High-end retailers abandoning China?

[Randy W]

I thought these guys were everywhere . . .

 

 

from the SCMP

 

Just why are Louis Vuitton and other high-end retailers abandoning China?

After a decade of aggressive expansion in China, international luxury brands are adapting to a cooling market by shrinking their physical presence and branching out into restaurants, cafes and even beauty salons

 

Following ten years’ aggressive expansion in China, they have been shrinking their physical presence in the nation to adapt to a cooling market plagued by a slowing economy, an ongoing anti-corruption campaign and Chinese buyers’ increasing overseas purchases.

 

The Fortune Character Institute, a Shanghai-based market research unit, forecasts mainland luxury sales to grow 3 per cent to US$25.8 billion this year, much slower than the 11 per cent in the recovering global market.

 

A study by the institute found that although Chinese shoppers consumed 46 per cent of luxury goods around the world, their purchases in their home market accounted for only 10 per cent of global sales, falling from 11 per cent in 2012 and 13 per cent in 2013.

 

The sluggish growth is reflected in the expansion plans of luxury brands. They are opening fewer new stores and closing more.

 

During the past two years, Burberry closed four stores on the mainland, Coach shut two, Hermes one, Armani five, and Prada went from 49 to 33.

 

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Chinese consumers, who are travelling overseas more often, now spend more than 70 per cent of their luxury budgets in Europe, North America, Japan and other countries where the prices are lower, options are greater, and services better.

 

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While reducing their physical presences, luxury retailers are embracing e-commerce despite their concerns that online channels cannot emulate the physical shopping experience.

 

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“Many luxury brands have begun to close the retailing price gaps between China and other markets. One of their purposes is also to establish a comprehensive global pricing system and prepare for their future online expansion,” Zhou Ting said.