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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 OfferingsVICTOR2290327364406464606Stable GrowthWealth transfer to next generationsPwC China Forecast:Global Luxu

3、ry Market Size,2017-2030E2)20020202120222023E2024E2025E2030E+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 Individuals Source:PwC analysis5Sustainable Transition Consumer mindset:Favour sustainable brand commitment with positive ESG attributes,willing to

10、pay 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)Regions

11、Markets: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-e

12、xpressionGlobal 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 j

13、ourneyExceptional&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 Repor

14、t 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 de

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

17、outure5),including a wedding dressTop 1%of wealthySpace:Exclusive VIC stores and VIC roomProduct:Limited and premium edition,precisely customised products with design and tailor perfection,unprecedented technicsService:First-time order,dedicated sales,impeccable carePre-sales(Awareness&Interest)360

18、EngagingAfter-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

19、need Fashion 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

20、 a multi-day New York experience for US VICs,including runway show+luxury tourUS:$72.6 trillionUK:$6.9 trillionNew VICs:Wealth passed 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 TransitionTCo

21、nsumer 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

22、%25%25%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 wi

23、th its 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

24、to pay 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|RVietn

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

26、%above 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 e

27、thical 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 cha

28、in/carbon 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 onli

29、ne at least 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%1

30、5%15%16%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%

31、11%16%32%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%9.7715.313.2 11.76 13.471114.59 14.32 10.12 12.13 11.28 6.84 14.13 11.79 7.658.047.635.07 11.41 9.41 10.08 6.698.347.817.347.53Luxury Groups Sustainab

32、le 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 secondhand fashion itemsPrefer local stores to online storesRepair broken fashion items instead of replacingMake sure that they do

33、nt 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 p

34、rogramme development 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 implementing sustainable pr

37、actices 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 Insi

38、ghts 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 p

39、romote 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 lux

40、ury 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 sec

41、torUltra-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 individuali

42、sm,self-expression and personal identityUltra-premium FragranceCulturally Attributed FragranceBrandFormulaPackagingSpecialtyPrice(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 wor

43、ldwide4)are brewed in oak barrels4.3K/100ml375K/set6)n.a.Sculptural hand-polished caps showcase LVMH Foundation building5)Apply precious ebony agarwood,customised rose essential oil,etc.Melt Season Invested by ELCs NIV7)(2023)DocumentInvested by LOrals China fund(2022)1K1.9K/30mlIntegrate Zen cultur

44、e1.28K/100mlLimited 300 sets/monthOriental&Unisex,adding Chinese flavours e.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 o

45、nly included 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 Ny

46、mphalis(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 inv

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

48、re HNWI/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 econo

49、myCollaborated 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 202

50、3Prada 2022Boucheron 202214Jack de Boucheron collection with CofalitCofalit:Industrial waste(include asbestos)vitrified,heated to 1400C to make the material inertEternal Gold:1st luxury jewellery collection using 100%certified6)recycled goldTraceability for diamonds&gold from mining to retail on web

51、siteSource: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

52、of Custody standards set by the Responsible Jewellery CouncilLV 2024Launched 1st mens high jewellery collection Les Gastons Vuitton16 items incl.rings,necklaces,earrings,bracelets,etc.RichemontHigh JewellerySustainable Jewellery5)Mens JewelleryEnrich portfolio with brand aestheticsResponsible practi

53、ce capture 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 USD2

54、01920222023China 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

55、 in major SEA 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 Go

56、lden Triangle(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 doubled before 2027;Wyndham will be tripled(reach 20)by 2024Travel recovery&luxury hotels open stimulate trave

57、l economy and 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 PacificV

58、ietnam:2 million 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&Arpel

59、s 1st store in Vietnam 2023Loewe 1st store in Vietnam 2023Acne Studios 1st store 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 milli

60、on USD,HSBC;4)According 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

61、:Be Bold,Take the No.1 SLOT2China Outlook:Chinas personal luxury market is growing steadily post-pandemic and is expected to be revitalised by 2025 Hainan seal-off policies PwC China Forecast:China Personal Luxury Market Size,2017-2030E 2537790200222023E 2024E 2025E2

62、030EKey Drivers11%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 1

63、0 years1),creating 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 be

64、tter leveraged 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 Expl

65、orationDemand from 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 Chines

66、e Family Office 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:Embrac

67、e 3 strategic levers,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 Cons

68、umers of Sustainable Luxury2nd generation 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 furnishingHain

69、an Duty-free MarketNew 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:Experie

70、nce-combined fine livingSustainable Supply Chain TRACE PrincipleStrategic Values:Trusted Resilience Agile Circular Eco-friendly Key success factors for sustainable supply chain at each stageSource:PwC analysisS L|O|TNotes:1)PWI:People with impairment193 Strategic LeversSL2nd generation of HNWIs:Will

