Political crackdown masking declines in China's luxury market
Photo credit: Keith Bedford for Bloomberg
New political leadership in China has encouraged austerity and frugality when it comes to gifting in business and politics. Many have attributed the recent slowing of luxury markets to these shifts. However, China's luxury market has been showing signs of fatigue before the change in government - owing primarily to shifting preferences.
“The Chinese consumers have become more and more flexible in the way they purchase. To some degree, it exerts negative impact on our sales in Chinese market.”
Gu Jitao, CEO of Montblanc China, told China Business News that Chinese consumers are open to using a variety of channels to make luxury purchases. "The Chinese consumers have become more and more flexible in the way they purchase. To some degree, it exerts negative impact on our sales in the Chinese market". For example, Taobao, China's largest e-commerce platform, revealed that luxury transactions doubled year-on-year in 2012. Additionally, with fast expansion within the China market, the service level at many retailers is not meeting customer demand. Combined with high import duties, Chinese consumers are leading the way in luxury spending outside of China. “For a Cartier watch, which sells for $81,100, the price in Switzerland could be 30 percent less,” stated a saleswoman at a Cartier store in Shanghai, who requested to remain anonymous.
Consumer preference and taste in luxury product has also begun to shift. More consumers, particularly in the largest cities in China, are trending towards more exclusive, expressive product - away from logo-heavy goods. Many brands, Gucci is one notable example, are implementing new product mixes to better adapt to the changes in market preference.