China‘s aspirational luxury shoppers might be the key to tackling luxury’s slumping sales in 2025 and beyond.
Once a core source of growth, these consumers seemed to be overlooked in the post-COVID-19 luxury boom when many brands prioritized big-ticket item sales with landmark events, lavish dinners and exclusive personal shopping experiences at ever-expanding VIP lounges.
With China’s 2024 GDP growth likely to come in just shy of 5 percent, and the property market continuing to suffer from a structural decrease in value, shoppers are looking to get more bang for their buck.
“On the Chinese economy, we expect a gradual slowdown in consumption due to decelerating income growth, and the investment sentiment will remain cautious against the uncertain backdrop,” wrote Natixis in a recent report.
With recent policy efforts to turn around the economy more actively, Morgan Stanley expects China’s fiscal deficit to break its implicit budget cap of 3 percent for 2025.
The shifting consumer mindset has quickly trickled down to the luxury and fashion sector, where consumers are seeking value assurance over fashionable pleasures.
“I may want to have a bag as an investment, which is a different process psychologically,” said Jonathan Siboni, founder of the data intelligence company Luxurynsight. “I may say I want to buy leather goods at Louis Vuitton because that’s their core, that’s where they come from, it’s reassuring, it’s going to keep the value because they’ve been doing it for 100 years.”
Fashion influencer Tao Liang, professionally known as Mr. Bags, agreed. “With rounds of price hikes, many feel that big brands have abandoned the Chinese middle class. More than ever, Chinese consumers are looking at the cost-performance ratio,” he said.
“They either save money to buy the most expensive bags, such as the BKCs [Birkin, Kelly, Constance] from Hermès, since they have very stable value in the secondhand market. Or they go for some styles that are under 10,000 renminbi [about $1,370], such as Longchamp and Ralph Lauren,” he added.
Mr. Bags with two China Exclusive Ralph Lauren Jumbo Polo ID bags.
Courtesy of Mr.Bags
In essence, those brands that respond to the shift with successful, swift price and product restructurings are more likely to return to growth than those that stick to unrealistically high price points.
Burberry is among the first in the second-tier rank to abandon the unattainable price and product mix that’s targeted at the 1 percent. Instead, the brand’s new chief executive officer Joshua Schulman has introduced a new strategy that emphasizes Burberry’s core strength of being 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 have been shopping at Burberry again, picking up logo wool scarves with prices starting from 250 pounds, and puffer jackets just above 1,000 pounds.
HSBC sees it as a promising move and recently upgraded Burberry from hold to buy as they believe Schulman’s strategy will help the brand turn around in the mid- to long term.
“We believe the fiscal year 2025 is unlikely to be profitable and that the fiscal year 2026 may also generate sub-par operating margin as Burberry implements a reset. On the bright side and in the absence of short-term profits, we believe a steep reset should ensure much healthier top-line growth beyond the FY24-26 period and, consequently, a rising margin,” said HSBC.
As Chinese shoppers continue to trade down, the definition of aspirational luxury is also evolving. A handful of Chinese designer brands has captured the “back to basics” moment and even taken market share from the likes of Burberry and Coach.
According to Bernstein, several success stories are notable, including Songmont, the accessible luxury handbag brand, and Lao Pu, a Chinese-style jewelry label focused on 24-karat gold.
“[Songmont’s] subdued aesthetic resonates with a quiet luxury zeitgeist, while its compelling prices and quality make it stand out — especially at a time when soft luxury prices have escalated,” said Bernstein.
A bag from Songmont’s spring 2025 collection.
Courtesy of Songmont
Seeing rising sell-through of Chinese brands, Galeries Lafayette has been allocating a fair share of its open-to-buy budget to “brands with Chinese roots,” according to Nicolas Morineaux, CEO of the Parisian department store’s China operations.
Under its “boundless retail” strategy, Galeries Lafayette, which has stores in Beijing, Shanghai and Shenzhen, is also finding growth in the “comfort shopping” segment.
“Premium and luxury brands were a bit surprised at the beginning to see Jellycat, Teddy Tails, and Fuggler next to them, but now they love it because traffic is coming back and they realize that they are reconnecting with the clients,” explained Morineaux.
For 2025, the retailer is looking to bring Galeries Lafayette Gourmet to the Chinese market.
With retailers determined to lure shoppers with experience and hospitality, luxury prices are turning them away.
In another report, HSBC pointed out that most brands have increased prices too much, too quickly, with very few exceptions such as Louis Vuitton, Hermès, Moncler and Loro Piana.
“It is clear to us that Dior, Saint Laurent, Burberry, Cartier, and many more would benefit from rebuilding a stepping stone for the aspirational consumer to come back after having been priced out,” the bank contended.
HSBC said Chinese consumers still have an appetite for the brands, but the mood seems quite poor and consumers have abandoned high-end malls, waiting for a better day.
“Hopefully, a combination of product initiatives, more favorable comps, and, importantly, the recent big stimulus measures announced on 24 September 2024 can begin to rebuild some future confidence,” it added.
According to the latest Altagamma-Bain luxury market report, the elevation of prices is impacting the luxury customer base, which is shrinking by 50 million from 400 million over the last two years, in particular Gen Z, and which is cutting back on discretionary items.
Bain also believes brands should fix the broken price-value equation.
“In the end, it’s in the hands of the luxury players and brands to choose, deliberately and intentionally, which of these tradeoffs to choose, whether, for example, to focus on their top customers, like they have done in the last couple of years, or to broaden to a global and broad customer base, or to base their offer on iconic pieces versus innovation,” said Federica Levato, partner at Bain & Company and leader of the firm’s EMEA Fashion & Luxury practice.
An image of Chanel’s Taikoo Guangzhou salon shared by a Chinese netizen on Xiaohongshu.
Xiaohongshu
On top of shifting brand preferences, luxury shopping malls in China need to adapt to new realities where everyone wants to be a VIP, according to Siboni.
An emerging trend in the past few years has been that anchor brands like Chanel, Vuitton, Dior and Cartier are taking up additional space in prime shopping malls to entertain big spenders.
“The VIP room is not meant to be discreet, but it’s meant to say, ‘we are going to provide extra services,’ because brands admit that they don’t really offer them in the market. But the service Chinese shoppers are experiencing in Japan is very good, where you don’t need to open a VIP room,” Siboni explained.
He believes that the luxury environment in China will have to be reshuffled in a way that creates excitement and also provides good service not just for top spenders, but aspirational shoppers, too.
