Business     

Frugality, anti-corruption affect luxury brands

Xinhua, February 28, 2013

• Sales of luxury goods on the Chinese mainland, a fast growing market for the sector in recent years, are on the decline as the country fights against corruption and extravagance.

  "Sales have dropped a lot," said a salesman of a Parker pens brand store on Fuzhou Road in east China's business hub of Shanghai.

  The salesman, who declined to be identified, said in the past customers purchased pens as gifts and sales of the products priced at more than 10,000 yuan (1,591 U.S. dollars) were good.

  But in the past month, which included the traditional Spring Festival and is usually a good season for expensive goods, salesmen of many luxury brands have felt the "winter chill" in their businesses.

  Guo Ming, an expert in luxury watches in Shanghai, said "Some who had planned to buy high-end watches worth more than 100,000 yuan as presents just purchased basic fashions valued between 30,000 yuan and 40,000 yuan."

  "Those luxury fashions are no longer a favorite. Low-key luxury goods have become more popular instead," he added.

  Sales of some high-end watch brands dropped as much as 30 percent last year in China, industry insiders said.

  China's new leadership has vowed to fight corruption and launched a frugality drive across the country. A number of official corruption scandals were exposed in recent months.

  Last Friday, Yang Dacai, former head of the provincial work safety administration of northwest China's Shaanxi Province, was expelled from the Communist Party of China. Last year, luxury wristwatches which Yang wore earned him the nickname of "Brother Watch" and raised concerns about his corruption, as a public servant could not afford so many expensive watches.

  Given the drop in sales, some luxury brands have reportedly decided to stop or slow their market expansion in China.

  However, Zhou Ting, dean of the Fortune Character Institute, which specializes in lifestyle studies of the rich in China, remains optimistic. She said, "The anti-corruption move has had a great impact on luxury goods. But entrepreneurs in booming cities or towns are becoming luxury consumers."

  The adjustment in the luxury brand market was expected given its rapid market expansion in China in recent years and the effect of the country's anti-corruption move, said Zhou.

  "The effect of anti-corruption measures is big and clearly felt. The high-end goods market should brace for adjustments if the campaign continues to keep momentum," said netizen "Liangcai-lijie."

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