LONDON — With waves of tense lockdowns and rounds of crackdowns on the tech, real estate and entertainment sectors in 2022, China’s personal luxury sales contracted for the primary time in five years, a Bain report published Tuesday revealed.

The “Setting a Recent Pace for Personal Luxury Growth in China” report estimated that spending in the private luxury space in China shrank by 10 percent in 2022.

Just about all luxury categories were impacted, but those with higher online penetration, similar to luxury beauty, performed higher than those with a smaller online presence.

The report said the watch market saw the sharpest decline, with sales falling by 20 percent to 25 percent from 2021. Fashion and lifestyle categories saw a 15 percent to twenty percent decline, while jewelry and leather goods performed barely higher, contracting 10 percent to fifteen percent.

Just a few brands managed to remain flat or grew throughout the difficult market environment.

Bruno Lannes, senior partner at Bain & Company in Shanghai, said three aspects contributed to their success. “First, larger brands outperformed smaller players on average. Second, brands with iconic portfolios did higher than those with trendy or seasonal merchandise and eventually, brands with a better concentration of Very Necessary Clients, or VICs, fared higher.”

Bain said some brands achieved higher VIC sales than the worldwide average of 40 percent in China, because the economic slowdown affected entry-level luxury consumers greater than ultra-high net value ones.

China’s thriving duty-free sector, which is especially driven by a dozen malls on Hainan island, was also heavily impacted in 2022, with sales down 30 percent year-over-year to 35 billion renminbi, or $51.5 billion, the report said.

In consequence of the decline, China Duty Free Group, the nation’s largest player available in the market, and its affiliates have been aggressively pushing for domestic e-commerce options to offset declines.

Price hikes within the Chinese market have also helped some brands to recoup their losses. Brands’ efforts to harmonize the worth between different markets pre-pandemic were thrown out of the window as China became isolated from the remaining of the world in 2020. Only a couple of maintained a world pricing strategy throughout the pandemic.

The report found that there’s a price gap of 25 percent to 45 percent between China and Europe within the leather segment and 25 percent to 345 percent in the jewellery and watches sectors. The worth gap for entry-level products is larger than high pricepoint items.

With China reopening on Jan. 8, with all COVID-19-related rules being scrapped, Bain expects that growth in the luxurious sector will resume in 2023.

“We consider 2022 was a reset, not a harbinger of more distress,” the report said. “The basics of consumption in China are still intact. In comparison with other emerging markets, China is a behemoth for luxury growth. It has a bigger variety of middle- and high-income consumers, and people populations are projected to double by 2030. Within the mid to long run, ‘the following China’ is China.”

Weiwei Xing, partner at Bain & Company in Hong Kong, said with luxury consumption recovering as COVID-19 subsides, mall traffic improves and consumer sentiment rebounds, she expects to see “2021 sales levels sometime between the primary and second half of 2023.”

The report also believes that Hainan will rebound and turn into a key travel destination again, even with the return of international travel.

For many who return to Paris, Milan and London from China, Bain urged brands to adapt and cater to their distinct shopping behaviors and preferences.

“Differences between the Chinese and global luxury market will widen, especially around digitalization, the retail environment, cultural references and relationships with brands. Brands that understand the nuances of the China luxury market will succeed over time,” the report said.

Xing also identified that “while optimism abounds, there are also risks. Brands must resolve pricing gaps between China and Europe before international travel resumes. As well as, as more Chinese high-net-worth individuals are residing outside of China, luxury brands must deliver excellent experiences in every single place on the planet.”