China Holiday Sales Seen Gaining as Economy Strengthens
From free hand pouches at Coach Inc. to discounts on flat-screen televisions at Gome Electrical Appliances Holding Ltd., retailers are dangling promotions to lure Chinese shoppers during next week’s Lunar New Year holiday.
The offers combined with an improving economic outlook in the world’s second-largest economy are set to give retail sales a boost during the biggest buying season of the year. China’s retail sales for January and February may rise 15.4 percent, the fastest pace in 13 months, according to nine economists surveyed by Bloomberg.
“Business will be better than last year,” said Ken Grant, Shanghai-based director of luxury consultancy FDKG Insight, referring to the coming holiday that celebrates the beginning of the year of the snake. “With the population getting more wealthy, it’s a time of mass spending.”
The Lunar New Year is a period when consumers splurge on everything from beauty products and jewelry to lavish family dinners. Steeper discounts, longer promotion periods and Valentine’s Day falling during this year’s festival period will help drive purchases next week, according to Barclays Plc.
The gold and jewelry sectors may be among the gainers, Barclays analyst Candy Huang said by e-mail.
Chow Tai Fook Jewellery Group Ltd., the world’s biggest jeweler by market value, has rolled out snake-design pendants, gold coins, and bars. The company’s website on online retailer T-Mall shows a joint new year and Valentine’s Day promotion that offers discounts of as much as 15 percent on some jewelry.
Gome, the nation’s second-largest electronics retailer, is cutting prices on items such as LG Electronics Inc. flat-screen television sets and luxury watches from Swatch Group AG’s Tissot brand over the holiday, according to its retail website. Customers will get a storewide 10 percent discount with every 1,000 yuan ($160) spent, according to the company.
Gome gained 1.1 percent to 94 Hong Kong cents at 1:46 p.m. in Hong Kong trading today. The benchmark Hang Seng index rose 0.2 percent.
Eating places are also rolling out incentives. Roosevelt Sky Restaurant, which overlooks the iconic Shanghai Bund, opened an extra floor in the eatery to cater to the flood of diners on Feb. 9, the meal before the Lunar New Year.
The restaurant, whose 888 yuan per person set dinner includes lobster and bird’s nest soup, said its four private rooms that seat between 10-30 people have been fully booked.
“To be honest, I was also surprised with the demand,” Neil Tang, the restaurant’s food and beverage director, said in an interview.
China’s gross domestic product rose 7.9 percent in the final three months of 2012 from a year earlier, halting a seven- quarter deceleration. The World Bank forecasts economic growth in the Asian nation will accelerate to 8.4 percent this year, more than four times the pace of the U.S., and versus a 0.1 percent contraction in Europe.
Next month, the Communist Party will complete the second phase of a once-a-decade power transfer that has Xi Jinping succeeding Hu Jintao as president and Li Keqiang replacing Premier Wen Jiabao.
“The new party leaders are in place, people whom the populace see as stable, trustworthy, and reliable, the Chinese feel very comfortable with their lives,” said Grant.
A pick up this year would mark a reversal from 2012, when data from China’s Ministry of Commerce showed holiday sales at the country’s main retailers and restaurants rose at the weakest pace since 2009. Sales during the week-long break last year climbed 16 percent to 470 billion yuan.
About 211 million Chinese are forecast by China Tourism Academy to travel overseas and domestically over the holiday, encouraging airports and shopping areas in other parts of the world to spruce up as well.
A Chinese passport will entitle customers to a special discount at duty-free stores in Singapore’s Changi Airport, where items including Calvin Klein perfumes and British menswear brand T.M. Lewin suits are sold.
Coach, the largest U.S. luxury handbag maker, is running a New Year promotion with China’s biggest payment provider UnionPay, under which cardholders spending a minimum sum at select boutiques in Hong Kong, Japan and the U.S. will receive a free wristlet.
This year discounts will be “longer and heavier,” said Huang. “That said, top-line will look good, but margins could be slightly worse.”
Even with the promotions, a clampdown by China on lavish gifting may damp sales of high-end luxury products, said Ka Leong Lo, a Hong Kong-based analyst at Religare Capital Markets.
China’s television watchdog has ordered all radio and television channels to cut advertisements suggesting “gift- giving,” in line with a broader push to limit corruption and excessive spending, the country’s Xinhua news service has reported. Money may flow into mid-end items priced below 10,000 yuan instead, according to Lo. Snackmaker Want Want China Holdings Ltd. may be a possible beneficiary of holiday spending on food, he said.
Overseas brands are trying to tap into the added consumption. Starbucks Corp. introduced seasonal offerings including Chestnut Macchiato and Peach Blossom Tea Latte, joining McDonald’s Corp.’s holiday menu of curly fries, red bean pies and grilled chicken sandwich.
“A lot of these brands want to make sure Chinese New Year is successful for themselves,” FDKG’s Grant said.