161、sExempted from routine regulationOver-seasTax Advantages:Duty-free categories are expanded,0 tariff,turnover tax will be reformed,preferential corporate tax and individual income tax 2025 Seal-Off Policy in Hainan(Hainan 2025 Policy)The seal-off policy is favourable for the deployment of luxury grou

162、psAfter Seal-Off203520202025Tariff/Consumption Tax/VATList Management:Goods of 4 categories3)are exempted from taxExpand Scope:All allowed goods are exempted from tariffTurnover tax will be reformedCorporate TaxOnly Encouraged Companies4):15%Companies Except for those on the Negative List:15%Individ

163、ual Income TaxHigh-end/High-demand but scarce Talents5):15%Residency in Hainan183 Days:3%/10%/15%tax based on incomeOverview:Hainan will become a special area featuring independent customs supervision by 2025,and will implement special supervision policies and operating model shown as below:Free flo

164、w through the 1stline1):Goods and articles will be exempted from customs supervision and freely transferredOpportunities in Hainan MarketSL|O:Hainan Duty-free Market|TFlourishing Duty-free MarketStrong Growth:2023-2025E CAGR of the Hainan duty-free market may reach 91%Favourable Policies:Trigger exp

165、ansion of luxury brands,sports and leisure tourism1Operating Model After Seal-offShort Term:Luxury groups may operate general stores6)onlyLong Term:Brands and DFO may be the same within China and DFO license may be cancelled3High Potential SegmentsExisting Market:Enhance cosmetics,jewellery and watc

166、h categoriesEmerging Market:Expand yachting,surfing and cruise with local characteristics2Before Seal-Off35Hainan Market Outlook:Favourable seal-off policies,coupled with enhanced sports and leisure tourism will accelerate the growth of Hainan market,positioning it as a pivotal battleground for luxu

167、ry groups13.6127.4849.5034.9043.76160.00+91%cbillion RMBHainan Duty-free Sales Revenue201920202021202220232025E+80%+25%No.of Duty-free StoresNo.of Duty-free Consumersmillion person-time471011126.764.226.724.483.84+34%Market Boom in 2020-2021:Fueled by optimised duty-free policies,featuring higher qu

168、otas,broader categories,expanded eligibility and frequenciesMarket Recovery in 2022-2023:Driven by visa exemptions,extended international routes,and a new pick-up upon purchase policy+15.2%+31.6%CAGR19-23Trigger the Expansion of Luxury BrandsSports Tourism:Create a sport-centric province that hosts

169、world-class sporting eventsPromote Sports and Leisure TourismcbaabLeisure Tourism:Establish a globally renowned tropical coastal leisure and wellness centre1)cSpecial fund for cultural and sports activities110 million RMB40 billion RMB(in 2023)(by 2025)Target sports&fitness market size in Hainan%of

170、the wellness industry of Hainans GDP10%of GDPHome PortDevelop a modern international cruise home port3)(by 2025)(by 2030)04%Franchise FeeDufy-free Operators:General Stores2):Tariff0Franchise Fee/B2C Sales TaxHainan turnover tax reform is under discussionClose the GapPolicies have propelled the flour

171、ishing of the Hainan duty-free marketFavourable seal-off policies will further stimulate its growth36Notes:1)Deep drop due to strict covid-19 control and provision policy;2)General stores refer to the stores in Hainan that do not have duty-free licenses;3)Integrate various functions such as cruise t

172、ourism,route operations,duty-free consumption,transportation hub,cultural leisure,etc.Source:Hainan Development and Reform Commission,Hainan Provincial Department of Tourism,Culture,Radio,Television and Sports,The Peoples Government of Hainan Province,PwC analysisSL|O:Hainan Duty-free Market|T1Trigg

173、er the Expansion of Luxury BrandscHigh Potential Segments:In addition to reinforce cosmetics,jewellery and timepieces in Hainan,luxury groups may also consider expanding to nautical categories through collaboration with upscale venues237Notes:1)Others include 42 categories account for 34.9%of the to

174、tal duty free revenue in Hainan;2)CAGR of 2021-2023Source:Hainan Provincial Department of Tourism,Culture,Radio,Television and Sports,PwC analysisSL|O:Hainan Duty-free Market|TExisting market:Cosmetics,jewellery and watchCasesCategoriesOMEGAs Seamaster Summer Blue launch in SanyaGucci&Ritz-Carlton s

175、alon event in HaikouEmerging market:Yachting,surfing and cruiseSports TourismLeisure Tourism84.7%YoY1,008.7Kyacht touristsSanya,2023YachtingSurfing329surf clubs202%CAGR2)Dior&Edition pop-up store with surfing products in SanyaChanel pop-up yacht clubon Long IslandCruise405%YoY149.4Kdomestic tourists

