Luxury’s biggest competitor may not sell luxury at all

What if luxury’s biggest competitors are no longer other luxury brands? Earlier this month, The Wall Street Journal said shares in LVMH and Prada were trading at an unusual discount to fast-fashion groups. On October 12, LVMH reported that Fashion and Leather Goods declined 5% organically in the third quarter, while Watches and Jewelry grew 6%. Group organic revenue was up 1%. Weaker consumer confidence, years of price increases and greater competition are part of the explanation. But I think there is another question luxury executives should be asking. Are customers reconsidering what is worth spending their money and time on? For decades, luxury benefited from the desire to acquire things that signaled success and social standing. A recognizable handbag, watch or piece of jewelry could say something about its owner. That desire has hardly disappeared. It may no longer command the same share of the customer’s money. The 2026 Hurun Chinese Luxury Consumer Survey, published in January and based on 470 wealthy Chinese respondents, found they planned to cut spending on material purchases such as watches and jewelry by about 10%, and raise spending on services and experiences, including travel, health and education, by about 12%. McKinsey and The Business of Fashion found something similar in a survey of more than 2,000 luxury clients in China and the United States. Asked where they would put an additional $5,000 of disposable income, respondents put travel ahead of watches, jewelry, leather goods and apparel. These are indications, not proof that a specific handbag was replaced by a holiday. They do suggest the customer is choosing across a wider set of options. If a handbag brand is no longer competing mainly with other handbag brands, who is it actually competing with for the customer’s money? Handbag brands spent years measuring themselves against other handbag brands. Jewelry houses looked at other jewelry houses. That still matters. It is no longer sufficient. Alternatives might be travel, wellness, a private members’ club or a serious personal interest. Some offer status and exclusivity, much like traditional luxury. Others offer health, new skills, time with family or personal satisfaction. What they have in common is that the customer may consider them a more rewarding use of money or time. Luxury companies may not see these businesses as competitors, but the customer is making a choice between them. I saw a version of this while my firm was advising the owners of a department store in China. Sales were falling. Brands were harder to attract. Management wanted to renovate the building and improve the tenant mix. That was understandable. Brands paid the rent. More useful was a different question: why would anyone come? We recommended a proper cultural program, with a team whose job was to keep giving people a reason to visit. Renovation produces a better box. The brief was a destination. Le Bon Marché, owned by LVMH, is the example we used. In 2025 it drew more than 22,000 spectators for Babel, a production combining dance and circus inside the store. A second season has been running since September and continues to the end of the year. People were given a reason to be in a department store that had little to do with needing to buy something. There was also a commercial bind. The landlord needed brands for rent. The brands needed traffic to justify the rent. Adding tenants did not solve why the customer should spend time there. How should a luxury house respond when falling sales reflect a customer reconsidering the purchase rather than a problem with the product? That same logic applies to a luxury house. When sales fall, management looks at what it can control. Product, marketing, pricing, distribution, the store. Sometimes those are exactly what needs to change. Sometimes the customer is reconsidering what the next purchase is worth. A brand can improve the product and spend more on marketing, and still find that people are buying less often. The sales report looks the same either way. The response should not. This is particularly visible in China. LVMH’s revenue in Asia excluding Japan fell 5% in the third quarter, after rising 7% in the first and 4% in the second, while the US grew 5% and Europe 4%. For two decades, international houses benefited from customers for whom a recognizable Western brand was a form of arrival. That demand has not gone. But many of those customers are now more experienced. Many already own the products they once aspired to. They know the prices. They also have more ways to use the money. Nor is this only a Chinese phenomenon. In mature luxury markets, customers who have spent years acquiring expensive products may ask what another purchase actually adds. Does every luxury house now need hotels and restaurants, or does the shift in customer spending call for something else? LVMH bought Belmond in 2019. Other houses have put money into hotels and cultural programs. Recognizing that experiences can make money is not the same as understanding what they do to demand for the core product. Not every fashion brand needs a hotel. Not every jewelry house needs to become a lifestyle company. Knowing what the customer is choosing between matters, including choices the company does not think of as competitors. That should change how a house thinks about product, pricing, the customer relationship and where it puts capital. Experiences and products are not clean substitutes. Travel can create demand for fashion, watches and jewelry. Some categories are still holding up. Watches and Jewelry at LVMH grew while Fashion and Leather Goods declined. People have not stopped wanting luxury goods. The competition for their spending is simply wider than the competitive set the industry still uses. Why are previously loyal customers buying less often, and where is the money going? Are they unhappy with the product, or does the product simply matter less than it once did? Valuation debates will keep asking whether luxury can recover its old growth and pricing power. Even if confidence improves, I doubt the competitive environment returns to what it was ten or twenty years ago. Luxury companies spent decades learning how to take a greater share of a customer’s luxury spending. They may now have to learn how to keep a place in the rest of that customer’s life. China State of Play is a strategic intelligence program from Jing Daily and Other Logic Partners. Angelito Tan is co-founder of Other Logic Partners, where he advises CEOs and founders of premium brands on Asia strategy. Drawing on more than 25 years of operating and advisory experience across the region, he writes about the strategic, cultural and commercial forces shaping how Chinese and Asian premium brands are redefining global markets.

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Luxury’s biggest competitor may not sell luxury at all