China and Luxury: A Market in Transition, Not Decline

In recent months, numerous luxury brands have reported subdued sales growth within China, sparking concerns over whether the nation’s appetite for European luxury goods is fading. This perceived slowdown has even led some investors to question the wisdom of continued investment in both the Chinese market and its consumers. Such sentiments have been echoed in industry discussions, with outlets like Fashion Network highlighting fears of diminishing demand. But is the reality truly as bleak as it appears?

Jacques Roizen of DLG argues that focusing solely on domestic revenues fails to capture the bigger picture. The evolving behaviour of Chinese luxury consumers tells a more nuanced story. During the pandemic, travel restrictions redirected luxury spending towards domestic markets, creating an artificial “boom” within China. However, this surge masked a deeper trend: historically, the majority of Chinese luxury spending has occurred abroad, with two-thirds of purchases made internationally.

Now, with international travel resuming, Chinese consumers are once again redistributing their luxury spending across global markets. While in-country sales may appear weaker, this shift is far from a decline. Data from Global Blue illustrates this point, showing that from September 2023 to August 2024, annual duty-free luxury spending by tourists exceeded €70 billion — an extraordinary 168% above pre-pandemic levels. Among these shoppers, Chinese consumers led the pack, accounting for 25% of global luxury spending.

At the same time, Chinese consumers are becoming increasingly discerning. They are shifting their focus towards quality and value, replacing impulsive buying patterns with a more measured approach. Economic uncertainties and significant price increases by some luxury brands have played a role in this trend, but the fundamental demand for luxury goods remains strong. It is the expression of this demand that is evolving.

For brands and investors, the key takeaway is clear: China remains a cornerstone of the global luxury market. However, success now requires a broader, more global strategy. Brands must adapt their approach, recognising that Chinese consumers are driving growth not just within China but across international markets.

To seize this opportunity, brands must invest in initiatives that resonate with Chinese consumers wherever they shop. This includes developing robust customer relationship management strategies that foster engagement and loyalty on a global scale. Equally critical is rethinking pricing strategies to eliminate disparities that could deter consumers. Finally, offering tailored services and exclusive experiences abroad can help brands capture the loyalty of Chinese tourists in key luxury destinations.

Rather than interpreting current trends as a decline, they should be viewed as part of a broader transformation. The Chinese luxury market is not slowing down; it is transitioning. With the right approach, brands can position themselves to thrive in this new era. The question is not whether to invest in China, but how to engage the enduring global power of Chinese consumers.