On your marks, get set, spend - shopping habits change rapidly

Fast fashion is so quick off the mark, it's leaving the luxury brands behind

Even though fast-fashion brands have long been denounced as copycats of luxury apparel, the latter is now finding itself behind the development pace of the younger upstarts, especially in China.

Japanese lifestyle brand MUJI opened 42 stores last year to realize its goal of having 100 outlets in China by the end of 2013. Japanese fast-fashion brand Uniqlo has meanwhile been boldly mapping out its 1,000-shop plan in China.

According to statistics released by linkshop, the leading Chinese retailing portal, Uniqlo opened 82 new stores in China in 2013, bringing the total number to 257. H&M had a total of 176 stores in China with the 62 new stores opened last year. Zara opened 18 more stores in 2013 to bring the total number 137. US brand Gap opened 28 new stores, giving it 71 stores in China. In short, there were about 1,000 fast-fashion stores in China by the end of last year.

However, the performance of luxury brands was less eye-catching, although some companies did reach further into the Chinese market. Ralph Lauren opened 26 new stores in China in 2013, six more than the number of new stores it opened the previous year. Chanel opened three more, and Fendi opened four new stores.

Jonathan Seliger, president and chief executive officer of Coach China, said the company remained in line to open about 30 new stores in China both in tier-one cities and lower-tier cities. But the big picture is not so rosy.

However, Paul Smith, Prada, Burberry, Hermes and Longchamp, among others, all failed to meet their expansion targets in 2013.

Following Louis Vuitton's announcement of opening no more new stores in tier-two and tier-three cities in China, Gucci also confirmed that it would not open any new stores in the country in 2013. Giorgio Armani closed its store on the Bund in Shanghai last year. It had stood there for about a decade. Dolce & Gabbana closed its store on Bund 6. In succession, Patek Philippe and Boucheron closed their stores on Bund 18.

According to a China retailing market report jointly released by the real estate service consultancy Knight Frank and global design and consulting firm Woods Bagot earlier this year, 65 percent of luxury retailers missed their expansion targets in 2013, largely because of the difficulty in finding good quality sites, the slowdown of expansion plans in the face of the anti-corruption and anti-extravagance policies and a change in strategy for internal reasons.

The slowdown of the Chinese market was not only reflected in the new store plans but also companies' recruitment plans.

Christine Greybe, president of the Chicago-headquartered executive search firm DHR International, also noticed a general slowdown in the luxury retail sector with growth dropping from double digits to single digit at best and, in some cases, being flat or negative for 2013.

"This will in 2014 affect recruitment negatively at the entry and middle-management levels. However at the C level and for senior management positions there will continue to be a need for talent as the profiles of the executives change and the demands of the business change to cope with the volatility of the current China market," she said.

DHR Executive Vice-President Kelvin Ling added that 2013 was a tough year for all sectors in the consumer industry in China. Many sectors were hit by the government's policy changes such as the ban on the gift-giving habit, the economic situation in areas such as increasing rental and labor costs and changes in consumer behavior in which the fast growth of e-commerce was the most significant.

"Those affected include the luxury sector, liquor industry, mass market retailers, apparel retailers and even some of the fast-moving consumer goods companies that rely on sales to institutions during the festive seasons," he said.

The number of gifts given by rich Chinese people also fell by 25 percent in 2013, a combined result of the country's economic slowdown and Beijing's resolution to crack down on extravagance and corruption, said Rupert Hoogewerf, founder and chief researcher of the Hurun Report, which monitors the spending habits of the wealthy.

Not only are the Chinese super rich less generous these days, but most Chinese are cutting back their budgets for luxury products in general. According to Barclays Research, which looked into China's economic performance in the first two months this year, luxury products sales were quite weak even during the Spring Festival, the traditional peak season of the year when people tend to buy expensive goods as gifts.

A China luxury goods market study released by Bain & Co also showed that the growth rate of the Chinese luxury market was a mere 2 percent last year, while the figure in 2012 was 7 percent and 30 percent in 2011. The slump was so huge that the US market overtook Asia to become the engine of the world's luxury market. The consultancy predicted the trend might continue throughout 2014.

However, it is too early to make firm assessments because there is still some good news for the sector. Luxury brands may only need to take a new path instead of sticking to brick-and-mortar stores because mobile luxury spending is on the rise in China, a recent KPMG e-commerce study showed.

About 70 percent of the survey respondents said they use their desktop computer every day to purchase items or search for information on luxury products, while 60 percent said they use their smartphones every day for this.

The survey also highlighted greater confidence in online channels across all age groups, including higher transaction amounts when purchasing online. The average amount spent by respondents on their last item was 1,515 yuan ($250) while 17 percent said they had last purchased an item online costing at least 2,000 yuan.

Online shoppers in tier-one cities tended to spend higher amounts when purchasing online, at about 1,640 yuan on average. The number was 1,350 yuan in lower-tier cities.

"China is steaming ahead because its citizens have three to four devices, more than the average globally. It is therefore essential for online luxury brands to have a strong mobile strategy, to look at their segmentation and develop interfaces that work well for both desktops and smartphones," said Egidio Zarrella, clients and innovation partner at KPMG China.

Despite the opportunities on hand, some luxury brands have been slow to adopt online strategies in China, preferring to take a wait-and-see approach. Nick Debnam, Asia-Pacific chairman of the consumer markets division at KPMG China, said: "Online is becoming more important for brand-positioning, and people are spending more and more online. I think this is a journey, and it is becoming more important to the brands."