No brand is immune to the luxury slowdown in China, but Versace is still on pace for double-digit growth this year. Despite some rocky times from the death of founder Gianni Versace in 1997 and the 2007 global financial crisis, Versace’s chief executive, Gian Giacomo Ferraris, is leading the company with a steady hand.
LVMH Moet Hennessy Louis Vuitton SA said Wednesday first-quarter sales rose 4 percent as the group, a bellwether for the luury-goods industry, struggles to adapt to a slowdown in China.
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Luxury sales growth in China’s have been slowing after a 20 percent jump in 2012. Sales are expected to drop by 2 percent for mainland China, which would be the first luxury sales decline in over a decade. The decline is largely attributed to the Chinese government’s austerity measures that have now expanded beyond public officials to businesses.
UK luxury handbag maker Mulberry said full-year pretax profit would be significantly below expectations after a slump in first-half trading added to the disruption of a product overhaul.
Luxury is no longer about buying and holding. Brand-conscious consumers are reselling their designer clothes and at the same time, buying more for less.
The market for pre-owned luxury goods – apparel, accessories, watches, and jewellery – is estimated at USD19 billion and rising rapidly, according to Claudia D'Arpizio, a partner at Bain & Co. The fastest growing segment is leather goods and clothing, which accounts for USD4 billion of the market.
Strong growth is expected for the global luxury market, but China may be falling short of expectations, according to a new report from Euromonitor.
Euromonitor forecasts the global luxury market to reach USD405 billion by 2019; meanwhile, luxury sales growth in China is expected to moderate to 4 percent this year and 6 percent in 2015. Luxury sales in China had increased 11.5 percent to USD9.6 billion between 2009 and 2014, according to Women's Wear Daily.
Rahul Narvekar, CEO, Indianroots.com, maintains that despite having a rich heritage, Indians are bedazzled by international brands. “If the choice is between the sari and the bag, most wouldn’t blink an eye to spend on the designer bag. This is killing the market,” he says. To counter the problem, retailers are gunning for international clients, with their higher average selling price and lower return rates.
In the months before Vogue China launched in 2005, there were many skeptics, people who said it would fail because China’s nascent luxury market was not ready for a world-class glossy magazine — consumers there were just not sophisticated enough. At the time, the nouveaux riche were in the grip of bling fever, undiscerningly buying the most expensive goods they could afford in order to show off their success, according to a 2005 report by consultants Ernst & Young.
OrotonGroup has emerged as a star performer among Australia's struggling retailers thanks to a solid rise in sales of its luxury handbags and accessories.
The upmarket retailer has lifted its annual profit 16 percent on the back of strong revenue growth.
Aiding the result was an 8 percent rise in like-for-like sales for the group's core Oroton handbag business, which had suffered a dip last year.
Retail opportunities for footwear brands are promising in China.
Although China's yearly household income is still around USD2,100 overall and USD4,700 in Shanghai, the number of consumers with disposable incomes is growing, and China's middle class along with it. Shoes often represent an entry point into the luxury market for people with money to spend, according to Peter Harris, president of the Pedder Group.