Beijing's anti-corruption drive hits China's luxury market
The slow growth of high-end items is in stark contrast to general sales, which climbed 13pc
The Communist Party's crackdown on corruption has hit luxury sales on the mainland, with consumption of luxury goods now lagging far behind retail sales growth.
According to global consultancy Bain & Co, the luxury market on the mainland stands at 116 billion yuan (HK$147 million) this year, up just 2 per cent from a year ago.
The party's efforts to curb wastage of public money and weed out corruption has had a large impact on "gifting luxury", Bain says, adding that watches and menswear have taken the biggest hit.
The growth of luxury sales on the mainland is in stark contrast to buoyant retail sales, which rose 13 per cent in the January-November period year on year.
Sales of watches dropped 11 per cent this year, the consultancy said. "Gifting luxury" accounted for up to 30 per cent of total sales on the mainland in past years when the market grew at a rapid clip, but it represented only a small portion this year, according to Bain.
The drop in luxury spending for gift purposes has stopped global brands from aggressively expanding in the world's most populated market.
"New store openings noticeably slowed down in 2013," Bain said in a report. "Most brands are conservative about future expansion and focusing more on store renovation, relocation and operational improvement."
By the end of November, 100 new stores were opened by global luxury brands, compared with 160 new openings for all of last year.
However, mainland shoppers continued to be the world's biggest spenders in the global luxury market, with two-thirds of their total spending made outside China.
Luxury consumption by Chinese, including those from Hong Kong and Macau, hit 350 billion yuan this year, or 29 per cent of the world's total, Bain said.
Chinese shoppers unseated Americans to be the world's largest shoppers for luxury goods for the first time last year.
Women's items, including clothes and shoes, appear to be the bright spot in an otherwise dimming luxury market.
"The mindset among global brands here is changing from men's categories and accessories to women's fashion," said Bruno Lannes, a Bain partner. "Brands are preparing for this major shift."