Chinese consumers were once the crown jewel of customers for luxury brands. But fashion houses like LVMH and Kering have fallen out of favor with the country’s wealthy elite.
Just a few years ago, China was the darling of luxe spending; from 2017 to 2021, the luxury market in the country tripled in size. Shoppers were obsessed with conspicuous consumption, and China became the new focus for fashion conglomerates hoping to revel in that growth. But then the COVID-19 pandemic struck, and the country went into lockdown. At the time, the majority of luxury goods purchased by Chinese shoppers were picked up in travel hotspots like Paris, London, and New York. When in-person shopping and jet-setting came to a halt, retail giants like LVMH and Kering brought business inside the country. It proved to be a crippling business mistake.
These fashion titans believed the Chinese luxury boom would only propel upward, but tension among consumers was simmering under the surface. Buyers were financially stretched thin and having a change of heart in terms of how they spent their money. The new Louis Vuitton bag or flashy Versace dress was no longer as appealing—they wanted to be more practical and invest for the long run. The shift to a more practical mentality bludgeoned luxury houses.
The big fashion brands’ earnings reports in recent years showed how changing Chinese tastes have impacted the industry. The share prices of luxury brands tanked in 2024—Kering plummeted 39.4%, Burberry fell 30%, LVMH dropped 13%, and Moncler dipped 7.8% last year alone. LVMH reported its worst company performance since the global financial crisis.
Chinese consumers have turned their backs on upscale fashion for a few reasons. A large part of this has to do with the country’s economic slowdown following the pandemic; housing and employment slumps tend to reduce flashy purchases, even if the wealthy aren’t hurting. Wealthy Chinese consumers also shifted perspective, preferring to invest their money in high-end property or experiences instead of the latest fashions.
Brands broke promises
Over the past two years, 50 million consumers have fled the luxury market. Brands aren’t keeping their promises with consumers: they’re charging more for the same products.
“Since 2019, there’s been a high price increase across luxury without a corresponding increase in innovation, service, quality, or appeal that a luxury brand should provide,” Marie Driscoll, an equity analyst focused on luxury retail, told Fortune. “This year, that really hit consumers, and we felt the full impact.”
