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Growth in demand for luxury goods in China is expected to slow markedly this year to 2.5%; last year growth was at 20%. This level of growth will be even lower than that for the Americas.

Hip ultra luxury brands are suffering from overexposure in China and sales are slowing. The slowdown is in part a result of Beijing’s corruption crackdown; high-end business gifts will suffer a drop off in demand. To do well in China is to keep up with Chinese tastes and preferences. Coach holds two-day workshops that inquire into invited Chinese customer’s feelings on new designs.

Second-tier brands such as Coach are benefiting from the shift away from ultra luxury as Chinese consumers are becoming more informed and look for more value for their money. Coach, sells handbags at about a third the cost of Louis Vuitton, and while LV is focusing on maintaining existing store sales, Coach is still in it’s growth phase. When first exposed to luxury, Chinese consumers wanted to get the most luxury that they could, but Chinese consumers are very open to trying new brands. In one survey 75% of Chinese consumers favor trying new brands, the highest of any tracked market.

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2 Responses to

  1. I read an article earlier this year that watch sales in China are plummeting with the crackdown on bribes. Watches are easily transferable and can be hard to trace, so they are the perfect currency for bribes, when bribes are tolerated. This could really ding some high end European brands and companies such as LVMH.

  2. A decrease in growth rate from 20% to 2.5% is a serious problem. It most likely reflect that the Chinese consumers are looking to save their money or possibly over-consumed on luxury goods in the previous year. There are a lot of big spenders in China and it will be important to keep them consuming!