What happened As China’s economy cools, a new reality is emerging for global luxury brands that have long depended on the country’s seemingly insatiable demand. According to the Industry Outlook 2025 by the Economist Intelligence Unit (EIU), China’s retail market is projected to grow by just 4% next year, only half of its 2019 level. Challenges such as the ongoing property market slump and demographic shifts are dampening consumer sentiment. Kering’s Q3 2024 results reflect the impact of these changes, with group revenue down 16% on a comparable basis. Gucci, its flagship brand, saw a 25% decrease in revenue in the Asia-Pacific region during the quarter, particularly impacted by lower store traffic and reduced consumer spending. This follows similar declines reported by LVMH, which experienced a 16% YoY drop in Q3 revenue for Asia, excluding Japan. The Jing Take The EIU’s latest industry outlook highlights the challenges luxury brands face amid China’s slowing market. The critical millennial and Gen Z segments, once key drivers of luxury consumption, are now more cautious and price-sensitive, prompting a shift in buying behavior. Younger Chinese consumers are increasingly making luxury purchases abroad – particularly in nearby markets like Japan – or opting for secondhand goods. This presents a challenge for brands that have heavily invested in expanding and upgrading their presence in China, including lower-tier cities, post-pandemic. In this context, many luxury brands are turning their attention to India. While China’s retail growth is expected to slow to 4% in 2025 – the lowest since 2022 – India’s retail sector is projected to grow at an average annual rate of about 5%. This shift has made India an attractive alternative for global luxury players seeking to offset slowing Chinese demand. The country’s relatively youthful population – averaging 28.2 years old compared to 39 in China – combined with a rising middle class provides fertile ground for brands looking to capture new consumers. According to a June 2024 report by BDA Partners, India’s luxury sector is expected to more than triple by 2030, driven by increasing discretionary spending and a growing number of high-net-worth individuals. Ultimately, new consumers will be the deciding factor in the next stage of China’s luxury market evolution. If the country’s youth unemployment rate stabilizes or decreases in 2025, and if Beijing can enact more substantial stimulus packages, luxury brands could see a rise in consumer enthusiasm and a greater willingness to shop locally. Conversely, without these changes, they could see a Japan-style stagnation take root in the year ahead. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.
