Chinese turn to local products could spell trouble for global firms
Chinese trendsetters are no longer exclusively interested in Western brands — and this isn’t just because the world’s second-largest economy is slowing down, industry insiders say. “Yes, the big brands offer good quality, but the prices are too high and the styles can be boring and old. I feel like we need fresh air, new blood,” said Coco Ma, a Shanghai-based designer and instructor at the Fashion Institute of Technology of Donghua University.
This is bad news for international companies that have relied on Chinese sales for rapid growth and profits in the wake of the global financial crisis. Adding to the woes, China’s economy grew 7.3 per cent in 2014, the weakest annual expansion in 24 years.
Eighty-three per cent of international luxury brands have closed some of their retail outlets in China this year, and this rate of closures is expected to continue, according to a Fortune Character Institute report released in November. Domestic consumption of luxury goods in 2014 declined for the first time in years.
“It’s partly because things like property are getting so expensive in China and people have less disposable income. The middle class is also becoming more individualistic in their tastes rather than just wanting to show off,” said Yvonne Ma, a Mandarin Chinese teacher in Beijing.
In Shanghai, many shoppers can be seen browsing in small boutiques selling clothing, bags and jewellery from local designers. HuaihaiRoad, which is dominated by international luxury labels, seems emptier in comparison.
Many others didn’t even bother going outside, since online shopping has become the preferred way to shop for millions of Chinese. “China-made products used to lag behind Western designs in terms of quality, workmanship and design, but now the gap is closing and I find Chinese designers’ tastes tend to be more similar to mine,” said Shanghai shopper Karen Li, who said she buys most of her clothes online.
China’s online sales account for about 10 per cent of the country’s total retail turnover. Chinese consumers also tend to buy more and a much wider variety of goods online than Western consumers.
Internet giant Alibaba broke its own sales record to make $14.3 billion in sales during China’s Singles Day, a 24-hour onlineshopping holiday in November, with more than 70 per cent of those sales come from its mobile sites. Meanwhile, the apparent wane in Chinese consumers’ interest in Western brands is not only limited to clothes and accessories. Sales of goods such as foreign cars are taking a hit as well.
The China Association of Automobile Manufacturers said sales of all makes of cars tumbled to a 17-month low in July. Demand was also hurt by a rout on the Shanghai stock exchange. China is the most important market for Europe’s largest carmaker,Volkswagen, which sells more than a third of its production there. — dpa