China’s aspiring luxury buyers may be the key to combating the slump in luxury sales from 2025 onwards.
These consumers, once the core of growth, are now being sold by brands with big-ticket sales through groundbreaking events, lavish dinners, and exclusive personal shopping experiences in an ever-expanding range of VIP lounges. It seemed to be ignored in the post-COVID-19 luxury goods boom that was prioritized.
With China’s GDP growth expected to be just under 5% in 2024 and the property market continuing to suffer from structural value declines, shoppers are looking to get more bang for their buck.
“As for the Chinese economy, we expect consumption to gradually decelerate due to slower income growth, and investment sentiment will remain cautious given the uncertain backdrop,” Natixis said in a recent report.
With recent policy efforts to rebuild the economy more aggressively, Morgan Stanley expects China’s fiscal deficit to exceed the implicit budget ceiling of 3% in 2025.
The change in consumer mindset quickly spills over into the luxury goods and fashion sectors, with consumers looking for assurance of value over fashionable indulgence.
“You might want to own a bag as an investment, but psychologically it’s a different process,” says Jonathan Siboni, founder of data intelligence firm Luxurynsight. “The reason why I want to buy leather goods from Louis Vuitton is because it is the core of Louis Vuitton, the origin of Louis Vuitton, something that I can feel secure about, and because it has been around for 100 years, it retains its value.” Because it drips.”
Fashion influencer Tao Liang, known professionally as Mr. Bag, agreed. “With repeated price hikes, many people feel that big brands have abandoned China’s middle class.Chinese consumers are paying more attention to the value-for-money ratio than ever before,” he said. Ta.
“They save up their money and buy the most expensive bags, like the Hermès BKC (Birkin, Kelly, Constance) because they have a very stable value on the second-hand market, or the Longchamp or Ralph Lauren. “Some people choose styles that cost less than RMB 10,000 (approximately $1,370),” he added.
Mr. Bag with 2 China Exclusive Ralph Lauren Jumbo Polo ID Bags.
Courtesy of Mr. Bugs
Essentially, brands that respond to change by quickly and successfully repositioning their prices and products are more likely to return to growth than those that cling to unrealistically high price points.
Burberry is one of the first companies in the No. 2 ranking to abandon unattainable prices and product mixes targeting the 1%. Instead, the brand’s new chief executive, Joshua Schulman, has introduced a new strategy that emphasizes Burberry’s core strength as an authority in the outerwear category.
With a dedicated campaign featuring a smiling Olivia Colman and a series of themed global pop-ups throughout the holiday season inspired by the spirit of British parks, Chinese consumers are once again shopping with Burberry, offering products from 250 I’m picking up a wool scarf with the price logo on it. lbs., and a down jacket costs just over 1,000 lbs.
HSBC sees this as a promising move and recently upgraded Burberry from hold to buy, believing Schulman’s strategy will help turn the brand around in the medium to long term.
“We believe it is unlikely that there will be a profit in 2025, and as Burberry implements a reset, operating margins may be substandard in 2026 as well.On the bright side, short-term profits may “If not, we believe a significant reset will ensure healthier sales growth in FY24-26 and beyond, resulting in higher margins,” HSBC said.
As Chinese shoppers continue to lower prices, their definition of aspirational luxury is also evolving. A handful of Chinese designer brands have seized the “back-to-basics” moment, even stealing market share from the likes of Burberry and Coach.
Bernstein said some notable success stories include Songmont, an affordable luxury handbag brand, and Lao Pu, a Chinese-inspired jewelry brand focused on 24-karat gold.
“[Songmont’s]subdued aesthetic resonates with the zeitgeist of quiet luxury, while its attractive price and quality make it an attractive choice, especially at a time when soft luxury prices are soaring. It stands out,” Bernstein said.
Bag from Songmont’s Spring 2025 collection.
Courtesy of Sonmont
Galeries Lafayette has seen an increase in the sell-through of Chinese brands and is dedicating a significant portion of its Open to Buy budget to ” The company is allocating it to “brands with roots in China.”
With stores in Beijing, Shanghai and Shenzhen, Galeries Lafayette, with its “infinite retail” strategy, is also growing in the “comfort shopping” category.
“Luxury and high-end brands were a little surprised at first to see Jellycat, Teddy Tales and Fugglers next door, but now they’re seeing traffic come back and they’re connecting with their customers again. I like it because it’s a good thing,” Molyneaux explained.
Looking ahead to 2025, the retailer aims to bring Galeries Lafayette Gourmet to the Chinese market.
Retailers are trying to lure shoppers with experiences and hospitality, but the prices of luxury goods are turning shoppers away.
In a separate report, HSBC said most brands were raising prices too quickly, with a few exceptions such as Louis Vuitton, Hermès, Moncler and Loro Piana.
“It’s clear that Dior, Saint Laurent, Burberry, Cartier and many other companies stand to benefit from rebuilding their foothold on which motivated consumers who have been priced out will come back,” the bank said. did.
HSBC said that while Chinese consumers still have an appetite for brands, the atmosphere seems to be quite bad, with consumers abandoning high-end shopping malls and waiting for better days.
“The combination of product initiatives, more favorable margins, and, importantly, the recent large-scale economic stimulus package announced on September 24, 2024, could begin to rebuild some confidence going forward. I hope so,” he added.
Rising prices are impacting the luxury customer base, which has declined by 400 million to 50 million people over the past two years, especially among Gen Z, according to Altagamma Bain’s latest Luxury Market Report. Purchases of discretionary items have also been reduced. .
Bain also believes brands need to fix the broken price-value relationship.
“Ultimately, it’s up to luxury companies to choose carefully and intentionally which of these trade-offs they choose, for example, whether to focus on their top customers, as they have done in the past few years. Federica Levato, Partner and Head of EMEA Fashion & Luxury at Bain & Company, said:
An image of Chanel’s Guangzhou Taikou salon shared by a Chinese netizen on Xiaohongshu.
Xiao Hongsho
In addition to changing brand tastes, China’s luxury shopping malls need to adapt to a new reality where everyone wants to be a VIP, Siboni said.
An emerging trend in recent years is that major brands such as Chanel, Vuitton, Dior and Cartier are occupying additional space in prime shopping malls to entertain big spenders.
“VIP rooms are not meant to be discreet, they’re meant to say, ‘We offer you an additional service.’ “But the service that Chinese shoppers are experiencing in Japan is so good that there is no need to open a VIP room,” Siboni explained.
He believes China’s luxury environment needs to be reshaped in a way that creates excitement and better serves not only high spenders but also aspiring shoppers.
