Global luxury brands and the mall developers that love them have hit hard times in China as Xi Jinping’s anti-corruption campaign has seen shoppers desert high end stores.
According to a recent report in the South China Morning Post, many luxury brands are scaling back their plans for new store openings on the mainland, at least until the many Chinese citizens who have profited from their government ties believe its safe to shop for Gucci and Prada again.
Sales growth for high-end retailers have reportedly gone flat and many experts expect openings of new stores to slow down this year. The SCMP spoke with Steven McCord, a director of China retail research at Jones Lang LaSalle, Shanghai, who explained:
A key reason (for the slowdown) is that the anti-corruption measures in China have curtailed the use of public funds for high-priced gifts. Meanwhile, for the more aspirational and price-sensitive customer groups, where there is still spending growth driven by rising incomes, they are increasingly going to Hong Kong or other low-tax destinations to buy luxury goods.
Sales of luxury goods on the mainland edged up 2 per cent last year from 2012 to 116 billion yuan (HK$148 billion), according to consultancy Bain & Co. Sales grew 7 per cent in 2012.
However, not all observers are so pessimistic about China’s retail future. A report released late last year by real estate consultancy Cushman & Wakefield found that China is now Asia’s largest retail economy with sales of US$1.7 billion forecast for 2013. The recent growth of the China market, and its positive outlook make the country the primary target for expanding international retailers, the report found.
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