After nearly three years of volatility, China’s luxury market is showing early signs of stabilization. By the fourth quarter of 2025, investment conversations resumed, long-paused projects returned to planning, and brands began reassessing how — and where — to place their bets in China once again.
In December, Louis Vuitton, Christian Dior, Loro Piana and Tiffany each unveiled flagships in Beijing’s Sanlitun district. Beyond the capital, Chopard traveled north to Harbin, staging an ice-culture pop-up aligned with the city’s winter tourism narrative (and underscoring a growing sensitivity to regional context). In Shanghai, Buccellati staged its first major brand exhibition in China, The Prince of Goldsmiths: Buccellati Rediscovering the Classics, from December 7, 2025, to January 5, 2026, tracing the maison’s Italian artistic and artisanal heritage through historical jewellery and silverware that foregrounded founder Mario Buccellati’s legacy, craftsmanship and evolution.
But beneath the recovery lies an uncomfortable truth: China has not “come back”. It has changed shape. The consumers who once powered explosive growth are fewer in number, sharper, and more skeptical. Digital behavior has accelerated past Western benchmarks. And the industry’s most entrenched operating assumptions — from VIC hierarchies to emotional retail theatrics — are being structurally challenged.
The question for global luxury is no longer whether China will recover, but whether brands are equipped for what China has become. In 2026, winning China will require a fundamentally different playbook.
The end of the old VIC era
Contrary to pre-Covid expectations of broad-based luxury expansion, the past two to three years have seen consumption power in China concentrate sharply among VICs. As household confidence weakened and asset markets underperformed, ordinary consumers pulled back, focusing attention on those higher-value clients.
Yaok Research Institute estimates that China now has around 4.46 million high-net-worth individuals with assets above RMB 10 million ($1.4 million), down 13% from 2019. Even so, their economic gravity has increased markedly: in 2024, they accounted for 28% of total consumption, delivered three-quarters of consumer-goods industry profits, and underpinned almost 90% of luxury sales.
The implication is stark. China is no longer an incremental market (where luxury companies can grow simply by capturing new customers and expanding market share in an unsaturated environment); it is now a zero-sum market, where one brand’s gain is another brand’s loss. Luxury brands must extract growth from a shrinking, increasingly rational elite. And that elite is changing from within.
“High-value consumers are becoming smarter and more restrained,” Zhou Ting, dean of Yaok Research Institute, notes. “They are shifting from conspicuous consumption to self-oriented consumption. Sport, leisure, and lifestyle-driven choices are replacing overt status display.”
This evolution is mirrored on Alibaba’s invitation-only luxury e-commerce platform Tmall Luxury Pavilion, where the classic VIC remains critical — but no longer singular. “We’re seeing resilience across different consumer cohorts,” says Anny Liu, the platform’s general manager. “New demographics are emerging while classic VICs remain important. The landscape has become multi-dimensional.”
Liu further adds that younger consumers, in particular, are reshaping the logic of luxury engagement. Rather than buying into brand hierarchies, they move fluidly across categories — heritage maisons, niche designers, sport-luxury hybrids, and lifestyle labels — guided less by logos than by personal aesthetic preference. “They’re willing to pay a premium, but only when there is emotional resonance that aligns with their identity,” she explains.
Yann Bozec, co-founder and managing director of the consulting firm YB Stratis, and former president of Tapestry Asia-Pacific, takes this argument further, challenging the very premise of VIC segmentation.
“The problem with VIC is that it’s an industry-defined classification, not a consumer reality,” he says. “In many brands, the revenue structure no longer justifies it. In ultra-high-end categories, everyone should be a VIC by definition. The label loses operational meaning.”
More importantly, the hierarchy itself is culturally misaligned. “Younger Chinese consumers — especially Gen Z — are uncomfortable with visible status tiers,” Bozec notes. “They actively reject hierarchical labels. Look at Chinese digital platforms: many have removed loyalty tiers altogether. That tells you something fundamental has shifted.”
The implication for 2026 is not that high-value clients disappear — but that privilege-based segmentation becomes incoherent.
