China’s crackdown on corruption has hit the sales of Western luxury brands
What is the height of luxury? Not in terms of products and services, but in terms of the luxury market and its potential for growth. Some factors came into play in 2014 which could have a huge impact on the global luxury market. First is Chinese President Xi Jinping’s much-publicised campaign to cut down on extravagance and root out corruption which has led to the sale of luxury goods slumping by as much as 50%. China was the hottest and fastest-growing market for luxury goods and the slowdown has led to top international brands like Giorgio Armani and Dolce & Gabbana closing their flagship stores on the Bund in Shanghai. The currency devaluations in Russia, Japan, Brazil and Indonesia are altering shopping and spending patterns globally. Then, there is the lingering economic slide in Europe.
The most authoritative tracker of the luxury market is Bain & Company, and its latest prediction is that worldwide sales of personal luxury products will rise a mere 2% this year, at the slowest pace since 2009. Events in China are casting the longest shadow. The crackdown has affected a number of Western luxury brands’ hopes in the fast-growing economy, with Burberry, Rémy Cointreau and LVMH all witnessing a slowdown during the third quarter. “With luxury goods, we are seeing the emergence of a new normal,” said Claudia D’Arpizio, a Bain partner in Milan, the fountainhead of the global luxury market.