High-end sector faces a halt due to "luxury scandal"
Rising economic and societal troubles in China haven't subsided. The well-off class is employing subtle tactics to avoid public scrutiny, opting for a toned-down image. This shift is causing ripples throughout the luxury goods sector.
As per a study, the rich Chinese are no longer flashy with their wealth. "For the first time in China's history, we're observing what's being called the 'luxury embarrassment'," said Federica Levato, a consultant from Bain, regarding the luxury goods industry report. In the face of unemployment and economic and social unrest, wealthier Chinese now prefer understated style.
Projected global sales for personal luxury goods - including clothing, accessories, and beauty products - may grow by zero to four percent this year, given constant exchange rates. This would be the weakest sales growth since 2020, when there was a plunge due to the Corona pandemic. "The market is certainly in a stagnant phase," Levato added. "After two and a half years of growth, there's fatigue with personal luxury goods." The bi-annual luxury report is highly esteemed in fashion circles.
The decline is most pronounced in China, as economic uncertainty is weighing on middle-class consumers. Those who can still afford luxury are allegedly shying away from conspicuous consumption, say reports.
Beiersdorf, the German consumer goods corporation (Nivea, Labello, Eucerin), anticipates a "markedly shrinking" Chinese market for luxury skincare this year. Despite the fact that its La Prairie creams, which fetch several hundred US dollars per pound, have gained market share.
Instead of flooding shopping malls, customers are setting up private meetings and choosing subtle, understated fashion over "very prominent and attention-grabbing items," said Levato. However, this trend is not likely to endure.
According to the study, there are indications of recovery in the luxury sector in the United States. Growth is being fueled by wealthier consumers, while younger, less affluent shoppers are hesitant. In Europe and Japan, the return of foreign tourists post-pandemic could boost luxury sales.
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The luxury goods industry in China, once known for flashy displays of wealth, is now grappling with a shift towards understated style due to economic and societal troubles. This trend is significantly impacting the luxury goods industry, with wealthier Chinese consumers avoiding conspicuous consumption.
Despite the downturn in China's luxury goods market, there are signs of recovery in other parts of the world, such as the United States and countries in Europe and Japan, where the return of foreign tourists could boost sales.