71、 inherit vast wealth,favouring sustainable values,quiet luxury1)&a desire for upscale social experiences resonating with elite classFeatures and Preferences of 2nd Generation of HNWIs420022trillion RMBHNWIs Wealth in Chinese mainlandAffluent BackgroundGrow up richInternational&

72、technological education and mindset2nd generations of HNWIs in China will succeed substantial wealthWealth passing to the 2nd generation of HNWIs72%of HNWIs completed or plan for wealth succession6.4 years average year to begin wealth succession1831432022-2032E2032E-2042E2042E-2052Etrillion RMBOccup

73、ied ParentsBusy with 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

74、ServiceTo fulfill emotional 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 utmo

75、st care,sympathy for 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 reso

76、nate elite social class 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

77、 exaggerated design or prominent logo+11%2nd generations 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 disposedTrace

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

79、umersGlobalChinaKeringPartner with VitrolabsDevelop 1st cow-free lab-grown leather from cell culturesGucci 1st 100%Carbon-captured Alcohol Fragrance Launched in Singapore&China,2023ChanelN1 DE CHANEL:1st eco-friendly collection,including perfume,cosmetics,skin care productsStella McCartney Worlds fi

80、rst-ever garments made from 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%2

81、8%17%22%17%21%17%22%16%20%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

82、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 least once in the previous year across 25 territoriesSource:PwC Global Consumer Insights Survey-Pulse 6,base:All respondents(8,975),PwC a

83、nalysisSL:Promising Consumers 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:T

84、arget A&F3)and premium beauty productsPregnancy:Target light sports and premium beauty productsUnique product features:Emphasise natural,safety,quality and non-irritationChinese Children5)Market Sizebillion RMB29.140.020202023EBeauty6)Premium A&F7)67%Walking65%Skincare44%Aerobics38%Photoshoot31%Make

85、upChinese Pregnancy Advanced 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:N

86、ew products:Skincare/cosmetic 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 1st AI makeup applicator13)%A&FBeautyA&FA&F,BeautyBeautyArt extracurricular activity:L

87、ead to demand for cosmeticsStylish 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

88、needs&triggered business opportunitiesHuge 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

89、 keep increasing63%63%respondents increased expense in pregnancy preparedness in China in 20238)StableDecreaseIncreasemillion people23Notes: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)Y

90、oung parents surveyed(no.of 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 Organisati

91、on)and the State Council of 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 Jeweller

92、y:With attributes of rarity,enduring worth and appreciation potential,holds promising expansion prospects in China market Scarcity&Social AttributesIndividualismIdentity expression Scarcity shoppingFlagship products promote purchasing enthusiasm among HNWIsImpactful co-branding&cultural expression p

93、roducts promote increasing penetration 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 Chines

94、e&trendy culture%of Chinese Young 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 Ra

95、teTASAKI 20222018-2023Luxury 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 perso

96、nal care.;2)&3)Euromonitor;4)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 elem

97、ents,rapid innovation,and responsible marketing strategies to capitalise the favourable outlook of the B&PC market2018 20192020 2024957706674+16%billion RMBChinese Premium B&PC2)Market SizeChinese brands have cannibalised the market share of foreign brandsChina Became the Worlds 2nd Large

98、st Beauty Market3)Incorporate 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:A

99、void misleading or exaggerated advertisement/promotion to comply with Chinese stricter industry regulations20000217%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 supervisio

100、n&penalty of Chinese B&PC policies 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 Admini

101、stration of Cosmetics LabelingMay 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

102、shall appoint a person in charge 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 a

103、nd personal care;3)General 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 s

104、howroom-based marketing to promote deluxe livingEmerging segment urges healthy and spiritual furniture244220202031Ebillion USDGlobal Luxury Home Furnishing Market Size1)Asia Pacific is at the top of the consumption list and will continue to grow rapidlyDemonstrate brand aesthetic&living attitudeDemo

105、nstrate brand value and individualismFocus 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 xDes

106、ign upgrade:Adaptable and natural 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

107、 decorsLifestyle showroom communication:E-sports and ChildrenLOVESAC Furniture 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

108、 in the US with 100K+active users Source:Euromonitor,PwC analysisLSGE-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 cyc

109、ling,while expanding multi-sensorial ultra-luxe travel in diverse scenarios Expand 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 teaho

110、uses 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,C

111、hina 2023LV 2023Will open its 1st hotel with an iconic monogram trunk facade,at Champs-lyses in ParisDior 20231st Caf DIOR in Chinese mainland,echoing 1940s French chic style of the Montaigne flagship store in ParisCuisineLV 2023Worlds 1st VIP lounge at Qatar Airport to expand luxurious travel and l

