By Xiaofei Xu

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In the Paris boutique of a Swiss luxury watchmaker, a Chinese customer anxiously discusses a credit card payment with her bank. After hours of back and forth, it finally goes through – to everyone’s relief.
“Things like this rarely happened before,” a salesperson at the store said, explaining how the card of the female customer was repeatedly declined as she tried to purchase a €25,000 (US$29,126) watch.
The salesperson has also noticed a decline in spending by Chinese customers, ceding their throne to clients from the United States and the Middle East.
“Now, many Chinese clients tend to shop at more accessible brands nearby and come here only to have a look. Even if they do make a purchase, they are more likely to buy cheaper models at €30,000 (US$34,953) to €40,000 (US$46,606),” the salesperson said.
China’s economic slowdown and changing consumer habits have pushed the European luxury goods industry into unfamiliar territory. The Chinese market has stopped growing while its consumers have become more selective, with many now turning to domestic brands.
Faced with this new reality, European brands were attempting new strategies in the crucial market, according to industry insiders and analysts.
“A main challenge is to manage the macroeconomic and revenue effects of the smaller growth rate, although the current stabilisation at around five per cent remains appreciable compared to many other parts of the world,” said Pascal Moran, executive president of the Federation de la Haute Couture et de la Mode (FHCM).
He noted that 2025 risked being a flat year for FHCM’s 100-strong members operating in the Chinese market, including household names such as Louis Vuitton, Chanel, Hermes and Christian Dior.
There is no way that you can justify that many price hikes so frequently
Sonja Prokopec, ESSEC
Still, a year without growth might be considered a positive after the Chinese luxury market declined by up to 20 per cent in 2024 – the worst drop in recent memory. Sales fell further across several major categories, including leather goods, watches and jewellery, according to a report published by Bain & Company.
The challenges that have dampened Chinese consumer confidence persist, driven by slower growth and a lingering property market crisis.
“For haute couture and luxury fashion, revenue elasticity is indeed higher than price elasticity, and the revenue effect induced by slower growth and the real estate situation is undeniable,” Moran said.
But analysts suggested the brands themselves also had to bear some of the blame. Citing cost increases, Louis Vuitton, Chanel, Prada and Hermes had all raised their prices multiple times in the past several years, sometimes as often as twice or even three times annually.
Chanel’s classic large 2.55 bag in France cost €11,100 (US$12,933) as of December 2024 – up 91 per cent from 2019 – according to an HSBC note tracking 20 iconic products from 14 luxury brands. From Cartier’s Trinity ring and Prada’s Galleria leather bag to Louis Vuitton’s Speedy bag, prices rose an average of 54 per cent between October 2019 and December 2024.
“There is no way that you can justify that many price hikes so frequently,” said Sonja Prokopec, professor of luxury marketing at the French business school ESSEC.
The steep price hikes have not translated into stronger profits. Chanel’s revenues decreased by 4.3 per cent last year while its earnings were down by 30 per cent compared to 2023, according to the French luxury giant’s 2024 financial results, published in May. That marked the first decline for the company since the global lockdown in 2020.
Chinese tourists have been travelling less and, when they do travel, they are buying less
Stéphane Bianchi, LVMH
In the report, the brand admitted that its fashion business had experienced “a more challenging context in Mainland China”.
“Luxury brands are not very transparent with their pricing. Consumers did not care much before, but that is not the case any more,” Prokopec said. The ever-rising prices of luxury goods, paired with China’s slowing economy, have prompted many consumers to reconsider whether purchases were worthwhile, she added.
Beyond brand strategies, geopolitics may also have weighed on Chinese spending patterns.
In the spring of 2025, a fall in Chinese spending abroad coincided with the uncertainty unleashed by US President Donald Trump’s tough trade policies against China – and European brands paid close attention to the trend.
“Until quite recently, the Chinese market and Chinese customers were buying all over the world, including in Japan due to the relative weakness of the yen. For the past three months, however, Chinese tourists have been travelling less and, when they do travel, they are buying less,” Stephane Bianchi, managing director of French luxury giant LVMH, told French lawmakers in June.
Bianchi also noted a shift in Chinese consumer sentiment when they travelled, as they drifted away from buying expensive bags or clothes towards experiences such as a pleasant stay at a fancy hotel.
This was echoed by a senior executive from a major European hotel group whose high-end leisure hotels in China saw better demand from Chinese consumers.

“For us and our competitors, businesses are holding on better in the premium or above category and in big cities [in China],” the executive said.
Industry insiders and analysts also noted a rise in nationalist sentiment among Chinese consumers, especially the younger generation, as well as a shift in how status was perceived.
“The older generation bought the ‘French idea’ where French luxury goods were markers of social status, but young people perceive status differently,” ESSEC’s Prokopec said.
Chinese buyers now had higher standards and were more selective. They wanted to buy into the whole experience, “encompassing culture, creativity and meaning,” FHCM’s Moran said.
Young buyers were also more open to vintage items, favouring brands whose bags were limited edition, good quality and in high demand on the second-hand market, namely Hermes.
The brand had also been more cautious in increasing prices, making consumers think Hermès bags were worth their price, according to Prokopec.
The Asia-Pacific region, excluding Japan, generated €3.5 billion (about US$4.08 billion) for the brand in the first half of the year – a 3 per cent increase compared to 2024, according to the group’s H1 report.
We live in a period of change, and our members are very attentive to the multifaceted evolution of the Chinese market
Pascal Moran, FHCM
The relative decline of European brands only made the rise of Chinese brands look more impressive, especially in the jewellery sector. Domestic brands like Laopu Gold have seen stunning results, partially fuelled by the price rally of gold.
“In the Chinese domestic market, although our products remain attractive, we are seeing the rise of a small nationalist sentiment, with a stronger desire to buy Chinese,” LVMH’s Bianchi said.
However, industry insiders and analysts noted that this was not fatal for European luxury brands, but rather highlighted the need for them to adapt to new realities in the Chinese market and among its consumers.
China remained a crucial market for the industry, and many brands, such as Louis Vuitton, were already adopting new strategies.
“Younger consumers are buying less French brands but they could easily come back. Brands just need to reinvent their story … it’s never going to go back to double-digit growth, but moderate growth is possible,” Prokopec said.
For these brands, reinvention might involve offering a fully immersive experience.
“There is a stronger emphasis on the experiential dimension, with Houses offering immersive activations, workshops and curated encounters that go far beyond the purchase itself,” Moran said.

Louis Vuitton’s immersive flagship “The Louis” in Shanghai – literally in the shape of a ship – became a sensation on Chinese social media, turning the boutique into a sightseeing destination.
The flagship store had a positive impact on the brand’s performance in the second quarter of 2025, according to LVMH CFO Cecile Cabanis.
“We have seen tangible improvement[s] locally … There are many visitors. The retail space is starting with a very strong start, and overall it creates a halo on the brand,” she said during the group’s first-half earnings call in July.
The Chinese market would be the defining factor in LVMH’s performance in the third quarter of 2025, Cabanis added.
Brands such as Chanel, Miu Miu and Hermes have also held shows in Hong Kong, Shanghai and Beijing since the beginning of 2024. These initiatives reflect “a deeper movement, strengthening long-term desirability and cultural resonance,” Moran said.
“We live in a period of change, and our members are very attentive to the multifaceted evolution of the Chinese market, which also brings them support to constantly innovate while sticking to their identity and fundamentals.”