Predictions for China's Luxury Retail Market in 2017

Economy
03/01/2017 10:58

Chinese shoppers are generally estimated to make approximately 30% of the world’s luxury purchases, and according to De Beers "Diamond Insight Report", Mainland Chinese demand for diamond jewelry doubled from a 7% global share in 2008 to 14% in 2015, making it the second largest consumer of diamond jewelry. Bain & Company estimated their share of the global luxury market decreased by one percentage point in 2016, due mainly to China’s economic growth slowdown, thriving demand for grey-market and counterfeit goods, and safety concerns affecting travel patterns. Fortune pointed out that, "Although Chinese shoppers account for a third of global sales of luxury goods, sales that actually take place in mainland China account for only a fifth. The rest are purchases made abroad - either ordered from overseas websites, bought by Chinese tourists, or smuggled in by 'personal shoppers' known as daigou, who fill suitcases with luxury items and sell them back home in person or online. That costs the Chinese government tax revenue, and also discourages the domestic consumption sector, particularly for higher quality goods, that Beijing has long been trying to boost to rebalance its economy away from exports."

Still, China is one of the most important blocs of shoppers worldwide for the global luxury industry, and will continue to be in the coming years as the upper-middle class rises across the country. Jing Daily has made five predictions for what to expect from China’s luxury market in 2017. First and foremost, they expect more repatriation of Chinese luxury spending, citing a a study by ContactLab which found that the percentage of luxury goods purchased abroad already decreased year-on-year in the first four months of 2016 from 43 percent to 40 percent. "This has been due to several key trends," writes Liz Flora, "including the Chinese government’s crackdown on gray-market smugglers, changes in tariff policies for travelers, importers, and cross-border online sellers, luxury brands’ decisions to harmonize their China prices with those globally, and the Chinese government’s development of duty-free shopping. With the Chinese government aiming to earn tax revenue and luxury brands hoping to cut down on the gray market, expect these trends to continue in the coming year."

Second, expect Chinese consumers to continue paying close attention to currency fluctuations, and to shop where the rates are most favorable: "Despite new tariff policies, some brands lowering their China prices, and a devalued yuan, many goods still cost more in China than they do elsewhere, and Chinese shoppers are very aware of prices and global currency fluctuations." Third, they expect E-commerce to continue to gain ground in the luxury industry as, "Around 80 percent of luxury brands are now available online in China in some form or another," and, "Mobile shopping is especially important, with mobile sales estimated to have grown by 51.4 percent year-on-year to reach $505.74 billion in 2016 (based on preliminary data). If they stay on track, they’re expected to grow by 45.7 percent in 2017, making up 61 percent of all e-commerce sales, according to China’s Ministry of Industry and Information Technology." Jing Daily also believes there will be no letup in China’s anti-corruption campaign that coincided with a plunging luxury sales growth rate when it began in 2012, and expects image-sharing through social media to continue being a crucial component of influencing luxury consumers online.