Despite the slowdown in spending and the government’s crackdown on luxury giving, consumer confidence remains high.
According to The China Luxury Forecast, released by Ruder Finn and Ipsos Group, 90 percent of the approximately 2,000 respondents plan to increase or maintain their spending on luxury goods, reports China Daily. However, luxury spending patterns in China are changing.
The survey found that the government’s crackdown on luxury gifts has been very successful. Only 12 percent of those surveyed admitted to purchasing luxury items for friends or business colleagues.
“Gifts accounted for a major chunk when we made the report three years ago. But the situation has changed a lot now,” said Ruder Finn Shanghai’s senior vice president Gao Ming. He added, “The government’s anti-corruption crackdown has been the main reason why gifting has declined so drastically.”
Despite the high overall consumer confidence, many luxury brands in China have been hard hit by the spending slowdown.
French luxury conglomerate LVMH blamed its Asian sales decline during the first 9 months of the year on slower China sales.
Italian luxury brand Tod’s saw a similar decline. For the first 9 months of 2014 in China, Tod’s reported sales of 169.9 million euros (US$211 million), a 3.3 percent decline compared to the same time period a year before. The company blamed the decline on the observation that “The store traffic in China is stabilizing at much lower levels than in the past few years.”
The slowdown in luxury spending is not the only reason for international luxury brands’ struggles in China. Changing consumption patterns by Chinese consumers are also to blame.
The China Luxury Forecast found that 44 percent of respondents planned to buy luxury goods for themselves or their families this year, but overall luxury spending is moving from physical luxury goods to experiential luxury. Even Chinese tourists, who account for as much as 27 percent of global duty-free luxury spending, are shifting their spending from overseas shopping to travel experiences.
Compounding the issue is the fact that many Chinese are dissatisfied with the level of service they get at luxury stores at home, which is driving more people to shop overseas or online. In fact, the survey found that only 19 percent of mainland Chinese consumers were satisfied with the service at luxury stores in China. The most common complaints were poorly brand-educated staff and limited product selection.
image source: stephan geyer