BEIJING — China, once the crown jewel of the $380 billion luxury goods market, has become a source of significant losses for many high-end brands. After years of rapid growth, luxury goods sales declined 2% globally last year, with China being the primary reason for the downturn.
The decline is attributed to a combination of factors, including a sharp drop in consumer spending among young, affluent Chinese, who are increasingly prioritizing experiences over material possessions. China's economic crisis and soaring youth unemployment, which has reached over 20%, have also contributed to the shift in consumer behavior.
Meanwhile, the rise of local Chinese luxury brands has posed a significant threat to European companies, which have long dominated the market. Brands such as Atelier Yuen, a Chinese watch company founded by two French nationals, are gaining popularity among Chinese consumers who are embracing a new wave of nationalism that favors domestic brands.
The impact on European luxury giants has been significant, with stocks of companies like LVMH and Richemont plummeting over 20% last year. Just a decade ago, China accounted for half of all luxury sales worldwide, but that figure has since dropped to 12%. As the luxury goods market continues to evolve, companies that cater to local tastes and preferences, such as Hermes and Cucinelli, are faring better than those that rely on traditional European branding.
