Are Zara, By Far, OTB exiting China? Not exactly

From luxury powerhouses to fast fashion giants, international brands are executing a strategic retreat from physical retail in China. A recent wave of closures raises a critical question for the luxury industry: Are these moves driven by economic headwinds, or do they signal a more fundamental shift in retail strategy for the world’s largest luxury market? Luxury and fast fashion get focused In February this year, Gucci closed two stores in Shanghai. That followed Louis Vuitton closing its brick-and-mortar location at Shenyang’s Zhuouzhan mall in October last year, which foreshadowed the shopping center closing completely in November. Italy’s OTB Group has shuttered several stores over the past year. And in October this year, Maison Margiela exited its locations at Shanghai’s IFC Mall and Hong Kong’s K11 Musea, following the July closing of its Jinge Huidu department store counter in Kunming, leaving it with no presence in the city. Meanwhile, sister brands Marni and Jil Sander pulled the plug on boutiques in Chengdu, Hong Kong, and Xiamen. In an email to Jing Daily, OTB group explained that China does remain a priority for the conglomerate. “Our goal is to strengthen control over our distribution, as we believe that investments in our retail network and in the direct management of our operations are the only growth strategy for our brands. Considering this vision, since 2022, our brands have opened 103 new stores in strategic locations.” This retail consolidation extends beyond luxury conglomerates to mass market players as well. Inditex giant Zara closed its stores in Changsha Huiju Center and Beichen Delta Joy City on January 19, continuing a contraction that has seen its mainland China presence shrink from 183 locations in 2018 to just 96 in 2024. Similarly, streetwear favorite Off-White shuttered six stores across mainland China last year. Are international brands retreating due to China’s economic challenges, or are they strategically recalibrating their presence in a maturing market? Economic headwinds or market maturity? Inside Retail Asia Features Editor Van Tong attributes the trend in part to subdued spending across the mainland. “Footfall has dropped in many cities, and consumer demand isn’t what it used to be. Gucci or Prada, for example, have been quietly scaling down their presence in the country in response to the economic headwinds.” Kering’s financial results released last Wednesday underscored the challenges facing luxury brands in China. Gucci, the group’s flagship brand, saw sales plummet 25% in the Q1 2025. The Asia-Pacific region, heavily influenced by China’s performance, also experienced a 25% decline, highlighting the impact of the weakening consumer landscape across the mainland. For OTB, it stated that the closure of some stores are in locations that are no longer in line with the positioning of the group’s brands or in malls that have lost their attractiveness over time, from which they have decided to leave and move the stores in other vibrant cities such as Hangzhou and Chongqing. China’s luxury market contracted by an estimated 18% to 20% in 2024, falling back to 2020’s level, according to a report by Bain & Co. Contributing factors include a sluggish real estate market, low consumer confidence, and increased overseas shopping amid reopened international travel routes. Yet, Tong cautions against reading these moves as total withdrawals. “It’s not just about cutting costs. For a lot of brands, it’s more of a repositioning. China is still hugely important for both luxury and fast fashion brands. They’re just moving away from having lots of stores everywhere to focusing on fewer, better ones.” The end of over-expansion Anaïs Bournonville, CEO of luxury consultancy AB Advisory, concurs. “It is both a strategic and financial necessity as the boom years of over-opening are fading,” she says. “The foot traffic in some shopping malls is decreasing; the consumer prefers the convenience of online shopping; and geographic proximity no longer enables sales to be multiplied.” The sophistication of China’s e-commerce ecosystem is accelerating this transition away from physical retail. With seamless digital platforms, advanced logistics networks, and integrated social commerce, brands can now reach Chinese consumers effectively without maintaining extensive brick-and-mortar networks across the country. These closures have sparked online speculation about brands’ commitment to China, with Zara facing rumors of a complete market exit. However, parent company Inditex maintains that reducing store count is actually part of a strategic pivot toward “larger, tech-equipped flagship stores.” This claim is substantiated by Zara’s new premium-positioned Nanjing flagship, which features Fit Check mirrors, automatic dispensers, and Asia’s first Zaracaffè — investments that signal the brand’s upmarket repositioning rather than retreat. “I consider this moment, not as a retreat, but as a reinvention,” Bournonville says. “Brands are making a shift to adapt to the desires of today’s consumers and gain in profitability in China.” From footprint to flagship The closures, then, may not so much be reflecting a crisis but, more of a course correction. Some brands are clearly adopting a “less is more” approach to protect future business, consolidating physical footprints while investing in omnichannel strategies. Inditex, for example, has leaned heavily into e-commerce and livestreaming on platforms like Douyin. “Today’s Chinese consumer no longer comes to a store to buy,” Bournonville says. “They come for the experience and they will favor brands that can offer them immersion and emotion.” This means creating destination-worthy locations. “It’s about time fashion brands move towards experiential stores and slow pop-ups,” she adds. The wave of closures is sweeping across tiers. Bulgarian niche brand By Far recently shut down all its China retail locations, including its Beijing flagship and multiple high-end mall stores. Its online presence has also been thinned, leaving only a Tmall flagship operational. Despite entering China with an extant local fanbase when it opened its first flagship there in 2022, a niche player like By Far cannot rely on Western celebrity endorsement and European craftsmanship alone to thrive. The brand’s presence on Chinese social media is limited. Although #ByFar has 4.1 million views on Xiaohongshu (also known as Rednote), that is less than some independent designers hailing from the mainland who do not have their own standalone retail stores. Feng Chen Wang, for example, has 1.28 billion views. While some closures are undoubtedly mainly the result of financial decisions, others reflect a move to deeper, data-driven approaches. “The strategy behind these store closures is driven by geographical intelligence,” Bournonville says. “The staggering concentration of boutiques and excessive proximity was killing the added value of the shopping experience.” Strategic shrinkage, not market abandonment In sum, what may appear as a market retreat is more accurately a strategic transformation for most, particularly in the face of global luxury headwinds. As Van Tong puts it, “Yes, the market retreat is apparent, but the market’s importance has not diminished.” Luxury and fashion brands are not leaving China. They are repositioning within it — perhaps they are trading square meters for storytelling, swapping transactional retailers for transformational spaces. The question isn’t whether brands are staying, it is how they intend to.

Are Zara, By Far, OTB exiting China? Not exactly

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Published April 29, 2025

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Are Zara, By Far, OTB exiting China? Not exactly