Chinese luxury goods market contracting significantly
Chinese shoppers now do about two-thirds of their luxury shopping abroad, which has triggered a slowdown in domestic store traffic and store openings, the report said. The Chinese are still the largest nationality of luxury buyers worldwide, with purchases making up 29 percent of the global market, a 4 percentage point increase over last year.
At the same time, consumption in China has shifted, with women's categories becoming more prominent, indicating a growing sophistication of Chinese customers. These shifts are a continuation of trends that began at the end of 2012, and are creating new imperatives for brands as they retool their China operations, from pricing to customer relations to fashion content.
Several factors have generated the cooling of China's previously exuberant luxury market, according to the study. The highly visible government campaign encouraging frugality and focusing on corruption has had a huge impact on gift-giving, which was one of the major growth engines for the sector.
The campaign has especially constrained the growth of luxury watches and men's categories. Watches make up more than one-fifth of the total domestic luxury market, and sales declined by 11 percent in 2013. The shift of menswear from being a growth category in prior years to a slightly declining one in 2013 was also attributed to the reduction in gifting.
Cosmetics, perfume and the personal care category, a mainstay of China's domestic market that historically generated more than a quarter of all sales, also dropped from 15 percent growth last year to about 10 percent this year.
Bright spots, however, remain in women's categories. Womenswear and shoes show strong momentum, with growth rates for the year ranging from 8 to 10 percent.
Much of this performance stems from women's increasing sophistication and influence, driving their share of luxury spending in China to equal men's by 2013, a rapid evolution from 1995, when more than 90 percent of spending was done by men.
In light of the market evolution, store expansion is no longer enough to drive growth. The number of new openings by global brands in China declined by one-third to roughly 100 last year from 150 in 2012 for the 20 brands involved in the study. ■