Luxury brands adapt to slowing sales(2)

Sales of luxury brands in China's market did increase in 2012, but growth was not as much as in previous years.

The luxury division of French multinational company Kering - previously known as Pinault Printemps Redoute, or PPR, until a recent name change - which includes Gucci, saw a 17.6 percent rise in sales in China in 2012, against 39.1 percent in 2011.

Richemont Group, another global luxury conglomerate which owns Cartier and Jaeger-LeCoultre, also reported a slowing market in 2012.

"Following several years of exceptional growth in the Asia-Pacific region, in particular China, sales were flat compared to the comparative figures for the same quarter last year," the group said in a trading update for the third quarter ended Dec 31, 2012.

Bain & Company said that watch and jewelry items, in particular, were hit hard by the slowing economy.

The Federation of the Swiss Watch Industry also reported a dramatic fall in the growth of Swiss watch exports to China in 2012 - they increased just 0.6 percent in 2012, after a 48 percent rise in 2011.

It said that luxury watch sales are unlikely to recover this year either, after recording a 9.9 percent fall in Chinese imports in January compared to last year.

Zhou Ting from the Fortune Center said the Chinese luxury market is not expected to recover for at least the next couple of months.

Government policies to curb excessive use of public funds to purchase luxury items are playing a significant part in dampening confidence in the sector.

Many Chinese luxury consumers, who are not civil servants, are also adopting a wait-and-see attitude on luxury consumption, said Zhou.

The boom times are unlikely to return, she added.

"The fast growth, when increases were well into double-digits in China's luxury market, has gone forever," she said.

Experts now suggest that quality of service has become a priority for many international brands.

In the past, analysts often criticized the luxury end of the market for an almost complacent attitude to customer service.

Lu Xiaoming said that companies now realize that to hold onto loyal, existing customers, and to win new ones in a tight market, companies have to "bring luxury back to basics, which means providing a unique experience, backed up by high-end quality and service", he said.

"Luxury brands have to listen to their consumers and understand their needs."

Some luxury brands have already taken action to change their strategy, and get closer to customers.

Louis Vuitton opened its first flagship "Maison" outlet in China on July 21.

Located in Shanghai's Plaza 66, the four-floor store was designed by acclaimed architect Peter Marion.

It is the company's only store offering custom-made shoes and bags in the Chinese mainland.

And to attract local consumers, mahjong and custom-made tea sets are also sold in the store.

Hermes also plans to open its fifth "Maison Hermes" in Shanghai, supplying services including custom-made items.

"We are focused on building long-term relationships with customers, on a more personal and in-depth basis, in order to secure their loyalty," Gucci said in its statement.

The price difference between luxury items sold in the Chinese mainland and overseas is also a hot topic, and many people have now chosen to shop overseas at lower prices.

Import tariffs used to be thought as the main reason for the price difference, but import tariffs are only a scapegoat, some experts say.

The brands themselves insist that logistics costs and other expenses in China mean label prices have to be higher.

Francois Henri Pinault, the chief executive officer of Kering, said the cost of shipping products from Switzerland to China was partly to blame.