Appetite for luxury wanes in China

Tourists examine jewelry at a duty-free shop in Sanya, Hainan province. China's luxury market shrank slightly last year. [Photo/Xinhua]

　　Purchases slowed last year amid slower growth, brand proliferation

Sales of luxury goods slowed in China during 2014, with the growth rates falling for the first time amid slowing economic growth and brand proliferation, a new study said on Tuesday.

China's luxury market is undergoing a fundamental shift, brought on by evolving customer dynamics, an influx of new, emerging luxury brands, and an economic slowdown, said the study released by global consultancy firm Bain & Co.

Based on a survey of 1,400 respondents across China, Bain said shoppers spent around 380 billion yuan ($61.13 billion) on luxury products worldwide in 2014, up 9 percent year-on-year.

Of this, about 30 percent of the purchases were made within China from brick-and-mortar stores and online shops. However, the total consumption fell by 1 percent on a year-on-year basis to 115 billion yuan, marking the first time that the domestic luxury market has shown such low growth numbers.

Among luxury goods, watch sales fell by 13 percent, the biggest among all categories, while men's wear purchases declined by 10 percent during the same period, particularly at premium price points. Leather goods sales remained flat for most of last year.

The slump in luxury goods sales are primarily a result of the ongoing anti-corruption and frugality campaigns, factors that have undermined luxury gifting, said Bruno Lannes, a partner with Bain.

Though jewelry sales showed a 2 percent growth in 2014, the sale of high-end products especially for women fell sharply. The growth in mid-level product sales, however, helped offset the weakness in higher-end products, said Lannes.

Last year also saw the highest number of store closings by luxury brands in China, with men's categories being the most affected, he said. Hugo Boss closed seven stores in China and Zegna six.

Most of the well-established brands remained conservative on new store openings after witnessing a decline in like-for-like sales. Emerging brands, on the other hand, were more aggressive in new store openings, the report said.

More than 80 percent of the respondents said they were more interested in emerging luxury brands and styles, with 44 percent keen on buying more emerging brands in the next three years. This is largely because the Chinese consumers are becoming more sophisticated, better informed and weighing purchase decisions on the design of the products, said Lannes.

Brands such as Balenciaga, Michael Kors and Jimmy Choo are gaining more popularity with Chinese consumers, the report said.

Fang Jinqi, a 32-year-old real estate agent from Shanghai, bought two pairs of Jimmy Choo high-heels and one pair of Balenciaga high-heels during her four-day trip to Japan in October.

"These brands are becoming better known in China. Even though they are expensive, the design of the products is undoubtedly top notch and some of them are worth collecting, even if not for daily use," she said.

Fang's choice of shopping in Japan also echoes with Bain's finding that South Korea and Japan were the most popular shopping destinations for Chinese consumers in 2014. The study said that the number of tourists from China to these two countries rose by 61 percent year-on-year. The appreciation of the renminbi against the Japanese yen is another major reason for the increased popularity of shopping in Japan.