#China #Shanghai #Bain Company #Luxury Goods #Chinese Market

China’s Luxury Market Overview

The personal luxury goods market in mainland China underwent a contraction of 3% to 5% in 2025, as revealed by Bain & Company’s recent report. This downturn, while significant, is considerably less severe than the substantial declines witnessed in the preceding year, marking an essential recalibration in the luxury sector.

Economic Context

Despite an atmosphere of cautious consumer confidence for most of the year, signs of recovery began to emerge in the latter part of 2025. This positive shift was bolstered by favorable base effects, comparing the second half of 2025 with the same period in 2024, together with a buoyant stock market and improving overall sentiment among consumers.

Senior partner Bruno Lannes at Bain pointed out that the recovery is not uniform across the market; instead, it is characterized by continued selectivity where consumers are prioritizing luxury items that deliver both value and quality. Experiences such as travel and wellness were highlighted as preferred categories, suggesting a notable inclination towards emotional and sensory experiences over material acquisitions.

Uneven Category Performances

The performance within various luxury categories showed significant discrepancies. Beauty products emerged as the strongest segment, witnessing growth rates of 4% to 7%. This growth reflects a sustained interest in ultra-premium skincare and fragrances, as consumers persist in seeking emotional gratification even amidst economic uncertainties. Contrarily, the fashion segment faced a decline of 5% to 8%, with leather goods suffering even more greatly, contracting by 8% to 11%. Factors such as historical price increases and a lack of innovative offerings inhibited consumer purchasing behavior in these categories.

Watches were among the hardest hit, experiencing a steep decline of 14% to 17%. This downturn could be attributed to consumers adopting a more rational approach to purchases and shifting their interests towards alternative investments, secondhand options, and sporty or smart devices. Jewelry did, however, show an improvement, with declines tapered to 0% to 5%, aided by rising gold prices.

In this selective market, branding fundamentals and category dynamics play increasingly critical roles. According to Priscilla Dell'Orto, another partner at Bain, brands that manage to retain desirability and deliver clear value through innovation and strategic pricing strategies have shown more resilience during this turbulent period.

Shifts in Consumer Behavior

A notable trend in 2025 was the decline in luxury spending abroad, a sharp contrast to 2023 and 2024. An estimated 65% of luxury purchases were made within mainland China, reflecting a significant consumption repatriation trend. Low currency values and reduced price gaps between China's market and major luxury hubs decreased the incentives for overseas shopping, further aided by domestic tourism growth and promotions in shopping spaces.

Daigou activities thrived but displayed signs of restraint, particularly as brands aimed to regulate gray-market sales and protect their equity. While sales among the top 45 brands monitored on Daigou platforms increased by 3% in 2025, this represents a decline from the previous year's 5% growth.

In tandem, the secondhand luxury market showed substantial growth of 15% to 20%, though it remains significantly underrepresented at less than 10% of the primary luxury market. The rise in supply of secondhand goods, coupled with increasing acceptance, particularly among youthful and price-sensitive demographics, has propelled this segment, supported also by the adoption of livestreaming for product verification.

Local Brands on the Rise

This report emphasized the ascendance of local Chinese luxury brands, especially in beauty, as they attract consumers through culturally resonant aesthetics, digital engagement, and competitive pricing due to locally sourced materials. As competitive pressures increase, consumers are consolidating their spending on fewer brands that they perceive to deliver genuine value.

Projected Outlook for 2026

Looking forward, Bain predicts modest growth for China's personal luxury goods market in 2026. Stimulated by a growing middle class, an uptick in consumer confidence, and favorable policies, the expectation is for continued replenishment of luxury consumption within mainland China. Nonetheless, this growth will likely remain highly specific to certain categories and brands, continuing the trend of selective purchasing.