Rich Chinese still hungry for luxury goods despite slowdown

Bloomberg

About half of Chinese consumers say they’re planning to spend more on luxury purchases this year in a recent survey as concerns mount that the slowing and trade war-battered economy may dent demand in the key market for premium goods.
Weeks after Apple Inc said that lower-than-expected Chinese demand is hurting earnings, a new survey of 1,385 affluent consumers by research firm CSG and public relations agency Ruder Finn showed that 46 percent of respondents in China and 32 percent in Hong Kong said they planned to spend more on luxury purchases this year compared to 2018.
While the results for China is in line with survey findings from a couple years ago, CSG’s Executive Director Simon Tye said the trend showed a softening.
“Over the last few years, we saw Chinese confidence going up and up,” he said. “For the first time in a long time, we are not seeing major growth sentiment in China.”
The global luxury industry has become increasingly reliant on China’s wealthy to drive growth and a perceived pullback in spending has been a consistent drag on luxury shares in recent months. The survey results signal some relief for makers of premium goods counting on China, which accounts for a third of the $1 trillion luxury market worldwide.
Earlier this month, Apple cut its quarterly revenue outlook, blaming slower-than-expected growth in China, setting off declines in the shares of luxury stocks from LVMH Moet Hennessy Louis Vuitton to Burberry Group Plc.
Richemont, the maker of Cartier necklaces and Piaget watches, had signalled in November that Chinese sales growth had slowed and trade disputes could dent it further. Its third quarter results last week, however, allayed some of those concerns. “Affluent consumers are still optimistic, however the energy is a little bit duller this year,” Tye said.
The average Chinese shopper in the survey, spent more than $35,000 on luxury goods last year, according to the report released. In 2016, when the survey’s results were announced publicly, 42 percent of Chinese shoppers said they would spend more on premium goods.
A sliding yuan and tightened government supervision of overseas purchases is also forcing luxury brands to rethink their strategies after years of relying on Chinese tourists on vacation in Paris to Dubai to prop up sales.
Brands are focusing on how to incorporate Chinese elements to gain attention locally: Burberry recently launched a Chinese New Year capsule collection and has a limited edition line sold only over Wechat, for example.