![Image courtesy of Armarium; the future of luxury retail will focus on more efficient stores](https://americanmarketer.com/wp-content/uploads/2016/09/Armarium-465.png)
Despite China’s continued position as the top spender for luxury goods, brands should consider scaling back their store footprint in the market, according to a new report from Boston Consulting Group. In the changing luxury market, the retail expansion that drove 60 percent of the growth in previous years will be replaced by organic growth, which will now account for 70 percent of the market’s development. With consumers slowing their purchases of hard luxury in favor of experiences, BCG advises a revamped bricks-and-mortar strategy that optimizes efficiency of square footage.
"Chinese luxury consumption grew dramatically in the last decade. Now one out of three luxury items in the world is bought by a Chinese national," said Olivier Abtan, a partner and managing director in BCG’s Paris office and the global leader of the firm’s luxury topic area. "In this environment, developing presence, for example stores in China, has been key to serve Chinese consumers and grow share.
"Luxury brands who have been early in developing stores in China, have been the winners in terms of share of Chinese consumption," he said. "In 2016, we have seen consumption in mainland China grow significantly, due to foreign exchange market effects and the willingness of the government to repatriate consumption in China."
Revised strategy BCG’s "Metroluxe: Countering Complexity in the Business of Luxury” compares its Metroluxe Index of the luxury potential in the most affluent global cities with the Bernstein Proprietary Luxury Store Count database, which uses public information to assess a brand’s number of stores in a particular city. When compiled, these data sources reveal that many Chinese cities are oversaturated, with a store count that is not backed by their potential. With Chinese spending slowing, the firm suggests scaling back the number of stores in the country, particularly in second tier cities such as Chengdu and Tianjin.![BCG Metroluxe graph](https://americanmarketer.com/wp-content/uploads/2017/01/BCG-Metroluxe-graph.jpg)
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"In mature markets, such as selected cities in the US and Europe, there is a potential for new luxury stores," Mr. Abtan said. "Especially in tier-2 U.S. cities. Yet, development has to be thought as an omnichannel development, combining physical presence and digital/ecommerce capabilities.
"Indeed, luxury ecommerce will grow at more than 15 percent per year in the years to come," he said. "With the cost of rent increasing for top locations, the role of a physical luxury store will have to change. It must become an experience place, where brands make their clients dream and where brands convey the right luxury messages to clients while transactions will happen both online and offline."