Consumer whiplash in China continues to challenge luxury

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In 2024, the luxury slowdown played a resounding role in the struggling Chinese market. But as the Year of the Snake approaches, the transition to 2025 concludes with a cautiously optimistic outlook for renewed consumer demand. Despite projections of a further decrease in spend, the lower tier of consumers (those spending less than RMB 22,499 or £2,450) continued its downward trajectory in the final quarter of the year. There was an influx of shoppers entering the higher tier, while the middle tier remained in line with that of Q3 2024. The volume of respondents spending over RMB 52,500 (£5,660) rose by 3 per cent, reaching the highest proportion (19 per cent) of high-tier spenders in the past year and placing just below the third-quarter peak of 21 per cent in 2023.

Looking ahead, consumer confidence is expected to decline in the first quarter of the year, with continued growth in the middle tier and an anticipated drop of 11 percentage points in higher-tier spending. Yet, variations in luxury market growth and consumer confidence are to be expected, as seen through contrasting trends such as post-pandemic revenge spending and conservative consumption.

Chinese shoppers are less concerned about the economy and job security than this time last year, with a 5 per cent and 2 per cent decrease, respectively. Though following the recent US election, the threat of a trade war has become increasingly tangible, causing US-China relationship concerns to rise 18 per cent year-on-year, up 8 per cent on Q3 2024. Despite this, consumer confidence remains high, defying the turbulent macroeconomic conditions affecting China’s growth.

Nonetheless, for the first time in 14 years, the Chinese government has announced a shift to a “moderately loose” monetary policy on the heels of a newly introduced stimulus package that aims to reduce mortgage rates and downpayment regulations in a move to combat fluctuations across consumer sentiment. The recent stimulus package in China has encouraged 40 per cent of those who were not previously planning on buying a home in the next year to do so. For the 34 per cent of those who were looking to buy, the stimulus has sped up this timeline, while 37 per cent are looking to purchase a more expensive property than they were previously.

This signals a new form of recovery in China’s ‘normal crisis’ era. It is uncertain whether this will be a long-term trend, but it is evident that the Chinese luxury consumer remains relatively resilient. “We expect the Chinese luxury market to remain challenging in 2025, especially in the first part of the year, as the stimulus measures could take some time before having an impact on consumer sentiment,” says Carole Madjo, head of European luxury goods research at Barclays.

Positive returns on authentic investments

Chanel remains the most-purchased luxury brand in China, followed by Dior. This quarter, Chanel purchase rates have increased 4 per cent compared to this time last year. In November, the brand marked its return to Hong Kong after 18 years with a runway show and a promotional film for its cruise 2024/25 collection. More recently, Chanel debuted its Métiers d’Art collection in Hangzhou; its first time launching the programme in China. The pre-launch short film, featuring local stars, proved popular on social media platform Weibo, gaining over nine million views and sparking wider discussion — “Chanel in Hangzhou” reached 210 million views on Weibo’s Hot Search list. This increased engagement in the final quarter of 2024 signals the maison’s ongoing investment in the Chinese market, reinforcing its commitment to consumers and positioning itself as a strong player among international luxury names.

Nearly all top 10 purchased brands have seen purchase intent rise over the past year. Fastest-riser Prada has witnessed a continued uplift of 10 percentage points in the past year. Beyond the Italian house, Hermès, Roger Vivier, Celine, Tod’s and Mulberry have each risen 5 percentage points.

Hard luxury players Cartier and Van Cleef Arpels have similarly invested in storytelling and localised brand campaigns through solo exhibitions in Shanghai. Brand strategies that feed into the wider cultural discourse to connect to the local market have consistently proven to resonate with China’s luxury audience. Respondents are relying more on brand recommendations from friends, family and colleagues, increasing from 28 per cent in Q4 2023 to 37 per cent a year later. Connecting to consumers authentically through cultural discourse on social media may bode well for attracting spend influenced by personal networks.

The responses to these new buying behaviours are mixed, however. While Chanel and various LVMH brands continue to invest heavily in the region, several OTB Group stores across Mainland China — including Maison Margiela, Jil Sander and Marni — have recently closed.

Corresponding with an increase in higher-tier spend, jewellery regained its most-purchased spot this quarter at 41 per cent. The categories that have witnessed the largest growth over the past year have been small leather goods (up 11 per cent) and casual shoes (up 9 per cent), indicating buyers’ continued demand for balancing high-priced items with more affordably priced luxury pieces.