112、eisure 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 en

113、try: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 Sto

114、re 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

115、Trends 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 L

116、uxurious 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

117、 expansion: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

118、high-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 e

119、ver-changing tastes,e.g.young HNWIs and UHNWIs253547626E+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.2120222023H1

120、+162%Pop Mart High-end Series Revenue4)Pop Mart Burning Fire auction price reached RMB 230,000million RMBDrama and exhibitionTrendy destination(e.g.caf)Cultural venueEQ1-Q3million peopleCumulative audience of commercial performances1)Increasing demand:From a large pool of active young con

121、sumers 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 Shangh

122、ai,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 20232nd collaboration with Marsper,a collection inspired by Gucci Cosmos(RMB8,000-18,000）28Notes:1)China Association of Performing Art

123、;2)China 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 Ric

124、h product 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 an

125、d high-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

126、penetration 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-commerceOf

127、fline 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 Book promoting b

128、rand culture&craftsmanshipDior Beauty is 1st luxury brand to start livestream on official Tiktok accountCartier displayed Into the Wild livestream in Moments ads,and realised 10 million exposuresDouble 11:1sthour2)no.of people ordered on Tmall LuxuryLA MER launched interactive app to engage consumer

129、s in low-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 bus

130、iness model1.5xvs.202220 Brands1st hour 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&mainte

131、nance etc.;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

132、 cultural 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-en

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

134、atisfy young 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 FeaturesHer

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

136、 limited edition in each city56%202164%20222023Tier-1NonTier-3121176No.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 hist

137、ory of Chengdu,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 com

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

139、K11 MUSEA(Opened in 2019)Art&Culture FocusSustainable LifestyleFulfill both younger generations and HNWIsLouis Vuitton 2022World 1st dedicated furniture and homeware store(appointment-only),also including fragrance salon,caf and barDior 2022-23Multiple designer collections limited-time stores with e

140、ver-changing hot 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)million Man-timeNature Discovery ParkHK 1st urban

141、biodiversity nature 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 w

142、ith before 20204)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,lif

143、estyle stores,etc.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

144、|O:Traditional Channels|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

145、growth estimated 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 ga

146、p,as well as intensified 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 Upgra

147、ded Luxury Stores 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 radiat

148、ing with the brilliance of a natural diamondLV 2023 Eye-catching Yayoi Kusama themed decorsChanel 20235)Asias 1st repair&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)Leat

149、her Goods6)Apparel 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 station

150、ery;3)IFC:International 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:approxima

151、te Total of“Jewellery,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 i

152、n areas of culture,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 Cui

153、sineShooting LocationShopping FirstExperience FirstURBTIX Ticket Revenue1)1344891,0612020/2021 2021/2022 2022/2023+181%million HKD34476920222023+65.8%Luxury Foodservice Revenuemillion HKDLouis Vuitton 20231st Hong Kong fashion show at the art and culture centre,Tsim Sha TsuiEntertainmentC

154、ultureCartier 2023Presented 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 moviesBacca

155、rat 2023Collaborated 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 City 34Notes:1)URBTIX(Urban Ticket

156、ing System)provides one-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

157、seal-off policy is approaching,Hainan will become the 3rd domestic 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 oth

158、er regions within the 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 li

159、sted in the Industrial 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

160、-free licensesSource:Hainan Development and Reform Commission,PwC analysisOther areas of Chinese mainlandControl at the 2nd line2):Goods and articles will be subject to customs supervision and taxationHainan Liberalisation on the islandCompany/InstitutionAccurate and efficient supervision with low-i

161、nterference0 tariff goodsExempted 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 d

162、eployment of luxury groupsAfter 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

163、Negative List:15%Individual 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

164、 shown as below:Free flow through the 1st line1):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%Favour

165、able Policies:Trigger expansion 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 cos

166、metics,jewellery and watch 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 pivo

167、tal battleground for luxury groups13.6127.4849.5034.9043.76160.00+91%cbillion RMBHainan Duty-free Sales Revenue2002220232025E+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 pol

168、icies,featuring higher quotas,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-cen

169、tric province that hosts 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

170、market size in Hainan%of 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

171、 have propelled the flourishing 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 f

172、unctions such as cruise tourism,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

173、 Duty-free Market|T1Trigger 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 a

174、ccount for 34.9%of the total 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

175、SanyaGucci&Ritz-Carlton salon event in HaikouEmerging market:Yachting,surfing and cruiseSports TourismLeisure Tourism84.7%YoY1,008.7K yacht touristsSanya,2023YachtingSurfing329 surf clubs202%CAGR2)Dior&Edition pop-up store with surfing products in SanyaChanel pop-up yacht clubon Long IslandCruise405

