The Louis Vuitton store at Plaza 66 Shopping Center at Nanjing West Road in Shanghai, China. While luxury growth is slowing on the mainland, Chinese shoppers are increasingly heading abroad to shop, according to Bain & Co. (Shutterstock)
A continued China slowdown is expected to keep global luxury growth in the single digits for 2014, according to a new study released today by consultancy Bain & Co.
The recent report, presented in partnership with Italian luxury industry association Altagamma, predicts that China’s local luxury market will grow by only 2 to 4 percent this year. This number is similar to Bain's estimate that China’s luxury market grew by 2.5 percent in 2013, and indicates a very slight rebound possibility. To get an idea of just how dramatically growth has slowed over the past three years, this number is down significantly from 2011’s significantly higher growth rate of 30 percent.
Thanks in part to China's growth rate, luxury sales growth is set to drop to between 4 and 6 percent in 2014, according to Bain’s estimate. This forecast is slightly lower than last year’s 6.5 percent growth rate. In an interview with Reuters, the study’s author echoed other luxury industry professionals who have called China’s growth rate “the new normal” over the past year:
"We are entering a new phase for the sector, call it a new normal," said Claudia d'Arpizio, partner at the consultancy whose forecasts are closely watched by the industry.
"There are unlikely to be more booms like the recent one in China soon, and mature markets can cope better with economic crisis, so growth should be more stable," said d'Arpizio.
While China’s ongoing anti-corruption crackdown and slowing GDP growth have both factored into the dramatic dip in luxury growth rates over the past three years, other causes aren’t necessarily bad news for the luxury industry. First, smaller niche brands that produce low-key, sophisticated products can benefit from Chinese consumers’ shift away from logo-heavy styles. In addition, Chinese luxury spending abroad to avoid tariffs is beneficial to all brands with a solid strategy to attract Chinese tourists.
The report is also clear to point out that slower growth rates certainly don’t mean the China market is becoming less important. With the inclusion of Chinese travel spending on luxury, Bain estimates that Chinese people will make more than 30 percent of all global luxury purchases this year.