Luxury brands are leaving China's lower-tier cities

Cartier has closed five stores in China this year. Tiffany has pulled out of Kunming and Harbin. Loewe followed suit in Kunming. Belgian leather goods house Delvaux has cut its mainland network to fewer than 10 doors. And Gucci’s parent Kering, which reduced its global store count by a net 75 units last year across its brands, has flagged another round of closures for 2026 — with China expected to absorb a significant share. The pullback marks a sharp reversal from a strategy that defined luxury’s relationship with China for much of the past decade. As wealth spread beyond Beijing and Shanghai, brands pushed into Harbin, Lanzhou, Kunming and dozens of emerging commercial hubs. Luxury boutiques became symbols of a city’s arrival, and developers competed aggressively to land European fashion houses that could elevate the cachet of new malls. Yet fewer stores does not mean less investment. While stores disappear from lower-tier markets, brands are doubling down on larger, more ambitious flagships in China’s biggest cities. Balenciaga recently opened a major flagship in Guangzhou. Louis Vuitton transformed a prominent Shanghai waterfront location into The Louis, a vessel-shaped retail, exhibition and hospitality destination. Across Beijing, Shanghai, Chengdu and Shenzhen, luxury houses are expanding stores, adding private client salons and dedicating more space to events, dining and cultural programming. The contrast is visible in the numbers. According to Savills, global luxury store openings fell to their lowest post-pandemic level in 2025. China’s share of global luxury openings dropped from 40% two years ago to 22 percent, while more than half of all luxury store openings worldwide were concentrated in roughly 30 leading cities. Rather than expanding into more locations, luxury groups are directing capital toward fewer, larger and more productive stores. The retreat from China's lower-tier cities The reassessment has become increasingly visible in earnings calls. Following Richemont’s latest annual results, CEO Nicolas Bos acknowledged that some of the group’s brands had grown overly optimistic about China’s growth prospects after years of strong performance. Cartier’s closure of five stores this year is part of a broader effort to rationalize its retail network. The admission is notable because Richemont remains one of the strongest performers in global luxury. Its four jewelry maisons jewelry (Cartier, Van Cleef & Arpels and Buccellati), generated 16.5 billion euros ($19.2 billion) in sales in the fiscal year ended March 31 2026, up 8 percent year-on-year, with operating profit reaching 5 billion euros ($5.8 billion). Yet even against that backdrop, management acknowledged that some expansion decisions made during China’s boom years now require reassessment. For much of the past decade, luxury brands viewed China as the industry’s most important source of growth. Chinese consumers at one point accounted for more than one-third of global luxury spending, encouraging brands to expand aggressively across the country. New stores were opened not only in established luxury capitals such as Shanghai and Beijing, but also in second- and third-tier cities that were expected to produce the next generation of luxury shoppers. That growth story has become more complicated since 2023. A prolonged property market correction has weakened household wealth, consumer confidence remains subdued, and spending has grown more selective. Bain estimates that roughly 50 million consumers have exited the global luxury market over the past two years, about one-fifth of the industry’s customer base. Jonathan Yan, partner at Roland Berger, believes many brands underestimated how dependent lower-tier city expansion was on continued economic momentum. “I think it’s both,” Yan said. “Brands were optimistic in their expansion into lower-tier cities, but the major factor has been the external environment. The real estate market weakened, consumer sentiment softened and many consumers saw their wealth decline alongside property values.” The reopening of international travel has also changed the calculus. During the pandemic, luxury spending that would normally take place in Paris, Tokyo or Seoul was redirected to mainland China. Once borders reopened, brands once again had to compete with overseas shopping destinations, reducing the need for dense domestic store networks. Why flagship spending Is accelerating Fewer stores in lower-tier cities does not signal a retreat from physical retail. Instead, it reflects a changing definition of what a store is expected to accomplish. According to Savills, nearly three-quarters of luxury executives now view experience-led retail as the industry’s most important long-term trend. Flagship stores increasingly incorporate restaurants, cafés, exhibition spaces, hospitality concepts and private client areas — their purpose extending well beyond the transaction. Jason Yu, managing