China’s Luxury Market Affected By Fewer Chinese Men Taking Up Mistresses: Report
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The waning social practice of married, wealthy, Chinese men with “second wives or girlfriends” may be having a negative impact on luxury goods sales in China, claimed a report by CNBC on Tuesday, after several luxury brands also warned of declining profits amid China’s economic slowdown.
The waning social practice of married, wealthy, Chinese men with “second wives or girlfriends” may be having a negative impact on luxury goods sales in China, claimed a report by CNBC on Tuesday, after several luxury brands also warned of declining profits amid China’s economic slowdown.
The report, citing a recent research note by HSBC analysts, said that Chinese men tended to buy “flashier, more logo-driven luxury goods” for their mistresses; though the increasing westernisation of the society meant that the practice was becoming more frowned upon than in the past.
Still, it is not uncommon for married, wealthy Chinese men to have “second wives or girlfriends (xiao san – literally “little three”, meaning the third person in a relationship),” says HSBC; while Tom Doctoroff, chief executive of JWT North Asia and author of What Chinese Want, noted that, “a mistress is a way of projecting power in Chinese society, and power projection is very important.”
[quote]“For the second wives, the luxury brands tend to be much more flashy and bling. Mistresses want to show themselves off,” Doctoroff added.[/quote]On Tuesday, U.K. luxury giant Burberry saw its share price drop by 21 percent after warning of slower sales and lower profits amid weakening global demand driven by China.
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Speaking to the Wall Street Journal, Burberry’s Chief Financial Officer Stacey Cartwright acknowledged that the decline of gift-giving in China, as a result of new scrutiny on public displays of wealth and the nation’s slowing economy, was “clearly having an impact” on their profit margins.
[quote]”We called out in the last release the fact that the gift giving part of the business [in China] had slowed very significantly. Clearly there’s the changing of the guard coming very shortly, and we’ll have to see what comes after that,” she said.[/quote]Jon Copestake, retail analyst at the Economist Intelligence Unit, added to The Guardian that luxury brands were now reliant on the strength of China’s economy for their own sales – with sales of luxury goods in China tripling in value in the last five years during the nation’s economic expansion.
[quote]“There is certainly an element of panic here,” he said. “Retailers’ reliance on China could be problematic. A lot depends on how the Chinese property bubble goes. Eyes remain firmly fixed on China to gauge whether slowing growth will undermine the ambitious expansion undertaken there by luxury brands in recent years.”[/quote]Still, market research company Euromonitor International believe that the luxury market in China could double in size by 2017.
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The recent drop may simply be down to changing buying patterns, said Doctoroff, who urged luxury brands to adapt to increasingly sophisticated Chinese consumers.
“As business becomes more sophisticated and conforms more to international structures, then the role of gifting will go down,” Doctoroff said.
[quote]“The Chinese are extremely savvy buyers relative to the length of experience they have in the consumer world. They pay a high price premium so really look for value, not just in quality, but what it says about the buyer. What they buy is increasingly understated — they want to show off, but discreetly,” he said.[/quote]
