China luxury goods market to slow down in 2014

By Michelle Yeomans

- Last updated on GMT

China luxury goods market to slow down in 2014

Related tags Luxury goods market Luxury good

According to market consultants, Bain & Co, China’s luxury goods market has slowed from 7% growth in 2012 to around 2% in 2013, with expectations of similar figures in 2014.

Analysts say Chinese consumers are now doing about two-thirds of their luxury shopping abroad, which has triggered a slowdown in domestic store traffic and store openings.

The cosmetics and personal care category, a mainstay of China's domestic market that has traditionally generated more than a quarter of all sales, also dropped from 15% growth last year to about 10% this year.

According to Bruno Lannes, lead author of the Chinese edition of the study; "China's luxury market has quickly changed from land-grab to a steady focus on consumer experience and 'like for like' sales.​" 

Shift in spending patterns

Bain also notes behavioural patterns in terms of consumption in China to have shifted, with women's categories becoming more prominent.

These shifts, the report indicates, is a continuation of trends that began at the end of 2012, and are now creating new frames to work with as they retool their China operations, from pricing to customer relations.

So, traditional measures like expanding stores for example, is no longer enough to drive growth. 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.

The focus they firm says, is now is on renovation, relocation and operational improvement for domestic shoppers, as 'like for like' sales were negative for most brands in 2013.

Chinese consumers biggest group ofluxury buyers

In terms of luxury buyers worldwide, the Chinese are still the largest nationality with purchases amounting to 29% of the global market, up 4% from last year.

Our regional expert Renee Hartmann reckons US and European prestige brand managers are suddenly paying closer attention to their overseas spending behaviour.

She advises cosmetics retailers to evaluate their store locations in order to better assess which are most attractive to the travelling Chinese consumer, and adjust merchandising, payment procedures and staffing to accommodate the growing numbers.

Adding fuel to this buzz is the tantalizing fact that only 5% of Chinese citizens currently have passports. The intense growth that luxury retailers have seen in recent years may prove to be just the tip of the proverbial iceberg​,” Hartmann explains.

As beauty brands make a further effort to appeal to these consumers abroad, the consumer behavioural expert says it is important to keep in mind their specific preferences and trends such as the demand for skin care products over colour cosmetics, and the importance of whitening, anti-ageing and moisturising properties.

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