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Present Challenges for Luxury Brands

by Giezel Garcia
02/12/2025
in Market Trends

Luxury brands such as LVMH, Kering, Burberry, and Moncler are facing headwinds in China, a market where they once saw significant growth. After years of strong sales, shifting consumer preferences and economic factors have led to a decline in demand for high-end fashion.

For years, Chinese consumers were a key driver of luxury sales, with the country’s market tripling in size from 2017 to 2021. High-end fashion houses expanded their presence in China, anticipating continued growth. However, the COVID-19 pandemic and subsequent lockdowns disrupted traditional spending patterns. Previously, many luxury purchases were made while traveling abroad in cities like Paris, London, and New York. When international travel was restricted, brands refocused their efforts on domestic sales—an approach that has proven challenging as consumer preferences evolved.

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Many consumers have adopted a more pragmatic approach to spending, prioritizing long-term investments over luxury fashion. Economic conditions, including a slowdown in the housing market and employment challenges, have also played a role in shifting spending habits. As a result, luxury brands have experienced financial setbacks. In 2024, Kering’s share price fell by 39.4%, Burberry’s by 30%, LVMH’s by 13%, and Moncler’s by 7.8%. LVMH also reported its weakest performance since the global financial crisis.

Rising prices in the luxury sector have further contributed to changing consumer sentiment. Some analysts note that while luxury brands have increased prices in recent years, corresponding improvements in quality, innovation, or service have not always been apparent. This has led some consumers to reconsider their spending, while others have turned to alternatives such as lower-cost alternatives or secondhand markets.

Demographic shifts are also impacting the luxury market. Young professionals, who previously made up a significant portion of luxury shoppers, are facing employment challenges. In June 2023, China’s urban unemployment rate for young workers reached 21.3%, contributing to a more cautious approach to discretionary spending.

As a result, some affluent consumers are choosing to invest in real estate, despite challenges in the property market. Homeownership remains a key status symbol in China, and those with financial resources see opportunities in acquiring high-end properties. Others are prioritizing experiences over material goods, following a trend observed among younger consumers globally.

These shifts have created difficulties for luxury brands that previously relied on strong demand in China. LVMH, for example, saw a 14% decline in organic sales among Asian consumers (excluding Japan) in the second quarter of 2024. Burberry issued multiple profit warnings related to sales performance in the region, while Kering reported an 11% decline in first-quarter revenue last year.

As consumer priorities continue to evolve, luxury brands face the challenge of adapting their strategies to align with new spending behaviors in China’s market.

Get comprehensive supply chain report news updates at The Supply Chain Report. For international trade tools, see ADAMftd.com.

#LuxuryMarket #BrandChallenges #RetailTrends #GlobalEconomy #LuxurySupplyChain #ConsumerShifts #MarketStrategy

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