China's luxury market losing sheen as 2014 looks grim

03 Dec '13

2 min read

China’s luxury market survived the Wall Street’s meltdown, riding on the back of Chinese youngsters who continued to spend freely and drove companies like LVMH, Prada, Gucci and Burberry to new heights. But, with market settling down and consumer behavior changing, the luxury brands are taking it easy and have begun to slow down their expansion efforts.

In the golden age of China, from 2007 to 2011, the global luxury brands witnessed the double digit growth numbers. But with economic slowdown and extreme nervousness associated with political transition last year, the current outlook for luxury brands has dimmed. Top brands, like Burberry and LVMH are witnessing extreme change of fortunes, with flat sales hinting that China’s luxury market is losing vigor.

Earlier in the year, Gucci froze its expansion plans in China and decided to renovate its existing stores. LVMH too posted a drop in its sales figures. The pace of growth in 2013 in mainland China witnessed a striking drop with only 2.5 per cent increase from 2012.

Analysts blame over-exposure for the drop in sales of the established brands. With consumer fatigue setting-in coupled with shifting tastes, the time is ripe for the second-tier brands to take a plunge. Designer label Stella McCartney, in which Kering owns a stake, has already launched its store in Beijing this year and expects to add one in Chengdu. Similarly, Givenchy too is looking to triple its store count in mainland China.

With market conditions expected to get harsher going forward into the New Year, known brands will have to rethink their strategy and come up with new offerings that offer more value for money and allow the Chinese consumers to express themselves differently and help them stand-out in a saturated crowd.

Fibre2fashion News Desk - India

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