Category shifts are also occurring on the first versus secondhand front. Since 2020, the annual growth rate of the secondhand luxury market has exceeded 30 per cent. In Q3 2024, 46 per cent of luxury consumers had purchased secondhand or vintage luxury goods, a percentage that rose to half of respondents by the final quarter of the year. Brands should consider integrating the vintage sector into China-specific strategies, as consumers — particularly those seeking accessible luxury options — are more likely to turn to secondhand platforms or overseas markets.

Quality comes to the fore

Against the backdrop of China’s weakened economy, engagement in shopping festivals appears to have dulled slightly in 2024, with 618 (which takes place each June) witnessing its first drop in e-commerce sales in eight years, according to data company Syntun. Despite this slowing enthusiasm for shopping festivals, Singles Day — one of China’s biggest — appears to be thriving. Ninety per cent of all luxury consumers surveyed purchased something for themselves or someone else during the festival in November 2024, with 43 per cent spending more than they did the previous year. Tmall reported a 46 per cent increase in year-on-year sales, while the volume of orders on Taobao increased by 50 per cent.

During the final quarter, 34 per cent of respondents spent less than RMB 4,000 (£440), 47 per cent spent between RMB 4,000 and RMB 14,999 (£1,651), while 9 per cent spent over RMB 15,000. As a category ripe for promotional activity, beauty brands tend to be the biggest beneficiaries of this spend. Skincare emerged as the most-purchased product type at 51 per cent of luxury shoppers, while 46 per cent purchased personal fragrance and 31 per cent invested in makeup. In fashion and accessories, jewellery (49 per cent), casual shoes (39 per cent) and handbags (36 per cent) led buys, with luxury brands such as Miu Miu, Zegna and Tory Burch seeing volume uplifts of more than threefold that of the previous year on JD.com.

This demand for luxury goods is further reflected in the touchpoints consumers have come to expect throughout their shopping journey. There has been a broader move away from traditional influencers — who act as entertainers as well as salespeople — as a trust crisis emerges in the market. In their place, trusted experts and brand ambassadors have come to the fore, who are able to speak to both products and their quality in detail.

The Year of the Snake chimes in early

The Year of the Snake will commence on 29 January 2025. While a Lunar New Year is usually accompanied by limited-edition product drops, the Year of the Snake could be a difficult narrative for brands to portray. Thought to be intelligent and charming, the snake can also be considered dishonest and vain.

Photo: Courtesy of Jaeger-LeCoultre

Despite this, brands seem to be leveraging new strategies — as demonstrated by the earliest and longest Singles Day period ever this year — to capture maximum consumer spend through premature campaign launches. Jaeger-LeCoultre has already launched its limited-edition Reverso watch, local brand To Summer released its Year of the Snake fragrance collection in November, followed closely by Burberry’s varied collection all in China’s lucky colour red, while footwear favourite Nike revealed its Year of the Snake design in October.

Enthusiasm for travel remains commonplace over Lunar New Year, with 90 per cent of luxury consumers expecting to do some form of travelling during the 2025 festive period. In accordance with trends favouring travel within Mainland China, 59 per cent expect to travel domestically (up 7 per cent from 2023), while 52 per cent expect to travel abroad but within Asia (up 10 per cent). The only travel not enjoying an increase is that outside of the continent, which has dropped 3 per cent to 34 per cent. “The recovery of travel in Europe is coming at a slower pace than we anticipated. However, we still expect to see some increased interest in Europe in the new year, especially as Japan is becoming less attractive due to currency moves,” says Madjo.

It is unclear whether the newly introduced stimulus packages will bolster consumer confidence, as 2025 presents a similarly tough macroeconomic climate to that faced in the lead up to 2024. Nonetheless, as China signals the continuation of luxury’s slowdown while ending the final quarter on the highest year-on-year spending growth ever, the region perfectly illustrates its crucial role in the international luxury market.

Vogue Business surveyed 532 luxury consumers in China, aged 18 to 64 in March 2023, 502 respondents in June 2023, 506 respondents in September 2023 and 506 respondents in December 2023, 503 in March 2024, 500 in June 2024, 500 in August 2024 and 500 in November 2024. Consumers were split by natural fallout across gender and age group (18 to 24, 25 to 34, 35 to 44, 45 to 54, and 55 to 64). Respondents were luxury shoppers with a minimum spend of RMB 1,000 ($142) on a single item or a total spend of RMB 8,500 ($1,211) over the last 12 months. Respondents were asked about their luxury shopping habits, as well as their spending and travel over Lunar New Year. This is the eighth edition of an ongoing quarterly study of Chinese luxury consumers in partnership with Barclays Research.

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