176、Diors wellness spa cruise trip in Paris Sanya,2023/02-2023/10Cosmetics14.3%Jewellery10.5%Timepieces34.9%OthersTotal40.3%100.0%YoY growth+4.8%+71.4%+50%of Duty-free Revenue in First 3 Quarters in 2023Hainan Xisha cruise line,2023Hainan serves as crucial channel for cosmetics,jewellery and watches:Con

177、tinuously to enhance these categories in Hainan market Expand nautical products with localised characteristics:Such as surfboards and suits,and introduce products inspired by local nautical featuresCollaborate to provide luxurious experience:Partner with cruises,resorts,surf and yacht clubs for them

178、ed pop-up stores and offer exclusive services1)Implications38Notes:1)General stores refer to the stores in Hainan that do not have duty-free licenses;2)Turnover tax treatment in Hainan is still under discussion;3)&4)Traditional channels refer to stores outside of Hainan subject to tariffs,import VAT

179、 and consumption taxSource:PwC analysisSL|O:Hainan Duty-free Market|TOperating Models of Luxury BrandsProduct CategoriesRequired CapabilitiesWithin the first few years after seal-offAfterwards(maybe after 2028)Limited categories for DFOsHigh-unit-price products,such as apparel,leather goods,luxury j

180、ewellery and timepieces,etc.Competitive productsFull categoriesLow-unit-price products,such as eyewear,perfume,cosmetics and accessories,etc.Traffic productsStore Location:In mature tourism centres(Sanya,Haikou,etc.)and essential pathway for departing the island(airports,ports,etc.)Pricing Strategy:

181、Balance with traditional channel pricingSupply Chain:Build up travel retail supply chain and self-operated bonded warehouse/distribution centre to benefit from short lead time,cost-effectiveness and flexibility to access Asia Pacific and Greater Bay Area,etc.Governmental Relationships:To secure bett

182、er locationDifferentiated SKUs:Distinct product categories and SKUs from general stores Pricing Strategy:Overall strategy to balance omni-channel pricing,including general stores in Hainan(with no tariffs but subject to sales tax)and traditional channels4)Directly Owned:May only operate general stor

183、esdue to the difficulty in obtaining duty-free licensesDirectly Owned:Less difference between duty-free stores and general storesAs new duty-free licenses may be released or existing ones may be cancelled along with the maturation of infrastructure and the retail market mechanisms in HainanOverseas

184、SuppliersPurchasing Centre in Hainan Tourists Leaving Hainan:Potential taxes for General storesNo further tax for DFO within quotaTourists Stay in Hainan:No further taxOverseasHainanNo tariffB2C:turnover tax,under discussion2)StoresOverseas SuppliersPurchasing Centre in Hainan OverseasHainanNo tarif

185、fFurther tax reformTourists Leaving Hainan:No further tax within quotaTourists Stay in Hainan:No further taxOperating Models After 2025 Seal-off:Within first few years of seal-off,luxury groups may operate general stores1)only,with the possibility for less difference with DFO in long run3General sto

186、res1)vs.Duty-free stores(DFO)3)1 TransformationT40Notes:1)ISDS:IFRS sustainability Disclosure Standard;2)CSRD:Corporate Sustainability Reporting Directive;3)United NationSource:PwC analysisSL|O|T:Sustainable Supply ChainPolicy RequirementsGlobal:ISDS1)Disclose sustainability and climate-related risk

187、s,opportunitiesand absolute GHG emissions throughout the entire value chain Europe:CSRD2)Mandatory requirements for the value chain risk management and quantified short/mid/long-term targets disclosure China:Chinas Green Development in the New Era White PaperDevelop green systems,including green fac

188、tories,supply chains,packaging,logistics etc.Accelerate GrowthOptimise CostElevate Brand ImpactMitigate RisksAchieved ValuesSustainable Supply Chain Definition&Characteristics:TRACESustainable Supply Chain3)is the management of environmental,social and economic impacts and the encouragement of good

189、governance practices,throughout the lifecycles of goods and servicesSecure ability to withstand and recover from disruptions ResilientReact to uncertainties quickly and efficiently AgileMaximiseutilisationefficiency and create closed-loop ecosystemCircularDrive ethical,responsible and transparent pr

190、acticesTrustedPrioritise low carbon and ecological well-beingEco-friendlyEnhance Consumer EngagementStrategic Value:As the foundation for realising all the opportunities,a sustainable supply chain will contribute to substantial financial outcomesKey Success Factors:To establish a centralised,synergi

191、sed and efficient supply chain,its essential to capture key success factors for each stage to maximisebusiness values(1/2)41SL|O|T:Sustainable Supply ChainSupplier ManagementSourcingProduct DesignPackagingSupplier Life-cycle ManagementSupplier EmpowermentMaterial and Technology RevolutionDesign Inno

192、vationGreen BenchmarkingCertified TraceabilityMaterial SubstitutionWeight&Size MinimisationSupplier Management:Integrate ESG into supplier Codes of Conduct,supervision and assessmentsSupplier Empowerment:Provide ESG training,host supplier forums,and co-invest in cutting-edge technologyMaterial and T

