New normal for Chinese luxury market

Warc, 21 May 2014

HANGZHOU/BOSTON: The boom years are over for the Chinese luxury sector and marketers should prepare themselves for a period of slower, steadier growth, a new study has said.

Worldwide sales of personal luxury goods are set to rise between 4% and 6% this year at constant exchange rates compared with a 6.5% increase in 2013, according to Bain & Co. "We are entering a new phase for the sector, call it a 'new normal'," said Claudia d'Arpizio, a partner at the consultancy.

"There are unlikely to be more booms like the recent one in China soon, and mature markets can cope better with economic crisis, so growth should be more stable," she added.

Bain's growth forecasts for China were between 2% and 4% which stood in stark contrast to 2011 when the sector was expanding at 30%. And while a slowing economy and a crackdown on corruption were factors in this slowdown, Jing Daily suggested that "other causes aren't necessarily bad news for the luxury industry".

There is expected to be a rise in Chinese overseas tourism which will benefit brands with a strategy to attract a class of shopper keen to avoid the high tariffs common on luxury goods imported into China.

If one includes Chinese travellers' spending on luxury, Bain estimated that Chinese consumers will account for more than 30% of all global luxury purchases this year.

Separately, Alibaba, the ecommerce business, announced a deal with the French government which will see it promote French brands to Chinese consumers through its online platforms, including brand promotion and marketing support on its online retail platform Tmall.com.

A week-long "Elegance of France" campaign is already under way, featuring exclusive product launches and limited-edition items from brands such as L'Oréal, Lacoste and Clarins.

Burberry is currently the only luxury foreign fashion brand operating on Tmall which upmarket brands have, according to Business Insider, tended to avoid amid concerns its discount business model could affect their image.

Data sourced from Jing Daily, People's Daily, Business Insider; additional content by Warc staff