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Luxury products sales slows in China (2)

(People's Daily Online)

09:43, August 17, 2012

(File photo)

An analyst from the Guodu Securities Li Yun said that the Prada originally planned to open between 10 and 12 stores in China, but the number of its stores in the Asia-Pacific Region did not increase at all in the first quarter of 2012.

Burberry Group's financial report of the first quarter of 2012 shows that its Asia-Pacific market's growth rate of 18 percent was still the highest and the sales volume of its stores in China maintained a growth rate of about 10 percent, which had decreased compared to the soaring growth rate of 2011. The latest financial report of the Chow Tai Fook Jewelry also shows that its income growth rate of the latest financial quarter before June was only 16 percent and the ratio of the sales volume of high-margin inlaid jewelry to the total sales volume had decreased from 27 percent of March to 22 percent.

According to insiders' analyses, in addition to the factor of economic slowdown, the huge price difference is also a reason for the slowdown of luxurious brands' expansions in China. Luxurious product giants are in a dilemma. In order to stimulate Chinese consumers to consume, cutting prices of their products perhaps is a good choice, but it will definitely reduce their margins and damage their brand images. If they raise prices in foreign markets to narrow the price gaps between China and foreign countries, it may successfully stimulate Chinese consumers to consume but will worsen their foreign markets already with weak consuming powers. After considering it carefully, some luxurious brands have to strengthen their product promotions in China. In stores of some brands, words like "50 percent discount" have appeared, showing that Chinese consumers are still major targets for these luxurious brands.

However, regarding the future growth rate trend of the luxurious consumption, insiders are not optimistic. The associate director of the Research Department on Consumption Economy under the Chinese Academy of International Trade and Economic Cooperation Zhao Pin said that, due to the summer reason, it accords with the market expectation that the consumption of July is a little lower than that of June, and in addition, since there is not a macroeconomic policy of greatly promoting the consumer confidence, the market growth rate has weakened. She predicts that this situation will last for the whole third quarter. However, the social consumption growth rate of the fourth quarter, stimulated by major festivals and holidays of October, is expected to rise to 14 percent.

Zhao predicts that the prospects of different luxurious brands will also be different in the Chinese market and some brands probably will continue suffering the "pain" of growth rate slowdown.

A brand strategist Li Guangdou suggests that luxurious brands should further study how to increase the purchase frequency of consumers and expand their consumer bases. For example, they could taking such measures as "localizing" their channels and marketing, fostering loyal customer groups from younger consumers and making well-targeted designs. In addition, they should also carry out dislocated competitions. For example, they could also develop in second and third-line cities in central and western regions of China while focusing on China's first-line cities.

Source: Xinhua

Read the Chinese version: 中国奢侈品军团“减速”了?

【1】 【2】

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