Chinese millionaires are expected to buy fewer luxury goods again this year, confirming a trend that will further complicate things for high-end brands and retailers, many of which had made China one of their priorities. Luxury firms are already struggling with a slowing economy in China and a clientele that increasingly shops online for the best price globally and eschews in-your-face logos.
Hermès, Chanel, Gucci, LVMH's Louis Vuitton brand and Apple remained among the most sought-after brands for gifts, the study showed, while Bulgari, also an LVMH brand, and other famous names such as Salvatore Ferragamo and Tiffany & Co. were less popular.
Overall spending by wealthy Chinese fell by 15 percent in 2013, the third consecutive year of decline, according to a survey by The Hurun Report, a monthly magazine best known for its “China Rich List,” which ranks the wealthiest individuals in China. The survey's results were based on responses from 393 Chinese millionaires, or those with personal wealth of at least 10 million yuan (€1.2m-$1.7). Hurun has conducted the survey for the past 10 years.
The drop in domestic luxury spending coincides with a government crackdown on corruption and ostentatious gifts that began in 2012, as part of a vow made by Chinese President Xi Jinping to be tougher on graft. He focused in particular on gifts made to government officials, often in exchange for preferential treatment or contracts. Spending on luxurious gifts, in fact, declined by a quarter in China last year.
The decline was also the consequence of a growing penchant among wealthy Chinese for traveling and shopping overseas in order to circumvent Chinese import duties and consumption taxes on luxury goods, which can go as high as 40 percent. Over two-thirds of luxury spending by mainland Chinese was overseas in 2013, a factor that contributed to the U.S. overtaking China as the world's fastest growing luxury market, according to a study by Bain & Company released in December.
Besides spending less at home, the number of wealthy Chinese who have emigrated or are planning to do so rose to 64 percent from 60 percent of the total in the previous year, the latest Hurun survey showed. A previous survey by Hurun, in 2011, indicated that most of the wealthy Chinese who decide to emigrate, or take this possibility into consideration, are motivated by seeking better opportunities for their children's education. Most of those leaving, or planning to do so, are looking for permanent residency overseas, mostly in the U.S., Europe and Canada, but very few decide to give up their nationality, possibly because they remain confident in China's future. In 2013, the millionaires' confidence in China's economy rose for the first time in five years, although those who felt “extremely confident” still accounted for only 31 percent of those surveyed.
For traditional luxury products like leathergoods, accessories and watches, this year is going to be flat or slightly down, Rupert Hoogewerf, founder and chief researcher at Hurun, told Reuters. On the other hand, for other relatively expensive items like tea, healthcare and education, Hurun is still looking at a booming market.