THE BLOG
19/11/2013 10:54 GMT | Updated 25/01/2014 16:01 GMT

From Bling to Low-Key Luxe: How China Is Influencing the Luxury Market

Spend, spend, spend: London's retailers were rubbing their hands together in anticipation at the start of October, and not because of any early pre-Christmas splurge from UK shoppers. The glimmer in their eyes was down to an influx of thousands of Chinese tourists, who see London as one of the bona fide luxury centres of the world.

The super-economy's elite were here on a Golden Week spending spree (named for one of China's most important holiday periods). And given the figures, it's easy to see why London's high streets were gogo: the Chinese account for a quarter of the global luxury spend - to the tune of a massive £18bn. Last year's Golden Week saw Harrods' till up an average of £3,500 from each Chinese shopper, while at luxury shopping centre Bicester Village, the average till spend was £735. The sums for 2013 are likely to be even higher.

But for how much longer?

It's evident that Chinese consumers are hugely influential in keeping fashion houses and luxury car manufacturers in business. But the luxe sector more than any other is vulnerable to the whims of geo-political changes, and the influence of the Chinese market could be all about to change as the Chinese government begins its crackdown on corrupt government officials.

Since his election, Chinese President Xi Jinping has made it his mission to target corrupt government officials who have taken advantage of the current system. Nanjing's Mayor Ji Jianye, is the latest target to be hit in a vast corruption investigation as China continues to pursue top-level officials as well as lower civil servants. It's no surprise that those who flaunted their wealth with flashy goods are taking a step back, amid fears the finger could be pointed at them next.

It's quite a turnaround, given that China has single-handedly accounted for the double-digit growth of more than one outré luxury brand since its golden age began in 2007. The jitters in the market started last year with an economic slowdown and the political transition has been exacerbated most recently by the crackdown on corrupt gift-giving. Both have changed the nature of what the once-aspirational logo means within Chinese society today.

Whereas once it was the mark of legitimacy - the very expensive badge of having made it - now ostentatious badge-flashing is starting to be seen by the Chinese population as the spoils of ill-gotten gains.

Take for instance drinks brand Pernod Ricard which recorded a 6% first quarter decline in sales in Asia and the rest of the world. The reason given - anti-corruption and anti-extravagance measures in China, goes to show that not even lower-end luxury goods are safe.

This doesn't necessarily show that luxury - or the desire inspired by the power of the logo - is dead; merely that China has taken a step away from flaunting, and moved towards low-key luxury goods, namely designer watches and handbags.

Luxury brands, especially car manufacturers, on the face of it then would do well to keep a weather eye on alternative markets such as the resurgent U.S.A , where other geo-political developments - namely, the fracking boom - has created a whole new avenue of millionaires ready to purchase and perhaps start a red, white and blue week.