Government spending curbs hit luxury goods sales in China
Staff Reporter 2013-06-17 08:39
A Cartier store in Nanjing. (Photo/Xinhua)
Sales of luxury goods in China have fallen, as the crackdown on lavish government spending has reduced the previously significant financial support made by officials, the party mouthpiece People's Daily reports.
Businesses in the luxury sector reported total sales of US$830 million between Jan 20 and Feb 20, which represents a drop of nearly 53% from the figure posted during the same period around the Chinese New Year in 2012, according to the World Luxury Association.
The association said in its report on the luxury market in China that during the first quarter of this year luxury goods gift buying, which accounted for 72% of the sales before 2013, has waned because of the loss of its main consumer group: government officials.
"Brands should now focus on building a loyal customer base among average consumers, instead of targeting the market of group buying and gifting as they did in the past," said Ouyang Kun, the association's representative in China.
China has become the second largest market for luxury goods globally, even though the country was only ranked No. 86 by the World Bank in terms of per capita gross domestic product, the newspaper noted.
Jing Linbo, deputy director of the National Academy of Economic Strategy under the Chinese Academy of Social Sciences, said apart from the government's efforts to curb lavish spending, a weak economic forecast also affected consumer confidence.
Meanwhile, Sun Lijian, deputy dean of the School of Economics at Fudan University, pointed out that the slumping luxury goods sales in China reflects the limited number of Chinese consumers that can afford such goods, which presents the brands with a challenge to expand into the Chinese market.
On the other hand, Zhao Ping, a researcher at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said the curbs on lavish spending and the decreasing purchases made for the purpose of showing off an individual's wealth has created the perfect opportunity for the government to push for the transformation of the consumption structure and help build local brands.
Zhao also suggested that efforts should be made to promote and encourage consumption with moderation, as well as sustainable consumption.
