China’s luxury market shrank again in 2025, but not the way most brands expected. After a 17-19% collapse in 2024, the market contracted a further 3-5% last year, landing at around $46 billion. LVMH posted its first quarter of positive sales growth in over a year. Kering fell 14.6% for the full year. Hermes held at +9% revenue overall but saw Asia-Pacific (ex-Japan) up just 1.5% in H1. The picture is uneven, and it rewards brands that made real changes rather than waiting for a market rebound.
The Numbers Behind the Slowdown
The 2024 collapse set a brutal baseline. By 2025, the market was still contracting but at a slower pace. Bain projects modest growth in 2026, driven by improving consumer sentiment, a stronger stock market, and government stimulus measures. The $65 billion valuation in 2025 is expected to climb toward $69 billion in 2026 and $93 billion by 2031, according to Mordor Intelligence.
But averages hide a lot. Within the same market:
- Hermes grew revenue 9% globally in 2025, driven by product scarcity and a waiting-list model that most brands cannot replicate.
- Kering lost 14.6% as Gucci continued to struggle with brand fatigue and a failed repositioning attempt.
- LVMH’s China business returned to growth in H2 2025 after management cited a “noticeable improvement” in Asia ex-Japan.
The brands growing in China are not doing so because the market recovered. They are doing so because they adapted faster.
Why Chinese Consumers Pulled Back
Price gaps and the Hainan factor
For years, a Louis Vuitton bag cost roughly 50% more in China than in the US and 70% more than in France. Chinese travelers simply bought abroad. That dynamic shifted in 2025. The yuan weakened, making overseas purchases less attractive. Hainan duty-free expanded, narrowing the gap for shoppers willing to travel domestically. Overseas luxury spending fell sharply as a result.
This is good news for mainland sales in theory. In practice, it means brands that relied on the “travel retail arbitrage” as a justification for their China pricing now have fewer excuses to delay local price corrections.
Anti-corruption and gifting culture
The institutional gifting market, which was a significant driver of luxury bag, spirits, and watch sales through the 2010s, did not come back. Diageo took a $411.5 million write-down on its China spirits business. Remy Cointreau saw sales fall 9%. Pernod Ricard reported similar pressure. The corporate gifting channel is not returning, and brands that were built on it need to find a new customer base.
Guochao and the rise of local alternatives
The “guochao” movement, which means national chic, reached a more sophisticated phase in 2025. Younger consumers are not choosing domestic brands out of nationalism alone. They choose them because the quality-to-price ratio is better and the cultural references feel personal.
Brands like Songmont in handbags, Laopu Gold in jewelry, and Li-Ning in apparel now compete directly with international luxury names. These are not fast-fashion imitators. They are design-led businesses with strong storytelling and active communities on RedNote.
For luxury brands from Europe and the US, this is the clearest strategic threat. It is not a trend that will reverse. Learn more about how top Chinese fashion designers are reshaping the competitive field.
What the Consumer Actually Wants Now
The 2025 Chinese luxury consumer is more selective and harder to impress. A few patterns stand out:
- Quiet luxury over logo-heavy pieces. Younger buyers prefer understated, well-made items. Visible logos read as insecure to this generation.
- Experience over product. Travel, wellness, and curated events pull spending away from physical goods.
- Value coherence. A consumer who spends 20,000 RMB on a bag wants to feel the price makes sense. If a comparable item exists for half the price, they will consider it.
- “Dan Ren” aesthetics. The “low-key person” trend on RedNote celebrates muted tones, soft silhouettes, and zero social class signaling. Oatmeal, greyish pink, relaxed fits. This is not a niche.
Brands that still lead with loud branding and aspirational celebrity imagery are missing the room. The consumer has moved.
RedNote (Xiaohongshu): Where Luxury Decisions Actually Get Made
RedNote has 350 million monthly active users, with over 70% under 30. For luxury fashion, it functions as a search engine, a product review platform, and a community. A consumer who sees a bag in a show will immediately go to RedNote to read what real users say. If the brand has no presence there, the conversation happens without them.
What effective luxury content looks like on RedNote
The platform’s algorithm penalizes promotional content. Brands that post polished ad-style images with price tags and call-to-actions see weak organic reach. What works:
- KOC (key opinion consumer) storytelling. A micro-influencer with 8,000 followers showing how she styles a Celine jacket for a Shanghai winter, including what she pairs it with and why, will outperform a brand post with 200x the budget. Trust is the currency.
