CHINESE consumers are forecasted to be the growth drivers for the luxury industry in the next decade but the mainland’s current economic slowdown could be bad news for designer brands.
With Chinese spending on topping US$90 billion annually on jewellery, clothing, and other high-end items, the downturn could affect exquisite brands such as Cartier and Salvatore Ferragamo in cities like Manhattan and Paris.
According to the Associated Press, the CEO of Tiffany & Co, known for its US$5,000 watches, noted the slump in Chinese spending on its products, with shares of the company fell 12 percent.
In one afternoon last week, Tiffany & Co’s flagship store in Hong Kong had only a dozen visitors, but most of them were merely window shopping.
Pressure is already mounting for the industry, which is seeing China’s big spenders opting to buy more luxury items within their own country instead of American or European outlets where the Asian customers are considered mainstays.
The Chinese customers, on the other hand, say they are tightening their belts amid the economic uncertainty which is exacerbated by the United States’ trade row with Beijing.
“The name brand goods are too pricey,” Zhou Jiqing, from Shenzhen, was quoted as saying.
“I’m waiting for the Christmas sale.”
Against the backdrop of cooling economic growth, which is also crippling China’s automotive and real estate market, observers say shoppers are skittish.
“Consumers are just not as excited about spending that kind of money right now,” Ben Cavender of China Market Research Group told the AP.
However, demand for Jimmy Choo Shoes and Tom Ford shoes fared better than other brands as the government tightened controls on bank lending to dampen the rise in household debts.
Fewer deep-pocketed mainland buyers are showing an interest in the Hong Kong’s luxury homes with market observers saying enquiries for property over HK$100 million (US$12.8 million) has fallen by half, according to the South China Morning Post.
“Most of the buyers from the mainland are business owners whose businesses might be directly affected by the tariffs, while some are just holding off on their offers because of the uncertainties,” said Patrick Chau, senior director of residential development at Savills.
Having the second-largest economy in the world, China’s growth rate is expected to relatively strong at 6.5 percent compared to last year’s 6.7 percent, but auto sales in the world’s biggest car market dropped 13 percent in October from the same period last year.
The real estate sector is also seeing developers dropping prices to attract home buyers.
The availability of major brand outlets in China has also discouraged Chinese buyers – many of them agents who buy in bulk to re-sell – from shopping abroad.
“Now, lots of world brands have shops in first-tier mainland cities,” customer Alex Bi said.