Wed, Dec 05, 2018 - Page 11 News List

Chinese appetite for luxury brands hit by slowdown

AP, BEIJING

Chinese tourists walk on Canton Road, the one-stop-shop high street of high-end brands in Hong Kong, on Nov. 29.

Photo: AP

The designer boutiques of Manhattan and Paris are feeling the chill of a Chinese economic slowdown that has hammered automakers and other industries.

That is jolting brands such as Louis Vuitton and Burberry that increasingly rely on Chinese customers who spend US$90 billion a year on jewelry, clothes and other high-end goods.

The industry is already facing pressure to keep up as China’s big spenders, mainstays for American and European retailers, shift to buying more at the spreading networks of luxury outlets in their own nation.

Last week, Tiffany & Co showed how much well-heeled Chinese tourists matter to retailers abroad. Shares in the jeweler known for US$5,000 watches and US$400 silver baby spoons fell 12 percent after its chief executive said they were spending less.

In Hong Kong, the top shopping destination for Chinese travelers, only a dozen visitors were in Tiffany’s flagship store one afternoon last week. Many looked without buying.

“The name brand goods are too pricey,” said Zhou Jiqing, from neighboring Shenzhen. “I’m waiting for the Christmas sale.”

Forecasters including Euromonitor International and Bain & Co say Chinese customers would be the luxury industry’s main growth engine over the next decade, but this year, shoppers are skittish amid cooling economic growth, trade tensions with Washington and weak stock and real-estate markets.

“Consumers are just not as excited about spending that kind of money right now,” said Ben Cavender of China Market Research Group.

Demand for Tom Ford suits and Jimmy Choo shoes held up better than some other Chinese spending as economic activity slowed following a government clampdown on bank lending to cool a debt boom.

The world’s second-largest economy, is forecast to grow by a relatively robust 6.5 percent this year, easing from last year’s 6.7 percent, but that is propped up by higher government spending on public works construction that helps to mask weakness in other areas.

Auto sales in the global industry’s biggest market plunged 13 percent in October from a year earlier. Housing sales are so weak that some developers are cutting prices. The main Chinese stock market index is down 22 percent from a year ago.

Even before the economy cooled, the industry was under pressure from shifts in Chinese tastes and buying habits.

Luxury brands, some of them centuries old, have raced to serve China as its consumers emerged as a powerhouse market. Brands designed watches, clothes and other goods for Chinese tastes.

Hermes created its first single-country brand, Shang Xia (上下), for China. Department stores from London to Los Angeles hired Mandarin-speaking salespeople. Chinese traders fly home from Paris or Rome with stacks of designer bags and other goods to resell.

The incentive to shop abroad has eroded as major brands opened their Chinese stores, and prices fell closer to US and European levels.

“Now, lots of world brands have shops in first-tier Chinese cities,” said Alex Bi, who was visiting Hong Kong from Guangzhou.

He and his sister, Jessica, were window-shopping in the bustling Kowloon District.

At the same time, Beijing has stepped up efforts to reduce reliance on trade and encourage self-sustaining economic growth based on consumer spending.

Import taxes on luxury goods were cut to lure shoppers home.

Luxury spending abroad is forecast to keep rising, but not as fast as in China. The share of spending that goes to retailers in China should rise from one-quarter of last year’s US$90 billion to half of 2025’s projected total of US$170 to US$190 billion, according to a Bain report earlier this month.

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