The 5 ways luxury can rebuild its China playbook

Last week, major luxury groups released their first-quarter results. Against a backdrop of prolonged global economic weakness and the disruption caused by the Middle East conflict that escalated in March, many brands were visibly affected. “Slower luxury growth” has become the industry consensus. At Kering’s Capital Markets Day, CEO Luca de Meo said plainly that after a decade of extraordinary expansion, luxury has entered a “reset phase” — the old playbook no longer works. Even though LVMH posted organic growth in Q1 2026, with improvement across most divisions, momentum remained weak — overall organic growth was just 1%, while its core Fashion and Leather Goods division declined 2%. Kering faced similar pressure: Gucci’s revenue fell 8% year-on-year on a comparable basis, marking its 11th consecutive quarter of decline. Even Hermès, long seen as the category’s outperformer, delivered a softer result — up 6% at constant exchange rates, ending years of double-digit growth. The slowdown is clear. The more pressing question is how brands respond. Across recent earnings calls, one keyword recurred: China. Drawing on earnings reports, conference calls, and on-the-ground shifts, this article outlines five strategies luxury brands are deploying to navigate the reset. From expansion to refinement: rewriting retail Over the past year, luxury stores have grown larger. The aim is twofold: to project presence and to deepen experiential engagement. Hermès’ new flagship in Beijing’s Sanlitun, opened in April, drew immediate crowds. The space blends East Asian heritage with French craftsmanship, expressing the house’s signature narrative of quiet elegance. Louis Vuitton has pursued a similar approach, investing steadily in immersive retail — from “The Louis” in Shanghai, a ship-like architectural landmark, to LV The Place in Seoul — each reinforcing the bond between brand and locality. Alongside flagships, brands are embedding themselves into neighborhood culture. In January, Fendi opened a Chinese New Year-themed pop-up on Shanghai’s Wukang Road. Chanel is set to follow with a Coco Beach 2026 pop-up on the same street in late April. But expansion has a counterpart: contraction. In March, Gucci closed its flagship at Shanghai’s Iapm mall on Huaihai Road, following earlier closures at Raffles City and New World Daimaru — moves that reflect Kering’s broader effort to rebuild its retail footprint on the principle of fewer, better stores. De Meo acknowledged that Gucci had “lost desirability in China” by over-distributing its products, diluting brand equity in the process. Rebuilding that desirability, he said, is now the top priority — requiring tighter focus on the brand, its clients, and a more selective distribution network. By the end of 2025, Kering operated 1,719 stores, down 75 year-on-year. In 2026, it plans to close at least 100 more while selectively investing in high-impact flagships. The broader shift is clear: from rapid expansion to curated presence, immersive flagship experiences replacing volume-driven retail. Long-term thinking and the return of scarcity Scarcity is an essential part of luxury's DNA — and no brand understands this more deeply than Hermès, which has chosen a slower, more difficult path: trading supply chain scale for brand depth. At a recent earnings call, Hermès Co-Executive Chairman Henri-Louis Bauer revealed that in leather goods alone, the brand has been expanding at roughly one new workshop per year: the 24th opened in 2025, followed by the 25th in April 2026, with further openings planned in 2027, 2028, and before 2030. Similar expansion is underway across other categories, including tableware production and Swiss watchmaking facilities. Behind these figures lies a disciplined industrial logic: no outsourcing, no short-term capacity surges, but a system built on in-house workshops, local roots, and long-term employment to preserve craft integrity. Today, 55% of Hermès products are manufactured in its own workshops and 75% are made in France — a network of 63 production and training sites that forms not just a supply chain, but the brand’s most resilient competitive moat. Heritage assets matter equally. At LVMH’s earnings call, management repeatedly highlighted the strategic significance of Louis Vuitton’s 130th anniversary of the Monogram — designed by Georges Vuitton for his father, the brand’s founder, and enduring across generations as a living thread of continuity. The commemoration was not conceived as a commercial campaign, yet it generated a stronger-than-expected market response and boosted sales of classic Monogram products — underscoring Louis Vuitton’s ability to nurture its customer base through product integrity and a distinctive retail experience, a strategy the brand intends to carry into the second quarter. Beauty as entry point, not just profit center At Hermès’ earnings call, a shareholder questioned whether sluggish growth in beauty and fragrance meant the brand’s recent expansion into makeup, skincare, and lipsticks — launched only a few years ago — had been a misstep. Co-Executive Chairman Axel Dumas did not shy away from the challenges. He