(Beijing) –Sipping a cup of Pu'er tea while watching white-gloved clerks wrap a newly purchased handbag has become something of an indispensable experience for today's luxury store shoppers in China.

But tea and other in-store perks are losing their luster as competition from online retail platforms eats into brick-and-mortar sales of luxury goods.

E-commerce is dramatically changing the face of upscale shopping in China, which, according to market tracker Fortune Character Institute, was the world's largest market for luxury consumer products in 2013. Chinese buyers spent US$ 106 billion on luxury products in 2014, an amount equal to 46 percent of the global total, according to the Forward Business and Intelligence Co., a Shenzhen-based market analysis firm.

More shoppers than ever are buying Hermes clutches and Christian Dior makeup by simply clicking a mouse at a time when demand for luxury goods in China and around the world is cooling down. That's a one-two punch that has retail stores reeling.

An October report by the U.S. consultancy Bain & Co., which surveys the global luxury market every year, predicted the US$ 275 billion industry would end 2015 with a mere 2 percent growth in overall sales, down from 3 percent in 2014 and the most meager expansion since 2008.

In China alone, Bain said, the market for luxury products was expected to grow just 10 percent in 2015, down from 13 percent in 2013.

Responding to the changing environment are some of the sector's most prestigious players. Prada and Louis Vuitton's parent LVMH are some of the big names that scaled back shipments to retail stores in the country last year, according to Bain.

Fortune Character said companies selling 83 percent of all high-end brands available in china downsized their storefronts last year. That percentage will likely to rise to 95 percent in 2016, the institute predicted.

In addition to e-commerce competition, Fortune Character said, stores are feeling the heat of the cooling economy, an increasing numbers of shoppers who buy upscale brands directly from overseas retailers through the Internet and while traveling abroad and the government's three-year-old campaign against official gift-giving. Tax policies are also affecting shopper habits.

As a result, according to company reports, Louis Vuitton closed seven stores in the country last year, following previous shutdowns by Prada and Hugo Boss. Also last year, Burberry downsized its flagship store in Hong Kong.

Click and Buy

Meanwhile, luxury brand companies are reaching more Chinese customers through the Internet. Hermes and Cartier are two of many companies now connecting to shoppers through websites. Sources told Caixin that Chanel recently opened an e-commerce business department at its China office, in hopes of finding new Internet channels to build sales.

Burberry opened a shop on Alibaba Group Holding Ltd.'s website Tmall.com in 2014, and the following year Chanel launched sales of its Coco Crush jewelry on the website Net-a-Porter. Cartier, Christian Dior and Hermes are also on the Web, with the latter launching a men's clothing, shoes and accessories website in September.

A 2015 report by the consultancy McKinsey & Co. said worldwide online sales of luxury products grew at an annual rate of 27 percent between 2009 and 2014 – about four times the sales growth rate for luxury-brand stores.

Worldwide, the report said, luxury shoppers in 2014 spent US$ 15.5 billion on products obtained through e-commerce platforms – an amount equal to 6 percent of global luxury spending. That figure was expected to top US$ 77 billion, or 28 percent, by 2025.

"All luxury brand companies know that e-commerce is inevitably the best way for future growth among the next generation of consumers," said Liu Xiao, director of the North China division at Meilishuo.com, an online fashion clothing retailer whose majority stakeholder is the social networking giant Tencent Holdings Ltd. "Everyone is finding a way."

Meanwhile, Liu said, most makers of luxury goods are approaching the e-commerce arena with caution. Some argue, for example, that they will always need stores to serve wealthy buyers of high-end clothes.

"Normally, shoes, scarves and other accessories are more proper for online shopping," she said. "But high-quality clothing requires a shopping experience that's not easy to get online."

Long Yu, a member of the board of directors at Coach Inc., a maker of handbags, said companies such as his think very carefully before giving any e-commerce retailer permission to sell products. Their caution is rooted in an intense desire to protect the value of every brand.

One employee of a firm in the luxury goods industry who asked not to be named said sales through any website that reaches a mass audience may diminish a company's brand value. That's why many brands are sold only through tightly controlled marketing networks. These networks force e-commerce providers who lack official resale authorization to acquire products through bulk dealers, and then resell at a markup.

Another concern among luxury goods manufacturers is that online sales may expose a brand to counterfeit risk. Some counterfeiting problems are more complicated than others. A person working for a luxury brand maker said that some of his online customers have abused the company's refund policy by buying a product online and later demanding a refund upon returning a knockoff version.

A person close to Burberry's China operations said that, in some months, up to 30 percent of all goods sold through the company's Tmall store were returned for refunds.

Despite the industry's fears, however, many investment firms see online as the future frontier for luxury brand sales.

Last May, the clothing and jewelry e-retailer Xiu.com said it had received a US$ 30 million investment from several firms including the Taiwanese equity investor Pacific Venture Partners and the U.S. venture capital firm Kleiner Perkins Caufield & Byers. That same month, online retailer Zhen.com said it had raised US$ 60 million.

Alibaba pumped more than US$ 100 million into the luxury shopping platform mei.com last summer, while Ping An Ventures, an investment arm of Ping An Insurance Group, led a group of investors to pour US$ 50 million into a platform called Secoo.com.

Customer Relations

Meanwhile, some marketers of international luxury goods have even done what may have been unthinkable a few years ago: They've cut prices in the country.

In early 2015 Chanel slashed prices 20 percent for its customers in the country, closing what had been a price tag gap that had forced customers to pay more than people in other major markets. Following suit with special discounts – some as high as half off – were Christian Dior, Versace, Cartier and Hermes.

A Fortune Character report said wealthy Chinese spent 20 to 30 percent more than luxury shoppers in other countries for the same brands in 2015. But that was down from nearly half in 2011.

Not all companies support price-cutting as a way to attract wealthy consumers in the country. "Large-scale price cutting hurts a luxury brand's image," said Liu.

So rather than discount, some companies have enhanced in-store perks for high-brow customers. And many are looking for new ways to balance popular perks with the power of the Internet.

Sun Yafei, CEO at the luxury e-retailer Saksfifthavenue.com, said that while it's true many companies are closing brick-and-mortar stores, they are also working to improve the shopping experience at those left standing. Some retail outlets are going so far as to offer café services and fashion shows to boost customer loyalty.

An employee of a Cartier store in Shanghai who asked not to be named said pampering shoppers is one way to build good customer relations and provide experiences that reflect a luxury brand's value in ways e-commerce cannot. "Our store can order expensive afternoon tea for customers even when they buy nothing," the employee said.

Some analysts are predicting a rebound for luxury product sales in the domestic market soon after a government decision to cut import tariffs on high-end brands.

The government also raised taxes imposed on luxury goods bought by shoppers overseas. Forward Business and Intelligence said the amount spent by the country's consumers on luxury purchases abroad and through websites in 2014 rose 9 percent from the previous year. But the amount spent in China fell 11 percent.

(Rewritten by Han Wei)