Chinese consumers were once major spenders on Western luxury brands, contributing about one-third of global expenditure and generating billions of USD for conglomerates like LVMH and Hermes. However, recent consumer belt-tightening has forced these brands to re-evaluate their strategies in the country.
Louis Vuitton has closed five stores in mainland China over the past two years. Galeries Lafayette also ceased operations of its flagship store in Beijing last May.
"Before, people used to compare who spent more money. But now they compare who got a good deal, spending less," Yuan, a 24-year-old dance teacher, told AFP. She chooses to shop at Super Zhuanzhuan, a store in central Shanghai displaying many secondhand luxury handbags, belts, and jewelry.
According to consulting firm Bain & Company, after a significant 19% decline in 2024, the personal luxury market in mainland China continued to shrink by 3-5% last year.
LVMH recently attributed a drop in its fashion and leather goods revenue to "slowing demand in China". Competitors in the industry are also expected to report similar results.
Bain & Company data further indicates that the secondhand luxury market in the world's second-largest economy grew substantially, by 15-20% last year. Chinese consulting firm Insight & Info Consulting estimates this market will reach 38,4 billion yuan (5,7 billion USD) by 2025, on track to surpass 100 billion yuan by 2030.
At Super Zhuanzhuan, shoppers wear black gloves to prevent finger oils from touching the products. Phoebe Ma, 24, notes that when her mother and her generation were young, China "was not as developed as it is now", and people knew only a few luxury brands.
"This formed the view that Louis Vuitton is the best and most reputable brand," she explained, adding that she finds "LV's monogram outdated". Phoebe Ma revealed that younger generations, like Gen Z, prefer to buy trendier Korean brands.
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Shoppers at a secondhand luxury store in Shanghai. Photo: AFP |
Chen Luo, head of China consumer research at Bank of America, stated that buyers are moving away from the notion that luxury is tied to social status. Instead, they are gravitating towards "personal identity, differentiation, experience, quality, emotional value, and cultural relevance".
"Additionally, China's retail market is heavily dominated by digital technology and social media. The digital ecosystem here is also unique. Foreign brands need to work hard to continue attracting consumers in this context," Luo said.
Increasing cultural and legal conflicts also pose difficulties for Western brands. LVMH recently won a lawsuit against the Chinese beverage chain Molly Tea for copyright infringement related to a four-petal symbol resembling the conglomerate's monogram pattern.
However, the lawsuit sparked a wave of backlash in China after internet users and state media pointed out that the monogram pattern shares origins with ancient Chinese motifs.
"Molly Tea might be doing well in China, but its global popularity is far less than Louis Vuitton. I think some people also feel this lawsuit is inappropriate," Echo Wang, 31, told AFP. LVMH leadership also acknowledged that the wave of controversy had a "negative impact" on them.
Analysts emphasize Beijing's essential role in the global luxury industry. "China remains an important market, though it may not be a growth driver in the next two to three years," Luo said.
Luxury spending typically recovers in sync with the economy. "The wealthy class will be among the first to benefit from the recovery process," he concluded.
Ha Thu (according to AFP)
