The Russians aren't coming and Europeans are in a huff - so what now for luxury retailers?
Sales growth in the global personal luxury goods market has slowed this year to 1-2pc from 3pc in 2014 at constant currencies, hit by lower demand in mainland China and Hong Kong, consultancy Bain & Co has revealed in a study.
The sector also suffered from flattish trading in real terms in the United States as the strong dollar bloated revenues in local currency but spooked tourists who preferred instead to shop in Europe and Japan where they could get better deals.
Overall, the market, which encompasses jewellery, watches, accessories and fashion but leaves out luxury cars, yachts and fine art, is set to reach €253bn by the end of the year.
That is a 13pc rise at current exchange rates on 2014, Bain said in the study produced with Italian luxury trade body Altagamma.
Back in 2011, 2012 and 2013, the sector's growth was 13pc, 5pc and 6pc respectively at constant exchange rates.
The slowdown is also due to the retreat of Russians, particularly from their traditional shopping hotspots such as Dubai and Milan.
A year ago, they were the world's second biggest buyers of luxury goods behind the Chinese, but their purchasing power has halved with the rouble's devaluation.
Adding to the industry's woes, local consumption by Europeans and Americans has fallen by a high single digitpcage in the past five years, said Claudia D'Arpizio, a Bain partner in Milan and lead author of the study.
She said many major brands had alienated local consumers by raising prices for certain items such as best-selling handbags.
The increases, which she estimated to be 30-50pc over the past three years for some items, were partly driven by the desire to harmonise prices with other regions such as Asia, where prices were higher due to tariffs and other factors.
"I think some luxury brands focused on China too much and lost focus on the local European customer base and as a result, some of them feel betrayed by these brands," D'Arpizio said.
"Those who could afford these goods in Europe started asking themselves 'why should I pay so much money for this product'?"
D'Arpizio said local European and American consumers increasingly opted to shop at discount outlets where they could get lower prices.
Bain estimated the outlet market now represented 10pc of total luxury sales, with its revenue doubling in the past three years to €26bn.
According to Bain, Chinese consumers represent 31pc of total luxury sales, followed by the Americans with 24pc and European with 18pc. It estimated that 80pc of Chinese luxury goods shopping is done abroad. (Reuters)