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Luxury goods sales slow as China demand ebbs

[October 30, 2013]  MILAN (AP) -- Chinese shoppers are cutting back on designer duds, leather handbags and pricey watches, putting a drag on global sales of luxury goods, which a study forecasts to expand just 2 percent this year.

The analysis released Monday by Bain & Company estimated 2013 luxury sales at euros 217 billion ($300 billion), up from 212 billion euros in 2012. The increase is a fraction of the double-digit growth enjoyed the previous three years.

Sales of luxury goods in China are expected to grow by just 2.5 percent, to 15.3 billion euros, as a result of an anti-corruption crackdown that has slowed gift-giving and a tendency by Chinese tourists to shop abroad, Bain said.

The United States remains by far the largest luxury market, with sales of 62.5 billion euros, followed by Japan and Italy, both in contraction with 17.2 billion euros and 16.1 billion in sales this year. China is expected to surpass France for the fourth place.

Luxury brands' earnings also were penalized by exchange rate fluctuations, namely a devalued yen and the relative weakness of the euro compared with other currencies, said Claudia D'Arpizio, the Bain partner who led the study.

For the Fondazione Altagamma, an association of Italian producers of upscale fashion, design, food and beverages that commissions the annual study, the analysis contains a few lessons: Internet sales are growing at double-digit rates and consumers are turning away from brands' second lines in favor of new names that are better attuned to local tastes.

''I think it is very clear that this market is becoming more complex and more competitive," D'Arpizio told The Associated Press. ''For many it will be a fight for market share going forward. The ones who can understand how the consumer is behaving and accommodate the consumers will be the winners."

Online sales are forecast to grow by 28 percent to 9.8 billion euros in 2013, still representing just 4.5 percent of all luxury purchases. D'Arpizio said that the potential for future growth is enormous, noting that 40 percent of brands have no on-line presence at all.

Online consumers range from off-price bargain hunters to brand-loyal customers. Accessories represent 40 percent of sales followed by apparel with 30 percent.

[Associated Press; By COLLEEN BARRY]

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