China Luxury Spending Grows at Slowest Pace Since 2000
China’s luxury spending grew this year at the slowest pace since at least 2000 as more shoppers traveled abroad and the government’s anti-corruption efforts curbed purchases, consultant Bain & Co. said.
Spending in luxury goods is estimated to have expanded about 2 percent in 2013 from 7 percent last year, the Boston, Massachusetts-based company said in a report released today. Growth in 2014 will be at a pace similar to this year, it said.
Demand for luxury items from Swiss watches and expensive liquor have slumped since President Xi Jinping ordered officials to cut down on lavish spending and stepped up investigations into graft. Kering (KER) SA’s Gucci sales fell in the third quarter and LVMH Moet Hennessy Louis Vuitton SA (MC) saw softening demand in perfume and cosmetics during the period amid a slowing economy and a shift to overseas purchases.
“China’s luxury market has quickly changed from land-grab to slow, steady strategic focus,” said Bruno Lannes, Bain’s Shanghai-based partner and lead author of the study. “The mindset among global brands here is changing from ‘where do we find growth’ to ‘how do we create growth.’”
China’s crackdown on extravagance and its anti-corruption campaign had a “large” impact on gifting, one of the major growth engines of the industry, and that hit sales of watches and menswear the most this year, Bain said. Sales of luxury timepieces declined by 11 percent in 2013, it said.
Swiss watch exports, including those from Cie. Financiere Richemont SA (CFR) and Swatch Group (UHR) AG, to China dropped 14 percent in the first 10 months of the year, data from the Federation of Swiss Watch Industry show.
Chinese shoppers now buy more than two-thirds of their luxury items overseas, a move that has led to a slowdown in store traffic and openings on the mainland, according to the Bain report.
Chinese consumers, who last year overtook shoppers in the U.S. to become the world’s biggest buyers of personal luxury items, account for 29 percent of global purchases, Bain said.
Female shoppers in the world’s most-populous nation are starting to increase their spending power and influence, with womenswear and shoe categories growing between eight percent to 10 percent this year, Bain said.
The study showed new store openings by 20 brands tracked by Bain fell by one-third this year to about 100 new outlets, with the focus now on renovation and operational improvement for domestic shoppers.
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