Luxury consumption in China: a story of dynamic transformation

The luxury consumption landscape in China has undergone an extraordinary transformation in recent years, driven by a rapidly expanding market and shifting consumer preferences. Over this period, China's luxury sector has grown fivefold, outpacing other global markets, thanks to an increasing consumer base in lower-tier cities.

 

However, this rapid expansion raises key questions about the complexity of the Chinese market, where regional, cultural, and generational dynamics play a significant role. The evolution of consumer behavior – from social status-seeking to more individualistic self-expression – has introduced new challenges for luxury brands. With cultural values, economic and geopolitical shifts, and digital engagement shaping purchasing patterns, understanding the nuances of Chinese luxury consumption is essential for businesses aiming to thrive in this ever-evolving market.

 

This article by Michael Antioco explores these intricate changes and offers insights into how luxury brands can navigate China's dynamic landscape.

 

The Evolution of Luxury Consumption in China

Between 2016 and 2026, the Chinese personal luxury market will have grown roughly fivefold, with an impressive Compound annual growth rate (CAGR) of 17%, a growth rate that outpaces many comparable markets such as those in Europe and North America. Few industries or sectors experience such robust market growth.

 

By 2028, in China still, according to Statista, luxury watches and jewelry are expected to represent 43% of the market by value, followed by fashion (20%), leather goods (18%), cosmetics and fragrances (17%), and eyewear (2%). Apart from a temporary dip in 2020, these categories have consistently expanded year after year. 

Despite recent turbulence – especially for brands that expanded too aggressively in China – I remain relatively optimistic about the future of luxury brands in the region. Growth in lower-tier cities, a trend I have closely followed since 2019, continues to be a strong driver of market expansion, while clients in top-tier cities are likely to keep buying – though probably opting for more exclusive pieces over entry-level ones.

 

A Complex Market: Is China Truly One Market?

This remarkable growth has unfolded through distinct phases, each shaped by cultural, generational, and geographical dynamics. While many refer to "the Chinese market" as if it were a single entity, I see a far more nuanced reality: a diverse array of consumer segments, each with unique preferences, behaviors, and levels of digital engagement.

 

One of the first academic studies on South-East Asian luxury consumption in 1998 (1) provided critical insights into the social motivations behind luxury consumption, setting the stage for understanding future trends, and revealed that South-East Asian consumers primarily sought to buy into a sense of belonging rather than simply acquiring high-quality products. They were motivated by the social affiliations these brands signified rather than by functionality or craftsmanship. 

Over a decade later, a second study by Pierre X. Lu (2) carried out in China confirmed these findings but noted a subtle shift: alongside the desire to conform to social norms and peer-pressure, an emerging aspiration toward self-expression was taking root.

 

Recognizing this complexity, I have examined large-scale segmentation studies, such as the one conducted by Gao et al. (3). This study revealed four primary groups (out of five), roughly equal in size: successful young men rewarding themselves with luxury items; young fashion-conscious women who spent the most on luxury items despite limited income; older consumers who spent less but still aspired to luxury; and a group of younger men whose spending patterns closely mirrored those of the fashionistas. This segmentation highlighted age, gender, and wealth as key drivers of spending behavior on luxury clothing.

 

However, as the market matured, demographic factors alone became insufficient to capture the nuances of client behavior. A subsequent psychographic segmentation (4) introduced four new dimensions: firstly, the degree of collectivism; secondly the preference for conspicuous versus functional luxury; thirdly the balance between impulsive and analytical decision-making; and finally, the openness to innovation and new brands. 

The results were striking: 22% of respondents displayed classic collective, conspicuous, and impulsive tendencies – fully aligned with earlier findings – while 50% exhibited behaviors consistent with traditional cultural patterns. The remaining clients, however, adopted a more individualistic and self-oriented approach to luxury consumption.

 

Cultural Theories and Their Influence on Luxury Consumption

As I consider the future of luxury consumption in China, several compelling questions come to mind:

• How will regional differences continue to shape consumer behavior in a disrupted market?
• Will Chinese consumers gradually adopt purchasing patterns similar to those in Japan or other luxury markets?
• Will luxury remain a tool for social affiliation, or will consumers shift toward more individualistic and product-oriented motivations?