acknowledged that in fragrance and beauty, Hermès does not have full control over distribution and retail, and that external factors — such as the bankruptcy of certain retailers — have weighed on the market. Within its own directly operated stores, however, beauty and fragrance continue to perform positively. In a beauty industry heavily driven by marketing, Dumas made clear that Hermès would not blindly follow prevailing industry playbooks. Instead, it would maintain its own pace — developing products that can withstand real market testing while preserving brand integrity. The company is currently focusing on skincare, aiming to create products that are genuinely superior to what consumers already own. On the product side, Hermès already has strong foundations: Terre d’Hermès is widely regarded as one of the best men’s fragrances, and the launch of the Barénia line has been well received. The remaining challenge, he noted, lies in improving the ranking and performance of its women’s offerings. In a marketing-driven industry, Dumas made clear that Hermès would not follow prevailing playbooks — maintaining its own pace and developing products that can withstand real market testing. The current focus is skincare, building on strong foundations: “Terre d’Hermès” is widely regarded as one of the best men’s fragrances, and the “Barénia” line has been well received. The remaining challenge lies in strengthening its women’s offerings. The strategic value of beauty lies in lowering the entry barrier — allowing younger consumers to access a luxury brand for the first time at an affordable price point, while daily use reinforces brand memory. Beauty may not be a core profit driver, but it is a key platform for building connections with the next generation of consumers. Rewriting the rules through localization The first three strategies reflect optimization within an existing framework. This one marks a more fundamental shift: no longer treating China simply as a sales market, but as a space for deeper localization. Kering is one of the clearest examples. On April 16, the group announced a minority investment in ICCF, the parent company of Chinese premium womenswear label Icicle, backed by its newly launched incubation platform, “House of Wonders,” which aims to identify emerging niche brands with strong cultural influence. Kering has also launched the “Kering CRAFT Creative Residency Program” in partnership with Shanghai Fashion Week, supporting emerging Chinese designers to study and train in Europe. The group has additionally backed Bao Lan, a Chinese high-end gold jewelry brand known for filigree inlay and traditional gold craftsmanship. Taken together, these moves reflect a significant, capital-intensive commitment to the local market — redefining the relationship between global luxury houses and China not as a one-way export model, but as a deeper, two-way integration. Compared with peers still hesitating or limiting themselves to surface-level localization, Kering has moved earlier and more decisively. Emotional value as a service strategy While global luxury groups navigate headwinds, domestic brands are charting a different trajectory. Laopu Gold is the standout example: according to its filings, Q1 2026 sales are expected to reach 19 billion-20 billion RMB ($2.6 billion–$2.7 billion), with net profit of 3.6 billion–3.8 billion RMB ($490 million-$520 million). On Tmall’s “3.8 Refresh Week,” the brand reportedly surpassed 300 million RMB ($41 million) in one second on launch day, exceeding 1 billion RMB ($137 million) by day’s end — figures that go far beyond product success. If traditional luxury has long relied on “distance” — maintaining authority through restraint, selection, and at times a certain emotional detachment — Laopu Gold is built on almost the opposite logic: replacing psychological barriers with emotional value. In-store, customers are greeted not with scrutiny but with a glass of water at just the right temperature. Rather than passive waiting, they are met with patient listening and continuous engagement. As queues have become the norm, the brand offers bread, coffee, and light meals — turning waiting time into part of the experience. This “excessive service” model reflects a fundamental shift in consumer psychology. When product differences become harder to perceive, how a customer is treated becomes a form of value in itself. The question luxury brands can no longer ignore: when consumers stop feeling privileged to be “selected” and instead prioritize being respected and understood, does the traditional “high-distance” logic that once underpinned luxury authority still hold? Perhaps this is the deepest shift of the reset phase — luxury is no longer only about products and price, but about the reconstruction of relationships. Luxury brands have never been immune to cycles. In this one, those who genuinely understand China’s changing consumers are the ones most likely to endure.

The 5 ways luxury can rebuild its China playbook

How Bottega Veneta weaved China’s forever it bag

Upgrade to Pro

Sectors

Insights

Company

The 5 ways luxury can rebuild its China playbook

How Bottega Veneta weaved China’s forever it bag