The shifting faces of China’s high-end buyers
As the mass market contracts, the next phase of luxury growth in China will not come from scale — but from areas of demand that remain structurally undervalued.
According to Yaok, nearly 78% of China’s affluent population remains “light luxury buyers” — meaning those who don’t spend frequently on luxury goods, but have the purchasing power — clustered in second, third, and even fourth-tier cities. On Tmall Luxury Pavilion, mid-tier cities — particularly in central China — are already contributing disproportionately to platform growth.
“What’s changed is access,” Tmall Luxury Pavilion’s Liu explains. “Consumers in Tier 3 to Tier 6 cities now have the same information, the same content, the same exposure as those in Tier 1 cities.”
Digital infrastructure has flattened geography. The opportunity now lies in pipeline building — acquiring, converting, and retaining consumers across vast regions without relying on physical density.
The country’s biggest shopping festival, Singles’ Day or 11.11, offers a clear signal. During this year’s 11.11 festival in November, luxury brands on Tmall recorded double-digit growth across their portfolios — driven not by aggressive discounting, but by deeper engagement and broader reach, according to Tmall Luxury Pavilion’s Liu.
At the same time, the definition of “young consumers” itself is expanding. “The biggest opportunity is not just young people,” Yaok’s Zhou emphasizes. “It’s older consumers whose consumption is becoming younger.” Middle-aged and older consumers are spending more on casual, sport-inflected, lifestyle-driven luxury — and they have significantly greater purchasing power than Gen Z.
Household decision-making is becoming central too. “Affluent wives and family managers are playing a much bigger role,” Zhou notes. “Family-based consumption, or consumption that improves overall quality of life, has enormous growth potential.”
Alongside newly wealthy technology professionals and high-earning professional creators with sustained earning power, these dynamics point to a market where luxury demand is increasingly uneven and segmented, rather than broadly expanding.
At the brand level, this shift is already being felt. Dusen Wang, president of Ellassay Group — a Shenzhen-based womenswear label that has evolved into a multi-brand fashion group through the acquisition of international names including IRO, Laurèl, Self-Portrait and Nobis — describes a consumer base that is no longer persuaded by surface signals alone.
“High-end consumers in China are becoming more rational. They are less driven by logos or short-term trends, and more by product quality, durability, and long-term value. At the same time, many of our most important clients are no longer concentrated in physical boutiques — they are increasingly active on digital platforms, where discovery and relationship-building now start.”
At the same time, Wang points out that the center of gravity for high-value clients is no longer confined to physical boutiques. “Many of our most important clients today are highly active on digital platforms. Discovery, comparison, and even relationship-building often begin online [on social media and e-commerce platforms]. The store is still important, but it is no longer the starting point.”
Why “digital vs store” is the wrong question
Despite this fragmentation, many luxury brands still operate with a divided mindset: online and digital for traffic and sales; physical retail for branding and experience. In China, that split is now a liability.
“The integration of online and offline is no longer optional,” says Liu. “Treating online as a sales conduit and offline as an experience space creates fragmentation. It directly undermines brand positioning.” The deeper issue is not channels — it is behavior. “High-potential luxury consumers are increasingly gathering on digital platforms [such as Tmall and Xiaohongshu],” she continues. “In the past, basic digital presence was enough. Today, the ‘display-and-sell’ mindset is obsolete.”
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By 2026, China will be one of the world’s most advanced AI-mediated shopping environments, according to Bozec. He believes the implications are currently underappreciated. “Within 18 to 24 months, consumers in China will rely on AI shopping agents the way they rely on GPS,” he says. “Shopping without AI will become the exception.”
Crucially, AI does not shop like humans. “AI doesn’t respond to emotion,” Bozec explains. “It evaluates product specifications, materials, craftsmanship, real consumer feedback, and logical coherence of brand values. Brand recognition comes last.”
