LOUIS VUITTON, Hermès, Cartier and other luxury brands are set to see growth slow dramatically over the coming years, analysts predict, due to the new Chinese government’s crackdown on “exuberant” spending.
As many other sectors suffered worldwide following the financial crash, sparked by the collapse of Lehman Brothers in 2008, the luxury sector was buoyed by the spending of Chinese consumers. Greater China currently accounts for a quarter of Louis Vuitton’s revenue, 35 per cent of Cartier’s and 45 per cent of Omega’s – while Hermès recently estimated that more than half of its global sales will soon come from the country.
“Just a few years ago, a slowdown in Chinese consumption would barely have produced a ripple in the luxury sector,” Luca Solca, a sector analyst, told the Financial Times. “Today, it has the potential to produce a tidal wave.”
Following a recent senior leadership transition in the ruling Communist party, government officials are keen to limit spending on gifts using public funds, which have resulted in several corruption and abuse-of-power cases in recent weeks, Reuters reports, although lower-priced goods are still permitted. The warning supports statements made by outgoing Burberry CEO Angela Ahrendts, who noted that the slowdown in Chinese spending may not be a “temporary accident, but a new norm”.