 

Hofstede's cultural dimensions provide some insights into these questions. China scores low on individualism and uncertainty avoidance but high on power distance. This concept of power distance describes how individuals within a society interact based on hierarchical structures. In high power distance cultures, authority figures are granted significant respect and deference, whereas low power distance cultures emphasize equality and fair treatment for all, regardless of status. 

I find it particularly interesting that societies with a high power distance tend to favor conspicuous consumption, using luxury items as markers of status (5).

 

I have observed however that, compared to Japan, China remains more inclined to use luxury goods as a means of signaling social status, suggesting that materialism is likely to persist, even as its manifestations evolve. 

 

This distinction becomes even clearer to me when I consider Japan’s high uncertainty avoidance and strong emphasis on social conformity, both of which have contributed to a shift toward a more understated, quality-focused approach to luxury consumption. In contrast, I see that in China, luxury items continue to function as symbols of social achievement, particularly among younger generations who are blending traditional cultural values with modern, global influences. Based on my understanding of cultural theories, I believe that the cultural drivers of luxury consumption in China are closely aligned with those observed in markets like Singapore, Vietnam, or Malaysia – even if the scale and maturity of the luxury sector differ.

 

Of course, external forces also influence consumer behavior, particularly through policy changes, economic shifts, and societal attitudes toward wealth that directly impact purchasing patterns. The Chinese government's anti-corruption campaign, high import taxes, and slower economic growth around 2012-2014 curbed overt displays of wealth, prompting brands to pivot toward more discreet, understated luxury. Outlet villages thrived by appealing to budget-conscious shoppers who sought discounts instead of paying full retail prices. 

Additionally, they provided luxury brands with an effective solution for handling excess inventory, reducing the need for frequent sales in their regular, directly operated stores – events that could otherwise undermine the brand's image of exclusivity.

 

Between 2014 and 2018, research into materialism deepened our understanding of these trends. Sun et al. (6) identified five key factors shaping Chinese attitudes toward materialism: face, harmony, guanxi, Maoism, and Deng Xiaoping's economic theory. Face, or mianzi, continues to drive many purchases, as luxury goods confer social prestige. Guanxi, or social connections, similarly supports materialistic tendencies, as wealth and status enhance one's network and perceived value within it. In contrast, harmony discourages conspicuous consumption, prioritizing social cohesion. 

Maoist ideology, which once dismissed materialism in favor of working for the collective good, was eventually supplanted by Deng's reforms in the late 1970s and 1980s, which legitimized wealth accumulation with the notion that 'to get rich is glorious.'

 

These factors have had complex and sometimes contradictory effects on attitudes toward materialism and, in turn, luxury consumption. While face and guanxi often fuel the desire for high-end goods to reinforce social status, harmony can temper this inclination by emphasizing collective well-being. Similarly, the ideological shift from Maoist frugality to Deng's market-driven pragmatism created a more accepting environment for materialism, contributing to the dynamic and evolving nature of luxury consumption in China. 

However, in the current context of growing international tensions and economic uncertainty, the relative influence of Maoist versus Dengist values may shift once again, potentially rekindling nationalist or collectivist narratives that could reshape consumer behavior and attitudes toward luxury.

Shifting Consumer Preferences and Behavioral Trends

As I analyze the latest trends, I notice that younger generations in China, particularly in top-tier cities, have become more individualistic and expressive, prioritizing self-fulfillment over social conformity. Additionally, regional differences remain crucial: cosmopolitan consumers tend to favor international brands, while those with stronger local ties appreciate designs incorporating Chinese cultural elements (7).

 

The Chinese market's latest evolution reflects broader societal changes, including the growing influence of social media (despite the 2021 campaign against excessive reliance on influencers and celebrities), shifting generational values, and a rising preference for experiential luxury. 

Luxury consumption is no longer confined to tangible goods; experiences such as travel, fine dining, and exclusive events are becoming increasingly popular. Digital engagement plays a crucial role in this shift, as younger consumers seek authenticity, personalization, and meaningful interactions with the brands they follow online.

