Luxury Goods Markets in Asia

As political season in China begins between the National People’s Congress and the Chinese People’s Political Consultative Conference, there have been concerns with the consumption of luxury goods. China has gone to extremes measures to prevent the issue of inequality by banning politicians to speak publicly about spending on luxury goods. With increases in social media, people have been able to show how wealthy they are by posting to websites such as Tumbler, Instagram, Twitter, and Facebook. Recently, there was an online argument between a Chinese socialite and a member of a sports car club over who has more money. As Asian countries begin to crack down on the over the top display of wealth, could luxury goods retailers be affected?

One market that could be affected by regulations in Chinese markets is luxury Swiss watches. With the introduction of cellphones, watches have become a piece of jewelry rather than a device used to keep time. What China does next could be a large game changer for luxury good companies. The development of Apple’s iWatch could also have a negative affect on the sales of luxury goods. Japan was one of the major luxury goods markets in the world for a very long time, but has increasingly seen its style trend move away from luxury. A report done by McKinsey & Company noted that younger Japanese consumers are shunning popular brands and are looking for products that are unique.

The report stated, “Over the past two decades, Japan’s much-sought-after luxury shoppers have altered the way they think and the way they shop. Most of them no longer buy something simply because everyone else has it. Younger Japanese consumers in particular are likely to shun a brand if everyone has it. Instead, they crave products that are unique and offer true value, not merely the flash of a trendy logo.”

It will be interesting to see how the Chinese government reacts to the popularity of flaunting ones wealth. Will companies such as Swatch, Rolex, and Modavo be affected by potential regulation in some countries? Although regulating the luxury markets in China would be extremely difficult and controversial, it could have a major impact on many luxury products. The increasing gap between Chinese social classes and problems with political corruption could lead to a decrease in luxury goods sales. If China follows the fashion trends of Japan, luxury goods could see a natural decline in luxury goods.