SHANGHAI: China's luxury market contracted 2% to Rmb 113bn last year as a result of the slowing domestic economy and a marked increase in the number of consumers choosing to buy luxury goods abroad, a new report has revealed.
According to the "2015 China Luxury Market Study" by Bain & Co., the global management consultancy, purchases from overseas grew 10% in 2015.
Luxury spending by Chinese consumers jumped 200% in Japan, while South Korea, Australia and Europe also proved to be popular shopping destinations because of favourable exchange rates and competitive pricing. At the same time, luxury spending in Hong Kong and Macau dropped by 25%.
Overseas travel is estimated to have risen 32% since 2014, but the growing popularity of cross-border e-commerce and online shopping also point to a significant shift in consumer behaviour, the report found.
Of the almost 1,500 Chinese consumers who took part in Bain's survey, nearly half said they had made purchases from luxury shopping channels last year.
Bain also reported that the growth of online and overseas luxury shopping coincided with the closure or reduction of physical luxury stores in China.
However, despite this seemingly downbeat picture for luxury brands dependent on the Chinese domestic market, the report went on to say they still have plenty of opportunities in the year ahead.
It recommended that luxury brands work on regaining their exclusive image, improve their digital platforms and content creation, focus more on fashion and be more flexible about their pricing.
"Despite persistent macro, economic and industry challenges in China, all hope is not lost for luxury brands," said report author Bruno Lannes.
"There are plenty of growth opportunities for those with more exclusive and fashion collections, digital platform engagement and digital content creation, as well as with pricing that encourages Chinese consumers to spend locally."
Digital engagement will be important because the survey revealed that nearly 80% of Chinese consumers said they usually get information about luxury brands from the internet and apps with a full 60% citing Weibo and WeChat as their source.
Data sourced from Bain & Co; additional content by Warc staff