 

Another emerging trend I have noticed is a growing price sensitivity among consumers, especially in light of substantial price increases by many brands since 2020 — in some cases, up to 50% for certain product categories and iconic items. These hikes have prompted a noticeable shift in consumer behavior, with many turning to international markets or secondhand platforms in search of better value. 

Additionally, recent revelations – possibly from rather unverified Chinese manufacturers – surfaced amid the ongoing US-China tariff conflict, casting doubt on the actual production costs behind some high-end luxury goods. These revelations have sparked consumer skepticism, a growing demand for greater brand transparency and a potential higher focus on product quality. 

This trend may further influence how luxury is perceived and consumed in China. Vintage luxury has gained mainstream acceptance, thanks in part to influencers on Douyin and Xiaohongshu, who promote pre-owned items as both stylish and sustainable.

 

Despite economic headwinds, I expect Chinese consumers to maintain their appetite for luxury, albeit with a more discerning approach. Younger clients now gravitate toward "quiet luxury," favoring subtle, high-quality items over logo-centric designs. This shift aligns with the rise of Guochao, a movement that prizes cultural authenticity and heritage. Even global brands like Dior and Louis Vuitton have incorporated traditional Chinese motifs into their collections to resonate with this growing sentiment. In April 2024, the brand unveiled its Women's Pre-Fall 2024 collection in Shanghai, featuring whimsical animal designs by contemporary Chinese artist Sun Yitian. This collection celebrated China's youthful vitality while honoring Louis Vuitton's French fashion heritage.

 

Managerial Implications for Luxury Brands

As I analyze how brands can succeed in China, I see that navigating its diverse market requires adapting to regional preferences, digital trends, and cultural shifts. How can brands balance global appeal with local relevance? 

In this section, I explore strategies such as tailoring products to regional tastes, engaging on local digital platforms, offering unique experiences, and blending international and local influences. How can brands stay agile in response to fast-changing consumer behaviors? Let’s examine some key approaches.

 

Continue to Adapt Offerings to Regional Needs, Prioritizing Quality

China's vast geographical diversity demands a nuanced, region-specific approach to marketing and product development. 

Consumers in cosmopolitan hubs like Shanghai, Beijing, and Shenzhen often respond favorably to modern, global aesthetics and cutting-edge digital experiences. They will probably also place higher emphasis on product quality in the coming years. 

In contrast, lower-tier cities, where purchasing power is rising rapidly, may exhibit stronger interest in traditional cultural motifs and heritage-inspired designs. Brands can tailor their offerings by collaborating with local influencers to resonate with regional identities while maintaining a consistent overarching brand narrative. For instance, Burberry's Lunar New Year campaigns, despite its significant global identity problems, have successfully integrated traditional symbols into contemporary designs, appealing to broader demographics across different regions.

 

Embrace Digital Engagement

The dominance of domestic platforms like Douyin, Xiaohongshu, and WeChat makes digital engagement essential. 

However, I believe success in this space requires more than just presence – it demands authenticity, interactivity, and localized content. Younger consumers, particularly Gen Z, seek behind-the-scenes insights, interactive livestreams, and brand storytelling that feels genuine rather than purely promotional. 

Investing in partnerships with local influencers (KOLs—Key Opinion Leaders) and even KOCs (Key Opinion Consumers) can amplify brand reach while fostering trust. For instance, luxury brands like Gucci have leveraged Xiaohongshu to showcase how their products fit into modern Chinese lifestyles, driving significant engagement.

 

Leverage Experiential Luxury

Luxury consumption in China is increasingly defined by experiences rather than just products. 

Younger consumers, influenced by global travel trends and social media, seek exclusive events, personalized services, and immersive brand interactions with a strong emotional component. Hosting limited-access events or collaborating with luxury hotels and private clubs can cultivate a sense of exclusivity and community. 

For example, Louis Vuitton's exhibitions, such as the "SEE LV" event in Wuhan a few years ago, offered visitors a curated, immersive brand experience while creating shareable social media moments that extended the event's reach beyond attendees.

 

Adopt a Dual Branding Strategy

The rise of Guochao (i.e., national pride in domestic culture) has reshaped consumer preferences, particularly among younger generations eager to express their cultural identity.

