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Luxury brands hit by slowdown in China's economy
Publication Date : 08-08-2014
Years of rising Chinese affluence in major cities have made global luxury players salivate over the prospect of expensive apparels and accessories.
However, in the past two years, the destiny of luxury brands in China began to look shaky in the face of the anti-corruption and anti-extravagance policies.
The market declined to around 2 per cent growth in 2013 from 7 per cent in 2012 and is predicted to continue with slow growth in 2014, according to a report released by management consulting firm Bain & Co.
Louis Vuitton Moet Hennessy has seen a drop in demand from Chinese buyers in its home market and overseas, it said in late July after posting below-forecast second-quarter sales and profits.
Kering Group, the parent company of Gucci, witnessed a 4 per cent growth in revenue in the first half of 2014, according to its first-half results released at the end of July.
Kering Chief Financial Officer Jean-Marc Duplaix told Reuters that the situation for Gucci remained negative in the Chinese mainland, where Gucci was in the final phase of appointing a new CEO.
However, he said business in China had improved since the end of last year, notably in big cities.
China still remains the largest consumer of luxury goods, contributing 29 per cent of purchases in the global market in 2013.
The report also found that women's fashion brands have experienced a sharp rise, with women's wear and shoes showing robust growth from 8 to 10 per cent.
Moreover, more premium brands are switching to China's e-commerce sector to attract consumers at home.
UK-based luxury brand Burberry Group Plc has opened a virtual store on China's largest online shopping platform Tmall.
Major labels Emporio Armani, Marni and Bally are working with foreign portals such as Italian online fashion retail company Yoox Group.
Salvatore Ferragamo has also launched an official China online store with online luxury retailer xiu.com.