Editor’s Note
This article examines a subtle but significant shift in China’s luxury market. While high-end malls remain busy, consumer spending is becoming more deliberate and value-conscious. The trend reflects a broader move toward rationality, with implications for global brands.
On a weekday, Shanghai’s IFC mall remains bustling with crowds. However, a closer observation by a Shanghai Securities News reporter reveals that few customers are leaving stores with shopping bags from traditional luxury giants. This mall, home to flagship brands from the three major luxury conglomerates LVMH, Kering, and Richemont, serves as a microcosm of China’s current luxury market: surface-level heat persists, but underlying consumer behavior has changed.
Bain & Company’s latest report indicates that in 2025, China’s mainland personal luxury market contracted by 3%-5%. While this represents a significant moderation compared to the sharp decline in 2024, consumers are shifting from “brand worship” to “value scrutiny,” making more rational purchasing decisions. This trend is forcing industry adjustments. Financial reports from the giants show LVMH awaiting recovery through business restructuring; Kering enduring growing pains and seeking breakthroughs amidst leadership changes and business divestitures; and Richemont maintaining stability amidst volatility, bolstered by the resilience of its jewelry business.
According to the “2025 China Personal Luxury Market Report” jointly released by Bain & Company and the Italian Luxury Association, China’s mainland personal luxury market showed a “first suppressed, then rising” trend in 2025, with clear recovery signals emerging in the second half. The full-year decline is estimated at 3%-5%, a significant narrowing of the contraction.
Consumer sentiment has turned cautious, shifting from chasing brand halo to seeking a “high sense of value” that balances quality, uniqueness, and practicality. Experiential consumption (such as travel and wellness) continues to be popular, reflecting consumer preference for emotional and sensory satisfaction. Bruno Lannes, a senior global partner at Bain & Company, points out that Very Important Clients (VIC) remain the core market driver, while the entry of younger potential customer groups is more cautious and delayed.
Consequently, performance varies highly across different categories. Beauty and personal care became the only category with positive growth (4%-7%), driven by stable demand for high-end skincare and fragrances. Leather goods and handbags faced significant pressure (down 8%-11%), primarily due to frequent price hikes and insufficient innovation, making purchase decisions difficult for consumers. The watch category saw the largest decline (14%-17%), as its investment appeal was diverted. The jewelry category improved (decline narrowed to 0%-5%), benefiting from its value-preserving attributes and rising gold prices.
In terms of consumption patterns, domestic consumption has solidified its dominant position. In 2025, domestic consumption accounted for 65% of Chinese luxury spending, while overseas consumption dropped to 35%. The narrowing price gap, optimized duty-free policies, and enhanced domestic shopping experiences jointly drove this “repatriation” trend.
Furthermore, the channel structure of consumption is undergoing profound evolution. Daigou (personal shopping agent) activities have contracted due to factors like strengthened brand control. Meanwhile, the second-hand luxury market grew rapidly by 15%-20%, though its penetration rate remains below 10%, indicating significant potential. According to the report, increased supply, consumer focus on price, and the widespread adoption of live-streaming platforms jointly drive the expansion of the second-hand market.
The continued rise of Chinese domestic brands is also a highlight. Brands like Lao Feng Xiang are gaining market share through culturally relevant product design, digital and interactive consumer strategies, and competitive pricing supported by local investment and supply chains.
The report notes that in a low-growth environment, competition is intensifying, the gap between leading and lagging brands is widening, and consumer spending is concentrating on a few brands that can provide a perception of “real value.”
The 2025 financial reports of the three major luxury groups clearly reflect their different fates during the industry adjustment period.
LVMH, the veteran luxury giant holding brands like Louis Vuitton and Dior, reported total annual revenue of 80.807 billion euros, a year-on-year decrease of 5%. The decline in both revenue and profit undoubtedly signals a market winter. Performance across its divisions varied: revenue in the core Fashion & Leather Goods division declined, but its operating margin remained high at 35%, demonstrating the pricing resilience of top brands; the Watches & Jewelry division performed brightly, with a 32.7% quarter-on-quarter surge in Q4 and full-year organic revenue growth of +3%, reflecting the continued preference of high-net-worth clients for value-preserving categories; the Selective Retailing division, led by Sephora, became a bright spot, with recurring operating profit surging 28%.
