Why Retail Expansion in China Should Be Lower Priority for Luxury Brands

on February 23 2015 | in Retail Travel Trends | by | with No Comments

luxury brands in China

Chinese consumers are increasingly spending on luxury goods while abroad, a trend that will have major implications for the global luxury market.

The purchase of high-end items within the Mainland has declined since President Xi Jinping’s austerity push. High taxes on luxury goods sold in China and slowed economic growth are also to blame for the lag in the country’s ¬†luxury market. Last year, luxury spending decreased 11 percent year-on-year to $25 billion. But luxury consumption outside of China has been growing in turn.

High taxes on luxury products sold in China have long been a barrier for consumption. This is now compounded by a heavy-handed government anti-corruption campaign, which has dampened purchases of luxury items on the mainland once given as gifts, which would help individuals secure relationships or other business dealings with government officials. Slowing economic growth is also a factor impacting the purchase of luxury goods in China.

Recent data from HSBC shows that Chinese consumers make around two-thirds, or 66.6 percent, of their luxury purchases outside of the Mainland. Fortune Character also reports that during last year alone, consumers from the Mainland made 76 percent of their luxury purchases while traveling outside of the country.

HSBC advises that luxury brands “shift their focus from expanding retail locations in China to learning how to better serve Chinese clientele abroad,” according to Women’s Wear Daily.

Macau and Hong Kong are strong areas for luxury shopping by Mainland Consumers, as they are “usually the first destinations for mainland residents to travel abroad.” But Chinese tourism in the United States, Europe, and Australia is also on the rise.

Chinese tourists make about 10 percent of all luxury purchases in the U.S. This figure is expected to rise with the number of tourists, which is expected to increase four times by 2021.

The percentages of luxury spending by Chinese consumers in European countries is even greater. When Chinese tourists visit Paris, they “allocate 80 percent of their budget to shopping,” and tourists from the Mainland now make 40 percent of luxury purchases in France. They additionally contribute to about 25 percent of sales in the United Kingdom and 35 percent in Italy.¬†

 


image credit: kagen33

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