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Luxury market stagnates as wealthy Chinese shoppers stay at home
[LONDON] The world's luxury-goods market stopped growing this year, according to a forecast from researcher Bain & Co, as the industry struggles to emerge from one of its weakest periods since the global recession.
Sales of personal luxury goods from Louis Vuitton coats to Hermes handbags are projected to linger at about 249 billion euros (S$379 billion) in 2016, the weakest performance since 2009 at constant exchange rates. At actual rates, sales are set to slip 1 per cent, Bain predicts.
The outlook adds to the gathering gloom around the industry. Burberry Group Plc this week reported declines in its Asian business and worsening results at its wholesale unit.
The luxury market is entering a slower "new normal", said Claudia D'Arpizio, head of Bain & Co's luxury division. The top of the market "will not have an enormous number of new consumers coming up in the near future." China's emerging middle class won't fuel growth to the extent of the previous boom seen by luxury brands, she said.
"It will be a war for market share," Ms D'Arpizio said. "There are already winners and losers." Fashion-house results may already reflect this new reality. Last month, Cie Financiere Richemont SA, the maker of Vacheron Constantin timepieces, said first-half earnings will probably fall about 45 per cent, and Hermes International SCA abandoned its 8 per cent sales growth target. Days later, industry leader LVMH beat analyst estimates.
Mainland China, where a slowdown has weighed most heavily on the industry, is starting to recover from three years of stagnation, according to Bain.
China has turned from a help to a hindrance for luxury makers - mainly due to a drop in the number of Chinese tourists heading to places such as France. Those who did venture abroad are choosing Brexit-discounted London boutiques over the Champs-Elysees. France's tax-free shopping is set to plummet by a fifth this year, further weighed down by concern over terrorist attacks.