The luxury goods market, once booming in China, is now experiencing a significant downturn. China, which previously accounted for nearly half of the global luxury sales, has dropped to only 12% of the market. The $380 billion luxury industry saw a 2% decline in sales last year, mainly due to the loss of 50 million Chinese consumers. This shift is attributed to a post-COVID economic and psychological crisis, particularly among the youth. With youth unemployment surpassing 20%, many young people are prioritizing experiences over material possessions.
In addition, the rise of local Chinese luxury brands has intensified competition. A wave of nationalism has made consumers more inclined to buy domestic products. For instance, Atelier Wen, a Chinese watch company founded by two French people, is gaining popularity with its affordable, high-quality timepieces.
Traditional European giants like LVMH and Richemont have suffered as a result, with their stock values falling over 20% last year. The only exceptions seem to be ultra-high-end brands like Hermès or those that tailor their marketing to the local culture and language. The shift highlights the luxury industry’s over-reliance on China and the necessity to adapt to changing consumer values and local competition.
Vocabulary:
• promised land (noun): A metaphor for a place full of opportunities and success. In this context, China used to be full of potential for luxury brands.
• psychological (adj): Related to the mind and emotions. Refers to how young Chinese consumers' mental state affected their spending habits.
• nationalism (noun): Strong loyalty to one’s country. It influences Chinese consumers to prefer local brands.
• gear toward (phrasal verb): To design something for a specific purpose or audience. Luxury brands now target Chinese preferences.
• quiet luxury (noun): Discreet, subtle luxury as opposed to flashy brands. Brands like Hermès represent this style.
• account for (phrasal verb): To make up or represent a certain portion. China used to account for 50% of luxury sales.
• sapphire (noun): A precious blue gemstone. Here it describes a luxury watch’s material.
• supercars (noun): Extremely fast and expensive luxury sports cars.
• booming (adj): Rapidly growing or successful. Refers to the past success of luxury in China.
Source: CNBC