[Authors: Riccardo Lora & Louis Hu, advisor : Luisa Qiu]
China’s luxury market has evolved rapidly, establishing itself as a key player in the global high-end retail scene. Today, China represents nearly 35% of all luxury purchases worldwide, and some forecasts suggest it could dominate the market by 2025, potentially reaching 40% of global sales by 2030. Major brands like Louis Vuitton and Chanel have heavily invested in China, aiming to capture the interest of a large consumer base with a taste for premium goods and exclusive experiences. However, recent shifts have challenged this growth. The government’s push to limit public displays of wealth, along with an economic slowdown linked to the real estate crisis, has led to more cautious spending habits among consumers. At the same time, younger shoppers are gravitating towards local brands that better reflect their own culture and values. As a result, China’s luxury market is seeing a downturn, marking a change from its previous strong growth path.
A significant challenge facing China’s luxury market is the economic slowdown, worsened by a real estate crisis and the lingering economic impacts of the pandemic. Real estate has driven China’s economic growth for years and provided a reliable wealth-building path for millions. However, with debt-laden developers, unfinished projects, and declining property values, the sector faces a crisis that is shaking consumer confidence. Many Chinese consumers have seen their investments in real estate going from the symbol of financial security to something that, like every other investment, has its ups and downs, with the tanking and downturn of the property value leading to greater financial caution and less willingness to splurge on high-end goods. The real estate crisis became particularly acute around 2021, when major developers like Evergrande defaulted on debts, exacerbating the problem. The pandemic, which began in 2020, has only added fuel to this cautious mindset. Despite China’s quick recovery in some sectors by 2021 and 2022, other areas have struggled, with supply chain disruptions, fluctuating job markets, and a dip in consumer spending affecting economic stability. As a result, even the fiercest high-end customers are reconsidering their spending habits, viewing luxury purchases as less of a priority amid economic uncertainty.
Another factor reshaping China’s luxury market is the shift in preferences among younger Chinese consumers, who are increasingly drawn to domestic brands. In recent years, a new sense of pride in Chinese craftsmanship and culture has emerged, with younger consumers seeking out homegrown brands that reflect their identity and values. Reports from People CN and Baidu highlight this trend, showing that today’s young Chinese shoppers are more likely to consider domestic products than they were a decade ago. For many consumers, choosing local brands isn’t just about price; it’s more about connection. They see domestic brands as more attuned to their tastes, lifestyle, and cultural heritage, and they appreciate the emphasis on quality and unique design that many local brands now offer. This shift presents a challenge for international luxury brands, which must now compete not only on prestige but also on relevance and authenticity; otherwise, they’re doomed to further enhance their negative trend.
Finally, the Chinese government’s recent efforts to discourage public displays of luxury on social media are reshaping the luxury market in China. By targeting influencer accounts that showcase lavish lifestyles and limiting content that promotes wealth, authorities are steering society toward values like modesty and social responsibility. Several influences have been banned as part of this initiative: Wang Hongquanxing lost access to his Douying account, where he showcased designer outfits, luxury travel, and jade collections. Sister Albalone, known for videos of her opulent mansion and lavish jewelry, saw her conten removed from platforms like Douyin and Bilibili. Young Master, famous for test-driving Roll-Royces and showcasing rare luxury items, also had his accounts blocked. This shift is forcing luxury brands, which have long depended on influencers (or KOLs) to create buzz and maintain visibility on popular platforms like Weibo and Xiaohongshu, to adapt. With fewer glamorous posts reaching consumers, brands now face the challenge of keeping their products desirable and relevant, especially among younger people who are used to seeing these luxury items promoted online. As a result, many brands are rethinking their messaging, moving away from flashy displays of wealth and focusing instead on themes of craftsmanship, heritage, and elegance that feel more refined and timeless.
So, what are the predictions for the future? The Chinese growth depends on navigating a range of political, economic, and social factors. Slower economic growth, real estate challenges, and a rising interest in domestic brands—especially among younger consumers—could all affect the pace of expansion. To succeed, economists and brand advisors say that international brands will need to adapt by embracing digital platforms and e-commerce that resonate with Chinese consumers while crafting strategies that align with local values like sustainability and authenticity. Achieving sustainable growth in this market will require brands to remain agile, carefully balancing their approach in a complex and evolving environment.
In conclusion, China’s luxury market, once a driving force of global growth, is undergoing significant transformation. Economic challenges, including the real estate crisis and lingering pandemic effects, have dampened consumer confidence and shifted spending patterns. Meanwhile, a growing preference for domestic brands, especially among younger consumers, is reshaping the competitive landscape. Additionally, the Chinese government’s push for modesty and social responsibility is forcing luxury brands to adapt their marketing strategies. To maintain relevance and continue their growth in this evolving market, international brands must embrace authenticity, sustainability, and local cultural values while navigating the complex political and economic environment.
SOURCES:
2023 China Luxury Goods market: A year of recovery and transition. (2024, March 8). Bain. https://www.bain.com/insights/2023-china-luxury-goods-market/
China’s real estate sector: Managing the Medium-Term Slowdown. (2024, February 2). IMF. https://www.imf.org/en/News/Articles/2024/02/02/cf-chinas-real-estate-sector-managing-the-medium-term-slowdown
What’s led to China’s property-market woes and what does that mean for the world? (2024, September 10). World Economic Forum. https://www.weforum.org/stories/2023/09/china-real-estate-slump/
Reuters. (2024, November 13). Global luxury sales fall 2% in 2024, among weakest years on record, Bain says. Retrieved from https://www.reuters.com/business/retail-consumer/global-luxury-sales-fall-2-2024-among-weakest-years-record-bain-says-2024-11-13/
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