According to Chinese market research firm Forward, China's luxury industry growth rate slump is set to continue. (Omega)
There's no doubt that China’s luxury market growth is in slowdown mode, and industry experts are scrambling to figure out just how long the slump will last. On the heels of a joint prediction between research firms Bain and Co. and Altagamma that the growth rate will be between 2 and 4 percent for 2014, Chinese market research firm Forward Intelligence Co. has released a prediction forecasting 2 percent growth through 2015.
Last week, Forward announced the publication of two Chinese-language reports titled “2014-2018 luxury project feasibility study,” studying investment prospects in the luxury industry, and “2014-2018 Chinese luxury goods industry market demand analysis and investment forecasts,” studying market development trends and predictions. In a more conservative estimate than Bain, Forward not only predicts that China’s luxury market growth rate will be 2 percent for 2014, but also believes that the depressed rate will continue into next year.
The announcement states that Chinese luxury consumers comprise two-thirds of all overseas spending, and are the world’s largest group of luxury consumers with 29 percent of all global luxury spending. As a result of the slowdown, domestic luxury retail stores are experiencing a drop in traffic, and many brands have delayed or shelved expansion plans in China.
Industries related to traditional gifting practices in China have been hit the hardest, says Forward, because of China’s ongoing anti-corruption campaign. According to Bain’s data, men’s luxury watches, accounting for more than a fifth of the country’s total luxury consumption, saw sales plummet 11 percent last year. Cosmetics, perfumes and personal care products also saw sales shrink from 15 percent last year to 10 percent this year. Forward says there could be a shift of focus in the luxury industry from men to women and cites Bain’s optimism about the female luxury market.
“China’s luxury market has rapidly transitioned from a frenzied growth bubble to one considering the consumer’s shopping experience and maintaining sustainable growth,” said Forward. “The world is also shifting its focus toward the female luxury consumer, and Chinese luxury retailers have done very well to adapt to this important trend.”