Bain & Company recently reported that China’s luxury market grew just 7 percent in 2012, compared to 30 percent in 2011. China bought a quarter of the world’s luxury products in 2012.
However, buyers are more fastidious: not only is the government trying to reduce lavish gift-giving, but the now-educated luxury consumers are more likely to think twice about their purchases. Rather than buying just for the prestige, they are considering how well a purchase will fit their needs, said Lu Xiaoming, the president of Organic Plus, which used to manage several high-end brands in China.
At the end of 2012, Richemont Group, owners of Cartier and Jaeger-LeCoultre indicated, “Following several years of exceptional growth in the Asia-Pacific region, in particular China, sales were flat compared to the comparative figures for the same quarter last year.” Many groups are reporting a year-on-year decline. Kering, previously known as PPR, which owns Gucci, saw just a 17.6 percent rise in sales in China in 2012, compared with 39.1 percent in 2011.
China Daily reports that the norm in China is at last turning from quantity, where aftercare was an afterthought, to quality. “The fast growth, when increases were well into double-digits in China’s luxury market, has gone forever,” said Zhou Ting from the Fortune Center.
Now that the Chinese luxury market has matured, and seemingly all the famous international labels have floor space in the country, many labels are looking to enhance their customer service rather than open more stores to attract customers.
Lu Xiaoming said that brands are developing a new appreciation for customer loyalty in tight times, and to retain customers, they will have to “bring luxury back to basics, which means providing a unique experience, backed up by high-end quality and service,” he said.
Brands are responding by growing closer to customers and halting new store openings. Bernard Arnault, the CEO of LVMH said it plans to adjust its expansion in China, which means staying out of smaller cities. He has said the group realized that many people from smaller cities tend to go to bigger cities to shop for luxury items.
Stores in big cities are looking to attract domestic shoppers with novelties. Louis Vuitton’s flagship “Maison” at Shanghai’s Plaza 66 is the company’s only location in China offering custom-made shoes and bags.
Hermes hopes to open its next “Maison Hermes” in Shanghai, where it can offer custom-made services. The hope is that Chinese shoppers can be enticed to do their buying at home, rather than flying overseas, where luxury goods remain cheaper.
photo credit: louis vuitton