director at CTR Market Research, describes the shift as a move from quantity to quality. “Luxury brands in China are pivoting towards a quality-over-quantity strategy, closing underperforming outlets in lower-tier cities to concentrate resources on flagship stores in top-tier cities,” Yu said. “This allows them to offer superior experiences and precisely target their core clientele while ensuring long-term brand value.” The strategy reflects broader changes in consumer behavior. Products can be discovered on Xiaohongshu (also known as RedNote), purchased through e-commerce platforms and delivered directly to consumers. Physical retail increasingly serves functions that digital channels cannot replicate. “In the digital age, prime locations in key cities provide exclusive in-person experiences such as art exhibitions, private salons and fine dining that online platforms cannot replicate,” Yu said. “Strategically located in cultural hubs like Shanghai or Beijing, they act as powerful marketing drivers, elevating brand prestige and creating social media moments.” Recent flagship projects illustrate how dramatically the store’s role has evolved. Louis Vuitton’s Shanghai project combines retail with exhibitions and hospitality, while Prada has turned Rong Zhai, its restored Shanghai mansion, into a long-term cultural venue hosting exhibitions, events, and brand activations. Across the luxury sector, dedicated VIC floors and private appointment spaces have become increasingly common as brands seek deeper relationships with their highest-spending clients. For luxury groups, the flagship is no longer simply a point of sale. It is a marketing platform, an event venue, a clienteling hub and, increasingly, a destination in its own right. Selling more to fewer customers For much of the previous decade, expansion was driven by the belief that China would continue producing new luxury consumers at scale. Brands opened stores in new cities to capture first-time buyers and expand market penetration. Today, the focus is increasingly on existing customers. “The high-net-worth individual or VIP clients are relatively resilient, but the rest are squeezed,” Yan said. That distinction is becoming increasingly important. Aspirational consumers, who were often making their first luxury purchases, have been more affected by economic uncertainty and weaker wealth creation. High-net-worth clients, meanwhile, continue to account for a disproportionate share of industry sales. As a result, luxury groups are focusing less on acquiring new customers and more on increasing engagement with existing ones. VIC events, private appointments, limited-edition products and bespoke services have become increasingly important tools for driving growth. “The overall pie will not grow that much,” Yan said. “The focus is on quality consumers who can continue purchasing more with the brand.” The comment points to a fundamental change in the industry’s assumptions. Future growth is increasingly expected to come from increasing spending per customer rather than dramatically expanding the number of luxury consumers. Why fewer stores can create more value The concentration of retail investment also reflects operational logic. During Kering’s Capital Markets Day, Saint Laurent Chief Executive Cédric Charbit highlighted the advantages of concentrating inventory in fewer flagship locations. Larger stores allow brands to carry broader assortments, offer a more complete selection of products and move stock more efficiently than fragmented networks of smaller boutiques. The same logic is visible globally. Savills data shows North America became the largest market for new luxury store openings last year, overtaking both China and Europe. Much of that investment flowed into established luxury capitals such as New York rather than secondary cities that briefly attracted attention during the post-pandemic recovery. Luxury brands have become increasingly selective about location quality as well. Prime retail corridors such as New York’s Fifth Avenue, London’s Bond Street, Paris’ Avenue Montaigne and Milan’s Via Montenapoleone continue attracting investment, while secondary luxury streets face greater scrutiny. For brands, visibility, tourism flows, high-net-worth density and cultural relevance have become more important factors than geographic coverage alone. China remains one of the world’s largest luxury markets, and brands continue to invest heavily in the country. What is changing is the assumption that growth requires more stores. Increasingly, luxury groups are betting that a handful of highly productive flagships in Shanghai, Beijing, Guangzhou and Chengdu can generate stronger returns than dozens of boutiques spread across smaller cities.

Luxury brands are leaving China’s lower-tier cities

How Bottega Veneta weaved China’s forever it bag

Upgrade to Pro

Sectors

Insights

Company

Luxury brands are leaving China’s lower-tier cities

How Bottega Veneta weaved China’s forever it bag