176、%YoY149.4K domestic touristsDiors 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 cosmeti

177、cs,jewellery and watches:Continuously 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,s

178、urf and yacht clubs for themed 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 s

179、ubject to tariffs,import VAT 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 ap

180、parel,leather goods,luxury jewellery 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,

181、ports,etc.)Pricing Strategy: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

182、Relationships:To secure better 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:M

183、ay only operate general storesdue 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 m

184、echanisms in HainanOverseas 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 H

185、ainan OverseasHainanNo tariffFurther 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

186、 DFO in long run3General stores1)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 sustainabil

187、ity and climate-related risks,opportunities and 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 gree

188、n systems,including green factories,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 a

189、nd the encouragement of good governance practices,throughout the lifecycles of goods and servicesSecure ability to withstand and recover from disruptions ResilientReact to uncertainties quickly and efficiently AgileMaximise utilisation efficiency and create closed-loop ecosystemCircularDrive ethical

190、,responsible and transparent practicesTrustedPrioritise 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

191、establish a centralised,synergised and efficient supply chain,its essential to capture key success factors for each stage to maximise business values(1/2)41SL|O|T:Sustainable Supply ChainSupplier ManagementSourcingProduct DesignPackagingSupplier Life-cycle ManagementSupplier EmpowermentMaterial and

192、Technology RevolutionDesign InnovationGreen 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 cutti

193、ng-edge technologyMaterial and Technology Revolution:Transit to bio-based,recycled or cell-cultivated materials while pioneering CCUS1)and AI Design Innovation:Adopt adaptable design and introduce sustainable/inclusive product series or brandsMaterial Substitution:Employ certified,recyclable and deg

194、radable materials,or utilise enzymatic recycling technologyPackage Minimisation:Embrace minimalist packaging through N in 1designs and lightweight optionsGreen Benchmarking:Provide quantifiable guidelines to benchmark and evaluate souring decisions Certified Traceability:Utilise blockchain and digit

195、al codes to certify the authenticity and traceabilityof productsMitigate RisksAccelerate GrowthElevate Brand ImpactMitigate RisksOptimise CostResponsibleInnovatingEngagingEvolvingElevate Brand ImpactOptimise CostEnhance Consumer EngagementEnhance Consumer EngagementKey Success FactorsKey Initiatives

196、Strategic ValuesBest PracticesSource:PwC analysisNotes:1)CCUS:Carbon capture,utilisation and storageProlongingStandardisingPlanningNetwork OptimisationSustainable LogisticsGreen and Smart WarehousingESG-linked Business ManagementSustainable RetailRecycle,Reuse and RemakeResale,Rental and SharedNetwo

197、rk Optimisation:Implement an E2E automated 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 profi

198、t&loss model to quantify ESG impact 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 mech

199、anism to recycle and remake for reuseResale,Rental and Shared:Develop or invest in a resale and rental platform to enhance product utilisation and extend life cycleAccelerate GrowthElevate Brand ImpactOptimise CostAccelerate GrowthOptimise CostWarehouse&LogisticsCircularityOperation&StoreEnhance Con

200、sumer EngagementMitigate Risks42Source: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 maximi

201、se business values(2/2)Key Takeaways: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 Transfo

202、rmationUltra-luxe+culturally attributed offerings360 ultimate luxurious lifestyles Sustainability integrated innovationsFast-evolving operation modelPrecise cross-channel differentiationSeamless and consistent experienceSustainable supplier empowermentInteractive consumer engagementCollaborative gov

203、ernment&industrial allianceSustainability 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 depl

204、oymentOffline:Lower-tier cities and culture tourism destinations HK:Experience-combined fine livingEmerging ChannelsSEA:Singapore,Vietnam and MalaysiaHainan:Sports&leisure tourism,post-seal-off operation model23Promising ConsumersVICs&2nd generation of UHNWIs/HNWIsSustainable consumersSpecial consum

205、ers:Children,pregnancies&PWI1)Growing CategoriesPremium fragranceLuxury jewelleryPremium B&PC2)Upscale home furnishingExceptional ExperienceSkiing&cyclingHigh-end travelExhibition&entertainmentArt toyTake the No.1 SLOTKey Takeaways:Luxury Groups should be the BEST in offerings,management and operati

206、ons to dominate the rapidly evolving market in the upcoming decade Michael CAsia Pacific,Mainland China&Hong Kong Consumer Markets Leader,PwC ChinaJennifer YMainland China Consumer Markets Leader,PwC ChinaSteven ZSustainability Strategy&Transformation Lead Partner,PwC ChinaSheila ZhengSSustainabilit

207、y Strategy&Transformation Senior Manager,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 t

208、he context requires,individual member 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 firm

209、s 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.