Chinese retailers and industry observers are eyeing the Chinese New Year with optimism — albeit an optimism tinged with a certain amount of caution as the luxury goods market shows clear signs of a slowdown.
The Year of the Snake begins Sunday, but celebrations last about a week, making it a key time for travel and shopping.
The Hong Kong Retail Management Association, which represents 6,700 retail outlets in Hong Kong, forecasted single-digit growth in Chinese New Year sales. More specifically, retailers of fashion, accessories, watches and jewelry said they anticipate single-digit growth over the season, in line with the overall trend.
Retailers “still expect growth but they have adjusted their expectations,” said Wesley Wu, project director at research firm Ipsos in Hong Kong. “It’s a new normal. Last year we saw expectations of 20 to 30 percent growth. Now, 10 percent to 12 percent is very good. This year has become more realistic,” he explained, noting that growth in China is still far better than in Europe or North America.
Byron Kan, general manager of Shanghai Centre, a retail and residential development, said he is expecting a holiday season similar to that of last year.
“I expect the industry will keep to the same growth rate as 2012 — healthy but not overly strong,” he said, noting an economic rebound over the past few months and a high level of consumer sentiment as salaries increase. “But until China’s luxury taxes are reduced, people will still take the trip to [Hong Kong] to make their big purchases.”
Shirley Li, a leasing agent at Sun Hung Kai Properties, which manages more than 12 shopping malls in Hong Kong, said the company forecasts Chinese New Year sales to grow by 15 to 20 percent this year to about 200 million Hong Kong dollars, or $25.7 million, with foot traffic up by 13 to 20 percent to 8.9 million.
While Christmas is not widely celebrated in Mainland China, it is a bigger holiday in Hong Kong. Li said Sun Hung’s stores recorded a 21 percent increase in revenue over Christmas, reaching 143 million Hong Kong dollars, or $18.4 million.
Paul French, chief China markets strategist for Mintel in Shanghai, voiced a more sober outlook for the New Year’s season.
“A combination of inventory build up in many sectors, concerns over consumer timidity to spend, the impact of online and the poor performance of department stores recently will mean that there will be some pretty deep discounting this [Chinese New Year] and for longer,” he predicted. “This is, of course, good news for the consumer — great prices, big range of products discounted but [it] will ultimately affect many brands’ margins and retailers’ same-store sales.”
Electronics, cosmetics and specially packaged festive gifts such as chocolates are popular items at Christmas and remain big items over Chinese New Year. But apparel, accessories and cosmetics tend to get more attention during the period before the lunar holiday as it’s traditional to buy some new clothes and shoes before the new year.
China’s luxury market, while still growing faster than that of other countries, appears to be losing some of its momentum. According to a recent report by Bain & Co., luxury sales growth in China slowed to 7 percent in 2012 from 30 percent growth in 2011.
To be sure, a recent Chinese government crackdown on high-end spending by Chinese officials using public funds put a dent into luxury spending. Bain’s research shows that watches and men’s wear were two of the hardest hit categories last year. Both of those categories are important segments of the gift-giving industry.
Ipsos’ Wu said that recent surveys find consumers are still spending but there are signs that shoppers are being more conservative in their gift giving. Cosmetics, particularly gift sets, as well as accessories such as wallets or other small leather goods, have overtaken jewelry as the most popular items during the Chinese New Year.
“People are cutting back a bit. They tend to spend less but still want to buy nice products,” Wu said.
French said he thinks midmarket beauty brands like Estée Lauder, L’Oréal and L’Occitane will do well as women move away from their “reliance on high-end brands.” He also said he sees bright spots for women’s footwear and “upper mass market” men’s wear as Chinese men move away from sportier styles of dressing.
Tourism is an important part of the equation as well.
Bain estimates that 60 percent of Mainland Chinese luxury shopping takes place outside Mainland China. The consultancy noted that the depreciation of the euro has made Europe a more attractive destination for Chinese shoppers as opposed to Hong Kong.
According to the Hong Kong Tourism Board, overnight visitors to the city increased by 16 percent in 2012, reaching 48.6 million. Mainland Chinese visitors made up the largest group and increased by 24.2 percent, according to the Tourism Board.
French said travel booking figures look strong, citing the popularity of destinations like Hong Kong, Macau, Singapore and Southeast Asia.
“Europe is looking good and London should see more [tourists] than Paris due to the low pound. America is more attractive now thanks to an ease on visa issuance and Australia remains popular, too,” he said.
Given ongoing political tensions between Japan and China over a territorial dispute, it seems unlikely that Chinese tourism to Japan will be bouncing back over the New Year’s holiday. Last month, China Daily reported that “Chinese-Japanese tourism remains near rock bottom” in terms of tour bookings for Japan.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty