China Major Report - China Retail: A Changing Landscape November 2015
- We expect the rising popularity of overseas purchases and the decrease in retail consumption for gift-giving purposes to continue to weigh on the mainland luxury retail space over the short-term. Recent stock market volatility in combination with the slowing of economic growth in China is also likely to further weigh on the sector.
- Given the recent sluggish performance of the mainland luxury market, luxury retailers are generally adopting a cautious stance towards expansion in the domestic market. In spite of the cautious stance of luxury retailers, developers of high-end retail properties are expected to maintain the current pace of new development, which may see new properties face difficulty finding sufficient leasing demand over the coming years’ time.
- Consumers are placing greater importance on the experience-aspect of retail properties, and the individualization of products. As such, luxury retailers have been upgrading their store premises to improve service and raise the quality of product displays and costumer shopping experience. Even so, physical stores are expected to maintain their dominance in the luxury retail space. Prompted by upgrades from luxury retailers, retail landlords have also begun to upgrade their properties to improve consumer shopping experience and differentiate themselves from their competitors.
- Due to the slower growth of the domestic luxury market and changes in the composition of the luxury product consumer base, luxury retailers are targeting properties that receive especially high levels of foot traffic, creating high demand for these properties.
- In the long run, China’s domestic luxury market still has enormous potential; the industry sector is expected to benefit from the growth of the middle class, female shoppers and youthful consumers, as luxury retailers seek to narrow the price gap between domestic and overseas markets.