In my analysis, I see that international luxury brands can respond effectively by integrating Chinese heritage into select collections while maintaining their global design language. Collaborations with Chinese artists or references to traditional craftsmanship – such as Dior’s recent use of Chinese knotting techniques – demonstrate cultural respect and resonate with local consumers.

This dual-branding approach ensures relevance in the local market without diluting the brand's international appeal. However, the intensity of this strategy should be carefully adjusted to align with market expectations, especially given that Chinese clients, according to Jean-Jacques Guiony, the newly appointed President & CEO of Moët Hennessy, “can sometimes exhibit disproportionately strong positive or negative reactions toward luxury brands depending on their broader sentiment and personal circumstances”.

 

Monitor (Fast) Consumer Behavior Shifts

Consumer behavior in China is evolving rapidly, influenced by shifting generational values, technological innovations, and macroeconomic trends. The balance between collectivistic and individualistic tendencies continues to shift, especially as younger consumers embrace individual expression while remaining connected to traditional social norms. 

Regularly monitoring social media sentiment, conducting localized market research, and staying attuned to emerging trends – such as the growing demand for sustainable luxury – can help brands remain agile. For example, LVMH’s early recognition of the sustainability trend led to initiatives like the "Nona Source" platform in 2021, which repurposes excess materials, aligning with younger consumers' eco-conscious values.

 

In a Nutshell - Adapting to a Dynamic and Evolving Market

The evolution of luxury consumption in China tells a fascinating story of transformation. From socially driven, brand-centric consumption to a more diversified landscape that balances tradition with modernity, the market continues to evolve. 

Ongoing trade tensions – including new tariff measures – raise important questions: how will they truly be implemented, for how long, and with what impact on luxury sales in the coming year? As I see it, understanding these shifts and adapting accordingly will be essential for any brand seeking long-term success in this ever-changing environment.

 

At the same time, brands must not only monitor economic indicators but also remain attuned to evolving cultural narratives, generational identities, and the shifting role of nationalism in consumer decision-making. Digital platforms and social media ecosystems continue to shape perceptions of authenticity and exclusivity, making cultural sensitivity and local relevance more crucial than ever.

 

In this complex environment, the ability to combine global prestige with local resonance will define the next generation of luxury success stories in China. A renewed focus on quality and craftsmanship will be especially critical with slowing market growth – particularly in top-tier cities, where discerning consumers are increasingly gravitating toward more exclusive, higher-end products. 

Brands that lead with excellence, not just accessibility, will be best positioned to thrive in a market that rewards both innovation and integrity.

 

References

(1) Wong, N. Y., & Ahuvia, A. C. (1998). Personal taste and family face: Luxury consumption in Confucian and Western societies. Psychology & Marketing, 15(5), 423–441.

(2) Lu, P. X. (2008). Elite China: Luxury consumer behavior in China. John Wiley & Sons (Asia).

(3) Gao, L., Norton, M. J. T., Zhang, Z., & Kin‐man To, C. (2009). Potential niche markets for luxury fashion goods in China. Journal of Fashion Marketing and Management, 13(4), 514–526.

(4) Lu, P. X., & Pras, B. (2011). Profiling mass affluent luxury goods consumers in China: A psychographic approach. Thunderbird International Business Review, 53(4), 435–455.

(5) Jiang, L., Gao, H., & Shi, L. H. (2021). The effect of power distance beliefs on the inconspicuous versus conspicuous consumption of luxury accessories in China and the USA. Journal of Marketing Management, 37(15–16), 1459–1489.

(6) Sun, G., D’Alessandro, S., & Johnson, L. (2014). Traditional culture, political ideologies, materialism and luxury consumption in China. International Journal of Consumer Studies, 38(6), 578–585.

(7) He, J.X., & Wang C.L. (2017). How global brands incorporating local cultural elements increase consumer purchase likelihood: an empirical study in China. International Marketing Review, 34(4), 463-479.

(8) Ling, J., & Juan, S. (2016). Luxury fever in China: Exploring the heterogeneity of consumers' perceived value. AMA Summer Educators' Conference Proceedings, 27–33.