LVMH’s adjustments follow two main lines: first, upmarketization, such as increasing its stake in the ultra-luxury cashmere-focused brand Loro Piana to 94%; second, diversification, developing sectors like beauty and selective retail to “fill gaps” and reduce over-reliance on the fashion and leather goods business. Additionally, LVMH sold its DFS Greater China business to China Duty Free Group for $395 million, optimizing its travel retail layout.
Kering faced the most significant performance pressure. In the first half of 2025, revenue was 7.587 billion euros, down 16% year-on-year, with the Asia-Pacific region (led by China) falling 22%. Revenue from its core brand Gucci dropped 26% in H1, becoming the biggest drag.
The group is fighting for survival through “multiple surgeries.” This includes a management reshuffle, selling its beauty business (including the Creed brand and beauty licenses for three brands) to L’Oréal for 4 billion euros to focus on core luxury operations; and channel optimization, with a net reduction of 41 directly operated stores globally to streamline the network.
Richemont demonstrated resilience amidst volatility. In the first nine months of 2025, sales at constant exchange rates grew 10% to 10.6 billion euros; operating profit grew 7% to 2.358 billion euros. The Chinese market returned to growth in Q2 (+7%), helping stabilize the group’s overall business. The performance pillar lies in its jewelry business, where sales of its four major brands (Cartier, Van Cleef & Arpels, etc.) grew 14% at constant exchange rates, with the operating margin remaining high at 32.8%, aligning with the current demand for “high value.” In contrast, its Specialist Watchmakers division remained under pressure.
Richemont’s strategy is clear: strengthen its core jewelry advantage, consolidate its leadership through product innovation (e.g., new collection launches) and network optimization (boutique expansion and upgrades); while controlling costs to cope with raw material and tariff pressures.
The Bain report predicts that despite ongoing volatility and uncertainty, China’s personal luxury market will achieve moderate growth in 2026, maintaining its status as the cornerstone of global luxury market growth. With the continuous expansion of the middle-income group, rising consumer confidence, and favorable policies, more luxury consumption is expected to repatriate to the Chinese mainland market. However, the extent of growth will still highly depend on specific product categories and brands.
The Bain report points out that in the future, brand differentiation will intensify, with “real sense of value” becoming the key to success. The game between domestic and international brands has entered a new stage. Domestic brands are breaking through from niche segments and gradually expanding their share through unique original strategies that deeply integrate Chinese elements into products; international brands are also more actively promoting cross-cultural cooperation to connect with Chinese consumers emotionally. Competition between the two sides will extend from the product level alone to a comprehensive contest encompassing cultural narrative, customer relationships, and supply chain efficiency.
Furthermore, the domestic second-hand luxury market is expected to become another pillar alongside the primary market, further maturing China’s luxury ecosystem. Official brand participation in the second-hand market or certified resale may become a new trend.
Looking at the industry giants, corporate strategies may further diverge. LVMH may continue to expand its brand portfolio through M&A and internal incubation to diversify risks. Group CEO Bernard Arnault stated he would remain cautious about 2026. It remains to be seen whether Kering can focus on revitalizing its core brands after business divestitures and a CEO change. Richemont may further strengthen its jewelry advantage and explore extensions within the hard luxury ecosystem.
Despite persistent macroeconomic challenges, China’s position as the cornerstone of global luxury growth remains unchanged. What has changed is the growth logic: shifting from “scale expansion” to “value deepening,” and from “symbolic consumption” to “meaningful consumption.” In this new cycle of rising rationality, brands that can truly understand and meet the deep-seated needs of Chinese consumers, whether from overseas or domestic, are poised to seize new opportunities in breaking through the current challenges.