Luxury brands adapt to slowing sales

After years of growth, public sector curbs bring halt to lavish spending

The period of breakneck growth in demand for luxury brands in China appears to be over, with many of the world's top brands now working hard to consolidate their positions by improving their service to customers.

Bernard Arnault, the CEO of LVMH, the world's largest luxury group by turnover, said it plans to adjust its expansion in China, and that might mean pulling back from some smaller cities.

The head of the company, which owns a portfolio of more than 60 prestigious brands such as Louis Vuitton, said it had found that many people from smaller cities tend to go to bigger cities to shop for luxury items.

Louis Vuitton has expanded rapidly in China, and has more than 40 stores throughout the Chinese mainland, including cities in central and western regions.

Arnault said the brand's development in China will focus on quality, instead of store openings.

And the company is not alone.

In a statement sent to China Daily, Gucci also said it planned to slow its expansion in China this year.

The Italian fashion and leather goods brand - which has developed its store network in China from five in 2004 to 72 by the end of 2012, spread across 34 cities - said it will develop "at a different pace than in past years", although it still plans to continue opening new stores in China this year.

Zhou Ting, director of the Fortune Character Research Center, said that Gucci - one of the highest-profile international luxury brands in China- may even stop opening new stores in the nation.

She added that the Chinese retail sector's slowdown and what has become the saturation of luxury brand names in some places, means a slowdown in openings is almost inevitable.

Almost all the famous international luxury names have stores in China, leaving very little room for any new ones, she said.

According to US consulting firm Bain & Company, the growth of China's luxury market was just 7 percent in 2012 against 30 percent in 2011, which had made Chinese consumers the world's largest luxury consumer group.

In 2012, Chinese consumers bought a quarter of the world's luxury products, within a global luxury sector which grew 31 percent, said Bain.

But experts say Chinese consumers have become a lot more careful and reasoned in their purchase of luxury goods.

China's luxury market has become more mature, several years earlier than originally expected, said Lu Xiaoming, the president of Organic Plus, which used to manage several high-end brands in China.

Consumers now know a lot more about luxury, and choose their items carefully, making sure they fit their needs rather than simply buying because of the labels, he added.

He said that many international luxury brands have already started noticing consumer indifference.