Chi­nese share of lux­ury mar­ket de­clines

China Daily (USA) - - ACROSS AMERICA - By CHINA DAILY in New York

Af­ter two years of re­ces­sion, China’s lux­ury mar­ket growth is again mov­ing into pos­i­tive ter­ri­tory, but 2016 marks the first time that Chi­nese con­sumers con­trib­uted less to global lux­ury sales than the year be­fore, ac­cord­ing to a report by Bain & Com­pany.

China’s over­all con­tri­bu­tion to the global mar­ket de­clined to 30 per­cent in 2016, a drop of 1 per­cent­age point from the year be­fore, said the con­sul­tancy’s an­nual Bain Lux­ury Study.

Brands can no longer rely on lowhang­ing fruit.” Clau­dia D’Ar­pizio, Bain & Co part­ner

Bain re­ported a 2 per­cent de­cline in 2015 for China’s lux­ury mar­ket, as con­sumers mostly spent their money on lux­ury prod­ucts over­seas. The new report says that this mar­ket is grow­ing again af­ter Bain re­ported in May this year that it would be up 2 per­cent.

Over the longer term, Bain said it still thinks of China as a lead­ing con­trib­u­tor to global per­sonal lux­ury goods con­sump­tion, due in large part to its grow­ing mid­dle class.

China’s lux­ury mar­ket has reached a mat­u­ra­tion point, said Clau­dia D’Ar­pizio, a Bain part­ner in Mi­lan and lead au­thor of the study.

“We are al­ready start­ing to see clear po­lar­iza­tion when it comes to per­for­mance with win­ners and losers emerg­ing across prod­uct cat­e­gories and seg­ments,” she added. “Brands can no longer rely on low-hang­ing fruit. In­stead, they re­ally need to im­ple­ment dif­fer­en­ti­at­ing strate­gies to suc­ceed go­ing for­ward.”

Chi­nese con­sumers’ over­seas pur­chas­ing power re­mains highly sig­nif­i­cant to many coun­tries, said the report, with coun­tries such as South Korea, Sin­ga­pore, Thai­land and Malaysia ex­pected to ben­e­fit greatly from the flow of Chi­nese tourists. But the Hong Kong and Ma­cau mar­kets will de­cline 15 per­cent at con­stant ex­change rates as main­land shop­pers con­tinue to shun tourism there.

The Euro­pean lux­ury mar­ket also has felt the im­pact of a de­crease in buy­ing over­seas by Chi­nese, along with geopo­lit­i­cal un­cer­tainty and ter­ror­ism, with the mar­ket hit­ting 1 per­cent growth on the re­bound of lo­cal spend­ing, the report said.

Mean­while, a sur­vey of Asian mil­len­ni­als who are liv­ing with their par­ents be­cause they can’t af­ford to move found that the money not go­ing to their hous­ing is be­ing spent on shop­ping and en­ter­tain­ment.

Ac­cord­ing to CBRE’s 2016 Asia Pa­cific mil­lenial sur­vey of 5,000 Asia-Pa­cific mil­len­ni­als — out of 13,000 glob­ally — be­tween the ages of 22 and 29, in­clud­ing 1,000 from main­land China, 63 per­cent of mil­len­ni­als from across Asia are still liv­ing with their par­ents. With more than 60 per­cent of main­land Chi­nese mil­len­ni­als liv­ing with their par­ents, they have the third-high­est rate of do­ing so in Asia af­ter Hong Kong and In­dia, which are both around 80 per­cent, the sur­vey said.

This is due to both cul­tural norms and high prop­erty prices in Chi­nese cities that make buy­ing real es­tate un­af­ford­able for the young con­sumers, ac­cord­ing to the report.

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