193、echnology Revolution:Transit to bio-based,recycled or cell-cultivatedmaterials while pioneering CCUS1)and AI Design Innovation:Adopt adaptable design and introduce sustainable/inclusive product series or brandsMaterial Substitution:Employ certified,recyclable and degradable materials,or utilise enzy

194、matic recycling technologyPackage Minimisation:Embrace minimalist packaging through N in 1 designs and lightweight optionsGreen Benchmarking:Providequantifiable guidelines to benchmark and evaluate souring decisions Certified Traceability:Utiliseblockchain and digital codes to certify the authentici

195、ty and traceabilityof productsMitigate RisksAccelerate GrowthElevate Brand ImpactMitigate RisksOptimise CostResponsibleInnovatingEngagingEvolvingElevate Brand ImpactOptimise CostEnhance Consumer EngagementEnhance Consumer EngagementKey Success FactorsKey InitiativesStrategic ValuesBest PracticesSour

196、ce:PwC analysisNotes:1)CCUS:Carbon capture,utilisation and storageProlongingStandardisingPlanningNetwork OptimisationSustainable LogisticsGreen and Smart WarehousingESG-linked Business ManagementSustainable RetailRecycle,Reuse and RemakeResale,Rental and SharedNetwork Optimisation:Implement an E2E a

197、utomated network planning systemSustainable Logistics:Leverage intermodality,optimise routes and invest in innovative renewable energy/fuelGreen and Smart Warehousing:Evolve towards a carbon-neutral and intelligent hubESG-linked Business Management:Develop ESG profit&loss model to quantify ESG impac

198、t of the companys activities into monetary value for business decisionsSustainable Retail:Formulate life-cycle green store standards that encompass both embodied and operational aspectsRecycle and Remake:Initiate consumer engagement activities with an incentive mechanism to recycle and remake for re

199、useResale,Rental and Shared:Develop or invest in a resale and rental platform to enhance product utilisationand extend life cycleAccelerate GrowthElevate Brand ImpactOptimise CostAccelerate GrowthOptimise CostWarehouse&LogisticsCircularityOperation&StoreEnhance Consumer EngagementMitigate Risks42Sou

200、rce:PwC analysisSL|O|T:Sustainable Supply ChainKey Success FactorsKey InitiativesStrategic ValuesBest PracticesKey Success Factors:To establish a centralised,synergised and efficient supply chain,its essential to capture key success factors for each stage to maximisebusiness values(2/2)Key Takeaways

201、:Be the BEST Luxury Brand3TransformationOperationsStrategy Levers44Source:PwC analysisNotes:1)PWI:People with impairment;2)B&PC:Beauty&personal carePioneer as a VICTORBe the BESTBuild up Visionary StrategyEnlighten Omni-channel OperationSustain Value Chain TransformationUltra-luxe+culturally attribu

202、ted offerings360 ultimate luxurious lifestyles Sustainability integrated innovationsFast-evolving operation modelPrecise cross-channel differentiationSeamless and consistent experienceSustainable supplier empowermentInteractive consumer engagementCollaborative government&industrial allianceSustainab

203、ility FoundationConsumer Mindset Reinvention:Be the activist and influencer to promote sustainable luxury lifestyle among young VICsSustainable Supply Chain-TRACE:Trusted,Resilient,Agile,Circular,Eco-friendly1Traditional ChannelsOnline:Differentiated accurate deploymentOffline:Lower-tier cities and

204、culture tourism destinations HK:Experience-combined fine livingEmerging ChannelsSEA:Singapore,Vietnam and MalaysiaHainan:Sports&leisure tourism,post-seal-off operation model23Promising ConsumersVICs&2ndgeneration of UHNWIs/HNWIsSustainable consumersSpecial consumers:Children,pregnancies&PWI1)Growing

205、CategoriesPremium fragranceLuxury jewelleryPremium B&PC2)Upscale home furnishingExceptionalExperienceSkiing&cyclingHigh-end travelExhibition&entertainmentArt toyTake the No.1 SLOTKey Takeaways:Luxury Groups should be the BEST in offerings,management and operations to dominate the rapidly evolving ma

206、rket in the upcoming decadeMichael CAsia Pacific,Mainland China&Hong Kong Consumer Markets Leader,PwC Hong KongJennifer YMainland China Consumer Markets Leader,PwC ChinaSteven ZSustainability Strategy&Transformation Lead Partner,PwC ChinaSheila ZhengSSustainability Strategy&Transformation Senior Man

207、ager,PwC ChinaEditorial boardConsumer Markets Leadership Contact us 45 2024 PwC.All rights reserved.Not for further distribution without the permission of PwC.“PwC”refers to the network of member firms of PricewaterhouseCoopers International Limited(PwCIL),or,as the context requires,individual membe

208、r firms of the PwC network.Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm.PwCIL does not provide any services to clients.PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firms professional judgment or bind another member firm or PwCIL in any way.