Turning to foreign markets
Liang Luofei, an industry analyst from the iResearch attributed the slump in China's luxury sector to the fact that the growing number of Chinese outbound tourists have largely driven consumer spending abroad.
"Last year, Chinese consumers bought $116.8 billion in luxury goods across the globe, among which about $91 billion - 78 percent of the total - was purchased overseas," Liang told the Global Times on Friday.
Chinese customers have shifted their attention overseas because many luxury products are cheaper in foreign countries than on the Chinese mainland due to high customs taxes, experts said.
China Customs levies tariffs on imported goods at rates ranging from 15 percent to 60 percent, according to a statement released by the Ministry of Finance on March 16.
Furthermore, the government also imposes a value-added tax and a consumption tax on luxury imports, making the final retail price of imported luxury goods as much as 67 percent higher than their cost, insurance and freight price, domestic retail industry portal linkshop.com said in March.
In 2015, Japan topped the ranking of destinations that attract luxury shoppers from the mainland, Bain & Company said in its report.
"I prefer to go shopping in Japan more often as it only takes a few hours by air and the visa policy has become more open," a 20-something white-collar worker in Shanghai surnamed Yu told the Global Times on Sunday.
"I would also like to buy expensive foreign goods such as cosmetics and jewelry through daigou [overseas personal shoppers], to save some money," Yu said.
In April, the central government instituted a new tax on overseas purchases to clamp down on daigou and encourage more domestic spending.
Although products bought overseas are still subject to customs tariffs, they're still cheaper than if they were purchased on the mainland, Liang said.
Xue Shengwen, an industry analyst at Shenzhen-based CIC Industry Research Center, also told the Global Times on Friday that goods will still remain cheaper overseas thanks to discounts and local tax refunds.
The luxury sector has also been hit by the government's campaign against corruption and official extravagance, Xue noted.
Future prospects
Some changes took place in Chinese consumers' spending habits toward luxury goods - customers' growing individualism continued to trend toward fashion and exclusivity, and smaller, fashion-orientated brands are still growing in popularity among the public, experts said.
Conspicuous consumption has declined while luxury experience spending has grown, and Chinese consumers have become increasingly open to new brands, Hong Junjie, director of the research center for luxury goods and services at University of International Business and Economics, told the Global Times on Friday.
Moreover, customers, especially among the emerging middle class, are becoming more knowledgeable and confident about purchasing overseas goods online.
"With the growing development of e-commerce, online shopping for overseas products has gotten a lot more convenient, so it is easy for me to buy luxury goods in other countries at a better price," a customer surnamed Zhou in Beijing told the Global Times on Sunday.
Xue from the CIC Industry Research Center predicted that the domestic luxury sector will continue to shrink, and about 95 percent of luxury brands will be forced to shut down some of their stores on the mainland in the coming years.
The current domestic luxury sector is going through a necessary stage. Besides, it will continue to suffer for a certain period of time, but eventually stable growth will return, Hong told the Global Times.
Luxury brands must employ a more tailored, localized marketing strategy in the coming years, with high fashion content.
Furthermore, they need to adjust their pricing to reduce disparities across geographies, experts said.
