Lure of luxury ebbs in market now "saturated"

BEIJING, July 27 (Xinhuanet) -- Some major international luxury groups experienced a sales slowdown in China in the first half of the year, even as the European market continued rebounding.

Source from (Xinhuanet): http://news.xinhuanet.com/english/china/2013-07/27/c_132578891.htm
Published: July 28, 2013


The growth of Kering SA's luxury division in China slowed to an average of 6 percent in the first half. The luxury group, which owns Gucci and Bottega Veneta, released its interim report on Thursday.

But sales growth in China was 21.5 percent in the first half of 2012 and 45 percent in 2011.
The group reported 4.68 billion euros ($6.21 billion) in global revenue, up 4 percent on a comparable basis.

The Asia-Pacific region, excluding Japan, "delivered more modest growth of 3.7 percent" to the group in the first half.

Jean Marc Duplaix, chief financial officer of Kering, said the moderating sales growth in the Asia-Pacific region reflected a "tougher macro environment".

The slowdown of China's economic growth is being cited as the cause of the luxury market deceleration. Some experts said that well-known international brands had actually been hit harder by weak economic conditions and the government's crackdown on extravagance.

"The big names' business declined in China seriously in the first half of 2013, for macroeconomic and political reasons," said Zhou Ting, director of the Fortune Character Research Center.

After years of fast development, China's market is becoming saturated with well-known luxury brands, Zhou said. These brands must get used to slower growth in China, which is a healthier situation.

Duplaix also said in a conference call that demand in China was lower than in the past.
However, conditions in mature markets including Europe and Japan are getting better for luxury brands.

LVMH Moet Hennessy Louis Vuitton, the world's largest luxury group by turnover, said in its interim report released on Thursday that the group "continues to grow in Europe in a more difficult economic environment" and Europe had "good resilience" in the first half of 2013.

Kering's luxury division also saw an 8.7 percent revenue increase in Western Europe during the period.

"This revenue growth was achieved not only thanks to tourism sales but also as a result of sales to the region's local customers," the group said in its report.

Chinese tourists contributed a lot to the United States' and Europe's market recovery, business insiders said.

Chinese people spent 60 percent of their luxury budget overseas, the result of a stronger yuan and increasing outbound tourism, according to a luxury market report by Bain & Co, a US-based consultancy company.

The luxury groups are still confident about the second half of 2013.

Kering forecast further positive momentum in the second half.

"Despite an uncertain European economic environment, LVMH will continue to gain market share," the company said.

The group said that its confidence comes from "the numerous product launches planned before the end of the year and its geographic expansion in promising markets, while continuing to manage costs".

 (Source: China Daily)