SHANGHAI: China's luxury market is undergoing a fundamental shift, as domestic spending on top-end goods dipped in 2014, even as overseas spending by Chinese consumers continued to boom according to a new report.
In its latest overview of this market, consultancy firm Bain & Company said that the ongoing crackdown on corruption and promotion of greater frugality among government officials were factors in the negative growth (-1%) in the domestic market.
This was especially true of certain segments that feature prominently in luxury gifting, notably watches and menswear. These two categories saw the greatest year-on-year declines, of -13% and -10% respectively, China Daily reported.
But other factors are also coming into play. Based on a survey of 1,400 respondents, Bain concluded that the character of the market is altering as the economy slows – the 7.4% figure for 2014 was the lowest in 24 years – and as consumer behaviours change and new brands emerge.
Logos, for example, are no longer regarded as essential, as luxury consumers grow in confidence and become increasingly adventurous.
Some 70% percent of the respondents to Bain's survey said they would like to try different brands and styles and nearly 45% said they plan to buy more emerging brands in the next three years.
Economic growth in 2014 at 7.4%, was at its lowest in 24 years, a
Spending outside China, however, continues to increase, by 21% in 2014, and Chinese consumers are now spending abroad more than three times as much as they spend at home.
"Travelling Chinese shoppers are the alpha consumers of global commerce today, with pent-up demand for high-quality goods at home leading them to overindulge in spending abroad," Sage Brennan, CEO of China Luxury Advisors, told Reuters.
Nor is the trend towards spending outside one's home market confined to Chinese consumers: a December report from Bain noted how, in most markets, the luxury goods industry is now driven by tourist spending. "Who the buyers are matters more than where they buy," it said.
Data sourced from China Daily, Bain & Company, Reuters; additional content by Warc staff