Luxury goods market dented by caution in China

A closely watched report by consultancy Bain & Co together with Italian luxury goods trade body Altagamma said the first signs of a deceleration began to appear in 2012 in China, the luxury industry’s main engine of growth.

A change in government in China and a crackdown on corruption have dented luxury spending by its consumers, the report said.

This year, the Chinese luxury goods market is set to rise by 8 per cent at constant currencies and 20 per cent at current currencies to reach £11bn, while last year it gained 30 per cent using both measures, the report said.

Chinese consumers, many of whom shop abroad, have become the world’s number one buyers of luxury goods, ahead of the Japanese, the Americans and the Europeans, the study found.

Chinese consumers now make up half of luxury purchasers in Asia and nearly one third in Europe.

Tourists overall represent 40 per cent of total luxury sales and in some countries, such as France, they make up 60 per cent. The country has become a top destination for Chinese tourists after simpler visa rules were introduced.

Europe has been hit by the eurozone debt crisis and luxury spending growth will approximately halve in 2012 from last year to 5 per cent, with Italy and Spain suffering the biggest slumps, the report said.

However, the Americas region is projected to post strong gains, with revenue rising 13 per cent by year’s end.

At current exchange rates, the report predicts that global sales growth in the luxury market will slow this year to 10 per cent from 11 per cent in 2011 but it forecasts a strong fourth quarter.

“Concerns about market weakness are somewhat overblown,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study.

“But we are seeing sharp disparities between brands that are not keeping up with the quickening pace of change in the market and those that are adjusting to shifts in tastes and demographics.”

Bain estimates that the luxury goods market will grow at constant exchange rates by 4 per cent to 6 per cent a year between 2013 and 2015, bringing the market to over 250 billion euros.

Despite concerns about the effect of the slowdown of growth in China, Peter Ackroyd, president of the International Wool Textile Organisation, said the future is looking bright for the Yorkshire’s wool mills.

Big brands such as Burberry, Prada, Yves Saint Lauren, Paul Smith and Chanel all source their wool in Yorkshire, and a boom in luxury wear has boosted the region’s industry.

Today, there are just over 40 wool processing mills in Yorkshire, which includes scourers, spinners, weavers, dyers and finishers.