SHANGHAI — Chinese consumers still love luxury goods but they definitely prefer to buy them abroad rather than at home, according to new research from Bain & Co.
The market for luxury goods purchased in China slipped 2 percent last year to 113 billion yuan, or $17.2 billion, while for luxury goods purchased abroad or through international e-commerce platforms grew 40 percent to 293 billion yuan, or $44.5 billion at current exchange, according to Bain’s “2015 China Luxury Market Study” released this week.
The research surveyed nearly 1,500 Chinese consumers and found a particular slump in the luxury watch, men’s wear and leather-goods sectors — these are sectors that were once exceedingly popular in China because of the country’s culture of gift-giving, but have been hit particularly hard by the government’s continuing crackdown on corruption.
Also notable was the destinations for shopping, which have shifted considerably over the past year. The number of Chinese traveling overseas reached 120 million last year, according to data from the China National Tourism Administration. Japan, South Korea, Europe and Australia were popular destinations thanks to favorable exchange rates with the yuan.
“We saw notable changes in where and how Chinese consumers acquired luxury goods last year. Buying overseas has been a trend for years, but destinations have changed,” said Bruno Lannes, a Bain partner based in Shanghai and author of the report.
Unsurprisingly, given the highly publicized slowdown in tourism from the Mainland, spending in Hong Kong slipped by a quarter.
Cross-border purchases through intermediary agents and e-commerce luxury purchased from overseas Web sites accounted for 48 billion yuan, or $7.3 billion at current exchange, in luxury purchases last year, with almost half of those surveyed reporting using these Web sites last year.
“Our research found that the industry is quickly adapting to these challenges in an effort to drive more luxury consumption at home through strategies such as global pricing and a greater focus on fashion,” Lannes said.
The research found that brands with an emphasis on fashion and heritage did particularly well and recommended that brands focus on the next generation of trendy, young consumers and “exclusivity” for continued growth in China.
Overall, Bain predicted that the macro environment for luxury in China will largely remain the same in 2016, with a further decline in the gray market of third-party shoppers emerging. It also forecast a growth in the percentage of marketing budgets to be pumped into digital channels, such as Weibo, a microblogging service often compared to Twitter, and WeChat, a hugely popular messaging app with online shopping and newsfeed functions built-in.
“Despite persistent macro, economic and industry challenges in China, all hope is not lost for luxury brands,” said Lannes. “There are plenty of growth opportunities for those with more exclusive and fashion collections, digital platform engagement and digital content creation, as well as with pricing that encourages Chinese consumers to spend locally.”