Luxury brands reducing prices in China

Luxury retailers are feeling a sting in the Chinese market and for the first time, a negative trend of sales growth has left many luxury brands no choice but to drop prices.

According to consulting firm Bain & Company's 2014 China Luxury Market Study, the country's luxury market shrank by 1% in 2014 compared with the previous year.

In March, Chanel announced that it was reducing its prices in shops on the Chinese mainland by 20%. Cartier announced on Friday that the prices of its watches in Hong Kong will be dropped by 5%. Before this, fellow watch makers Patek Philippe and TAG Heuer dropped their prices by 18% and 13% respectively.

But while the luxury market in China may be going through a tough time, the passion of the country's consumers for luxury goods continues. According to a Fortune Character Institute report on the Chinese luxury industry in 2014, 46% of the world's luxury goods were consumed by Chinese people... but 76 percent of this spending took place abroad.

This is reflected by the findings of Bain and Co., who report a huge increase in purchases by overseas personal shoppers who buy luxury goods to send to Chinese customers, known as "daigou" in China. The market is now worth an estimated value of 55 to 75 billion yuan in 2014- nearly 50% of the store sales in China. High on the shopping lists of many consumers were cosmetics, followed by leather goods, watches and jewellery.