China's luxury sector might be reeling from the twin blows of the government's anti-corruption drive and a weaker yuan but wealthy Chinese consumers haven't lost their urge to splurge, according to the CEO of high-end Swiss watchmaker Piaget.
Whereas in the past, China's well-heeled would have flocked to their usual haunts in Hong Kong and Macau, they are now heading elsewhere to shop, Philippe Leopold-Metzger told CNBC.
"Today's Tsim Sha Tsui has become Tokyo, Seoul and Taipei," he said, alluding to Hong Kong's famous shopping district.
Hong Kong and Macau, traditionally the playground of wealthy Chinese, suffered from Beijing's anti-corruption crackdown on expensive gift-giving. Rising anti-mainland public sentiment and the pro-democratic protests in September last year also dimmed the allure of Hong Kong for Chinese tourists.
"The [Chinese luxury] market overall continues to grow, but it has shifted away from purchases in Mainland China and Hong Kong to foreign markets like Europe, Japan and Korea," said Brian Buchwald, CEO of consumer intelligence firm Bomoda.
Buchwald adds that 75 to 85 percent of Chinese consumers luxury spending originates outside of China.
Richemond Group, the Swiss luxury goods group that owns the Piaget brand, reported a 4 percent increase in sales at constant exchange rates for the five months leading to August. The boost to sales came largely from Europe, and was driven by Chinese tourist spending while abroad, reported Reuters.
According to a Bomoda report, Chinese consumers preferred to shop for luxury goods overseas because they were more confident of the branded good's authenticity. A belief that luxury goods sold abroad were superior to locally sold merchandise, as well as prices that were up to 40 percent lower due to the lack of Chinese import taxes, also helped spur purchases, Bomoda found.
"The challenge today is to track where [Chinese consumers] travel," said Leopold-Metzger, alluding to the way retailers must respond to the change in spending patterns.
Despite the decline in luxury goods sales, the Piaget CEO said the mainland remained one of the brand's priorities.
"There is a lot of wealth created every day in Asia, China and everywhere across the region," Leopold-Metzger noted, adding that Piaget was opening new stores in China where there was demand, and using sharper pricing strategies to attract domestic consumers.
"We have to create excitement," he said.