Luxury brands “giving up” on China’s domestic market as tourist numbers, purchases jumped last year – report

The world’s leading luxury brands are gradually “giving up” the Chinese domestic market, according to the 2014 China Luxury Report.

The claim comes as total luxury overseas purchases by Chinese consumers rose 9% to $81bn as 117m travelled abroad last year, a 20% year-on-year increase, the report by Shanghai-based research centre Fortune Character Institute (FCI), showed. That meant luxury purchases in the domestic market declined 11% to $25bn in 2014.

The institute found that 76% of Chinese consumers’ luxury purchases are completed overseas, an outflow that the research institute rated as “very serious”.

FCI director Zhou Ting noted that many luxury brands are cutting marketing budgets in China, or transferring these budgets to other markets, suggesting the brands are “disheartened” with the Chinese market.

She said: “Luxury brands put a lot of weight on Chinese consumers, but not as much on the Chinese domestic market. This has somehow become an agreement reached unknowingly but simultaneously among many luxury brand managers,” she told China Daily.

The report also noted that “rampant” fake products are one of the major reasons for luxury brands’ lower confidence in the Chinese domestic market.

According to the FCI, counterfeit luxury products in China outnumber genuine items six-to-one.

Consultancy firm Bain & Company found in its latest China luxury market study that 55% of Chinese luxury goods spending was made by consumers during overseas trips and another 15% was made through friends, relatives or professional agencies.

Ding Haozhou, chief executive officer of Zonfa Commercial Management Group, said local authorities have noticed the outflow of luxury spending, and the recent tax refund policy is an attempt to retain such high-end consumption within China.

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