China’s luxury market recalibrates as it contracts for second year in a row
China’s personal luxury goods market contracted by as much as 5% last year, a significant moderation compared with the sharper decline seen in 2024. That is according to a report from Bain & Company.
Following a sharp decline from 17% to 19% in 2024, China’s luxury market decreased by a more moderate 3% to 5% in 2025. While the first half of the year remained difficult, a recovery started taking shape in the third quarter. This shift was supported by a robust stock market and a resurgence in consumer confidence during the latter half of the year.
Consumer behavior is becoming more selective and knowledgeable, driving a transition toward a slow growth pattern. Shoppers are now prioritizing value-driven items that balance quality, exclusivity, and practicality.
Differences between categories
Bain & Company said that there is a steady preference for experience-based consumption, such as wellness and travel, over material goods. Brands that cater to either affordable luxury or ultra-premium segments have emerged as winners by delivering perceived true value to affluent young consumers and ultra-wealthy individuals.
Performance across different categories remains mixed. The beauty sector was the strongest performer, rebounding with 4% to 7% growth as demand for high-end skin care and fragrances remained steady.
Fashion also showed resilience, outperforming leather goods and bags, which struggled due to price increases and limited innovation. The watch category faced the most severe pressure, declining by 14% to 17% as consumers shifted toward smart devices or secondhand alternatives.
More domestic spending
The report also found a notable decline in overseas spending. In 2025, 65% of Chinese luxury purchases occurred within mainland China. A weaker currency narrowed the price gap between domestic and international markets, diminishing the appeal of shopping abroad. Additionally, improved domestic shopping experiences and promotions have encouraged consumers to spend at home.
While the primary market faced challenges, the secondhand luxury market grew by 15% to 20%. Although it still accounts for less than 10% of the total market, this segment is expanding as younger, price-sensitive buyers seek more cost-effective and sustainable options.
Livestreaming has played a crucial role in this growth by building consumer confidence in product authenticity through real-time interaction. The trend took off in China, with livestreamers offering big discounts on ecommerce websites like Taobao Live, a part of Alibaba Group.
Rise of local brands
Local Chinese brands are also capturing more market share by appealing to cultural connections and local preferences. These emerging players differentiate themselves through a better understanding of local aesthetics and digital-first strategies.
Some local winners are successfully blending global luxury standards with an authentic Chinese identity. For example, jewelry maker Laopu used traditional Chinese techniques and motifs, while ‘quiet luxury’ brand ICICLE, with one foot in Shanghai and the other in Paris, mixes Chinese and Western aesthetics.
Looking toward 2026, the market is expected to show more positive signs, though volatility remains. Domestic policy support and the continued repatriation of spending are likely to stabilize the industry. China is expected to remain a cornerstone of global luxury growth as the ecosystem matures through the expansion of both primary and secondhand markets.
“After the turbulence of 2024, the market in 2025 began to stabilize, although consumer confidence remained fragile,” said Bruno Lannes, senior partner at Bain & Company.
“What we are seeing is not a broad-based rebound, but the start of a recalibration phase, with early signs of recovery emerging in the second half of the year. This recalibration is also segment specific, with the ‘Very Important Clients’ continuing to represent a large share of the market, while younger aspiring consumers have delayed entry into the luxury category.”
