Consumer confidence and luxury spending will maintain healthy momentum in China during 2015, despite the slowdown experienced by some global brands, a study said on Dec 11.
According to the 2015 China Luxury Forecast prepared by global public relations firm Ruder Finn Inc and Ipsos Group Co, a Paris-based market research group, 90 percent of the about 2,000 respondents it covered for the report plan to increase or maintain their spending on luxury items in 2015.
The report, which tracks key trends in the luxury sector in the Chinese mainland and Hong Kong, said that there has, however, been a change in the overall consumption pattern, with the number of customers purchasing luxury goods as gifts falling drastically, partly due to the ongoing government campaign against corruption and extravagance.
Only 12 percent of the respondents purchased luxury items for their friends or business partners this year, said the report.
“Gifts accounted for a major chunk when we made the report three years ago. But the situation has changed a lot now,” said Gao Ming, senior vice-president and general manager of Ruder Finn in Shanghai.
The government’s anti-corruption crackdown has been the main reason why gifting has declined so drastically, Gao said, adding that the impact was felt across the sector and brands.
Yet another reason behind the change in spending is the changing luxury preferences of consumers, with spending veering from goods to other segments, he said.
About 44 percent of the respondents were keen on purchasing luxury goods and services for themselves, and their families are the main recipients of luxury items, the report said.
Though consumer confidence improved, it did not translate into better sales for luxury brands in China as a growing number of the luxury purchases were made in overseas markets.
Chinese consumers are now the largest group of global luxury consumers with the highest growth rate, and their overseas spending on such items is about three times that of domestic consumption, said a recent report from Bain & Co, a United States-based consultancy firm.
Global Blue, one of the main duty-free shopping providers, said that during the first eight months of this year, luxury consumption in China recorded 10 percent growth over the corresponding period in 2013.
Several global luxury brands, however, reported lower sales in China. France-based LVMH Moet Hennessy Louis Vuitton SE, the world’s largest luxury goods maker, said the slower sales in China dragged Asian sales during the first nine months of the year.
Tod’s SpA, an Italian luxury goods maker, reported sales of 169.9 million euros ($211 million) in China in the first three quarters of 2014, a 3.3 percent decline over the same period in 2013, according to company reports.
“The store traffic in China is stabilizing at much lower levels than in the past few years,” Tod’s said in the report.
Many Chinese consumers are now making purchases overseas, as the local stores cannot satisfy them, said Anne Geronimi, vice-president of Ruder Finn Asia.
Only 19 percent of the Chinese mainland consumers said they were satisfied with the level of service in local luxury stores, the Ruder Finn report said.
Limited selection, poor service and staff who are not well-versed with the latest market trends are all prompting Chinese consumers to shop abroad, Geronimi said.
The growing outbound tourism market in China and the resultant spending are also triggering more luxury purchases abroad.
Statistics from the National Tourism Administration show that the number of Chinese going abroad exceeded 100 million by November this year.