This shifts power decisively from emotional seduction to structural credibility. Emotional storytelling will still matter — but it must be precise, substantiated, and embedded in product reality. “You won’t be able to mask weak products behind beautiful narratives anymore,” Bozec says. “AI exposes inconsistencies between price, quality and value.”
Platforms like Tmall Luxury Pavilion are already building for this reality — connecting short video, live streaming, influencer content, AI-driven personalization, and physical retail into a single operational loop. Its latest strategic partnership with Xiaohongshu enables brands to link content exposure directly to sales, creating a seamless path from discovery to purchase. Users encountering a brand post on Xiaohongshu can move to Tmall to explore, add to cart, and complete transactions. This ecosystem allows luxury brands to combine culturally relevant storytelling with precise audience targeting. The results are measurable: sixfold growth in post-content search traffic, fivefold increases in add-to-cart behavior, and a 30% rise in direct conversions, shares Liu.
From experience to resonance
As consumers become increasingly informed and digitally connected, traditional store functions — product education, trend discovery and brand storytelling — can be accomplished online more efficiently. This raises a key question: what unique value can physical stores offer in an environment where information and comparison are easily accessible?
“Experience is replicable,” Bozec says. “Coffee, champagne, events — anyone can copy that. Resonance cannot be replicated.”
Historically, stores helped consumers learn about products, discover trends, and absorb brand stories. AI and digitalization will perform all of these functions faster and better. Even AI-augmented sales associates will not out-knowledge a consumer’s personal agent.
“The only defensible value left is genuine human interaction,” Bozec argues. “Warmth, attentiveness, presence. Feeling understood.” Resonance, unlike experience, is relational. It is contextual. And it cannot be reserved for a privileged few.
“If AI enables universal personalization,” Bozec adds, “then human resonance must also be universal. It cannot be hierarchical.”
This reframes the future store as a space for hosting rather than selling. Paradoxically, this may require more staff, not fewer — but hired for empathy, cultural fluency and listening skills, rather than transactional efficiency.
From an operator’s perspective, this shift also requires brands to rethink how stores and digital touchpoints work together over time. Ellassay’s Wang describes the store less as a sales endpoint than as an entry point into a longer relationship.
“A store today is no longer just a point of transaction. It is the entrance to a brand’s world. Online channels, in contrast, have become the infrastructure for storytelling and long-term engagement. What really accumulates over time is not just sales, but brand IP, aesthetic systems, and a service experience that has boundaries, rhythm, and warmth. That is where loyalty is built.”
The new playbook: Clarity as the ultimate luxury
Looking ahead to 2026, a clear thesis emerges for China’s luxury market: brands that lack clarity, integrity or substance will struggle, while those with sharply defined purpose, product excellence, and human-centered retail experiences will thrive.
“Brands that try to be everything to everyone will disappear faster than ever,” Bozec warns. “AI accelerates forgetfulness. Inconsistency is punished immediately.”
To win back China by the end of 2026, luxury brands must abandon legacy assumptions and rebuild around a new operating logic. In short, it is about moving beyond privilege-based VIC hierarchies toward universal personalization. There is also an operating logic that places product back at the centre, not as storytelling fodder, but as something robust enough to withstand machine scrutiny and algorithmic comparison. It also demands a reimagination of physical retail. Stores must become spaces of human resonance, designed to slow people down, build trust, and translate brand values into lived experience.
Crucially, this next phase requires brands to let go of excessive central control. Winning in China will depend on empowering local teams with real creative and strategic authority — not merely executional responsibility — and trusting them to shape culture, not just interpret it.
On this point, Wang is blunt about what must change for international players. “For international brands operating in China, the most important shift is to develop their own local judgment. You cannot rely indefinitely on headquarters templates. The market is moving too fast, and decision-making authority has to be closer to the consumer.”
Finally, digital can no longer sit on the periphery as a marketing channel. It must be treated as foundational infrastructure to link product, retail, service, and storytelling into a single, continuously learning system.
China’s recovery is real. But it is not cyclical — it is structural. The brands that succeed will not be those waiting for China to return to what it was, but those willing to understand what China has become — and what it will demand next.