- Behind-the-scenes content. Gucci ran a dual strategy during Milan Fashion Week SS2025 that combined live streams, post-show highlights, and search ads. The live reservation tool built anticipation before the show. Post-show, footage was repurposed into short-form storytelling clips. Engagement held across all three phases.
- Soft reviews and unboxing. Videos showing the interior lining, the stitching, the weight of a piece in hand. These posts get saved and shared heavily. The save rate is a stronger signal on RedNote than likes.
- Local styling context. What does this piece look like worn in Chengdu in July, not on a Paris runway? That is the question RedNote users are asking.
Brands that want to win on RedNote need to commit to a consistent posting schedule, build relationships with KOCs rather than only top-tier KOLs, and accept that the tone must feel personal, not corporate. Read more about building a RedNote and WeChat strategy for fashion brands.
Fashion China Agency’s Approach
At Fashion China Agency, we work with international fashion and luxury brands that want to grow in China without guessing. The market is specific. What works in Paris does not translate directly to Shanghai, and what worked in Shanghai in 2019 does not work today.
Our work covers three main areas:
- Digital presence and content. We build RedNote and WeChat strategies that match the platform’s expectations. That means local tone, local visuals, and local references, not translated Western campaigns.
- KOL and KOC programs. We identify the right voices for each brand’s position, whether that means a top-tier fashion editor or a niche KOC with a highly engaged community in a specific city. See our work on KOL marketing in China for more detail.
- E-commerce and retail. We help brands set up or improve their presence on Tmall Luxury Pavilion, JD.com, and WeChat Mini Programs. Distribution choices matter here. The wrong channel damages brand perception. Learn how to approach selling fashion online in China the right way.
We do not offer generic China market entry packages. We work on specific problems with brands that are serious about the market for the long term.
Marcus’s Take
I have been in Shanghai for over a decade, and I have watched luxury brands make the same mistakes on a loop. The most common one is treating China as a single market. It is not. A consumer in Chengdu, a consumer in Shanghai, and a consumer in a tier-3 city have different reference points, different platforms they use daily, and different reasons for buying luxury. Brands that show up with one campaign localized into Mandarin and call it a China strategy are not doing China strategy. They are doing a translation.
The second mistake is assuming the slowdown is a confidence problem that will fix itself when the economy improves. Some of it will. But a lot of the shift is permanent. Chinese consumers now have access to high-quality domestic alternatives that did not exist five years ago. Songmont bags sell out. Laopu Gold has a waiting list. These brands are not winning on price. They win on cultural fit and honest storytelling. That is a direct challenge to every European maison that has been coasting on heritage positioning without building real community in China.
The brands I see doing well right now share one trait: they treat Chinese consumers as the most informed buyers in the world, not as an emerging market to be educated. Because that is what they are. A 28-year-old woman in Beijing who follows 40 fashion accounts on RedNote, travels to Milan or Paris once a year, and comparison-shops across platforms before any purchase knows more about your product than most of your own retail staff. When you show up with surface-level localization and a brand ambassador who posts twice a year, she notices. The brands that respect that intelligence, and build content and products around it, are the ones growing right now.
Summary Table
| Factor | 2024 Situation | 2025-2026 Update |
|---|---|---|
| Market size (China personal luxury) | Sharp 17-19% decline | $46B in 2025, -3 to -5%, modest recovery projected for 2026 |
| LVMH China performance | Negative across quarters | Return to growth in H2 2025, +1% Q4 revenues globally |
| Kering / Gucci | Declining | Full year revenue -14.6%, Asia-Pacific weak |
| Hermes | Resilient | +9% global revenue 2025, Asia-Pacific ex-Japan +1.5% H1 |
| Price gap (China vs abroad) | 50-70% higher in China | Narrowing due to weak yuan and Hainan duty-free expansion |
| RedNote (Xiaohongshu) | Growing but underused by brands | 350M MAU, key discovery platform; KOC content outperforms ads |
| Local competition (guochao) | Emerging | Songmont, Laopu Gold, Li-Ning competing directly with Western luxury |
| Consumer preference shift | Post-COVID splurge fading | Quiet luxury, “Dan Ren” aesthetic, experience over product |
| Spirits / gifting market | Anti-corruption pressure ongoing | Diageo wrote off $411.5M; corporate gifting channel not recovering |
Marcus Zhan is a fashion marketing strategist based in Shanghai. Follow his work on LinkedIn.
Sources: Bain & Company, China luxury 2025 press release | China Briefing, luxury market outlook 2026 | Luxury Society, China luxury recovery 2026