Appeal of bling dims

Meanwhile, there are also increasing signs of changing consumption patterns in China, one of which might lighten the gloom for the luxury brands, as it suggests that they are still selling their goods to Chinese consumers - only not in China.

A survey conducted by KPMG found that 71 percent of respondents traveled abroad in 2012, up from 53 percent in 2008. And while 35 percent of Chinese people purchased luxury goods when traveling overseas in 2010, 62 percent did so last year, according to McKinsey. Moreover, some Chinese customers believe overseas boutiques offer a better service and more choice. By improving their service and providing only-available-in-China items the brands would be able to attract more consumers to buy in China.

Many surveys have found that Chinese consumers are using social media platforms and online forums to discuss and research luxury brands. Data from KPMG show that around 70 percent of potential consumers search for luxury brands on the Internet at least once a month. And while Cartier's axing of stores might seem like a retreat, it could merely signal a reduction in costs, since online shopping is increasingly popular, especially among younger customers.

McKinsey reported that the percentage of online buyers in China has increased from 2 percent in 2010 to 8 percent in 2012, and the number is expected to continue to grow, which means the traditional strategy of opening more retail outlets and spending big on advertising may be less effective than before.

It is estimated that the middle class in China will increase based on a compound annual growth rate of 14.1 percent, which means there will be 256 million potential customers by 2025. China remains the priority market for luxury brands, but they will have to change their business models if they are to succeed. However, with the changing consumption patterns of a growing middle class, less official gift giving and a better quality service from the brands, the luxury market in China will be more healthy, becoming a sustainable source of consumption that can help drive the economy.

The author is a journalist with China Daily. E-mail: zhujin@chinadaily.com.cn

(China Daily 07/05/2013 page8)