What: China’s personal luxury market contracted moderately last year, with consumer selectivity, domestic spending, and the rise of local brands reshaping the sector.

Why it is important: The reduction in overseas shopping by Chinese consumers emphasises the impact of pricing strategies and improved domestic experiences on purchasing behaviour.

China’s personal luxury market experienced a moderate contraction last year, following a sharper decline in 2024. The first half was marked by fragile consumer confidence and restrained discretionary spending, particularly among younger aspirational buyers delayed by weaker job prospects. However, the second half showed early signs of stabilization, driven by favorable market conditions and a tentative return of confidence among affluent consumers. The market is now entering a recalibration phase, with top-tier consumers maintaining a disproportionate share of spending and brands catering to both affordable luxury and ultra-premium segments emerging as winners. Beauty led category growth, while watches struggled and the resale segment accelerated, supported by livestreaming and digital platforms. Domestic consumption accounted for 65% of luxury spending, a reversal from pre-pandemic norms, as narrowing price gaps and enhanced in-store experiences encouraged shoppers to buy locally. Local Chinese brands are gaining ground across categories, leveraging cultural fluency and digital engagement. As the market matures, growth is expected to be modest, uneven, and increasingly dependent on brand and category differentiation.

IADS Notes: Recent developments in China’s luxury market reveal a profound transformation, with both local and global brands recalibrating their strategies to address heightened consumer selectivity and a maturing retail landscape. As highlighted in January 2026, local brands such as Labubu are leveraging emotional connections and premium collaborations to capture market share, while global players intensify competition through immersive flagship experiences and architectural innovation (WWD, January 2026). The shift toward experiential and value-driven retail is further evidenced by the pivot to personalised engagement and innovative store formats, as seen in October 2025, where brands like Louis Vuitton set new standards for destination retail (Inside Retail, October 2025). Lower-tier cities have emerged as key growth drivers, with brands succeeding through cultural adaptation and locally relevant strategies, a trend documented in March 2025 (BoF, March 2025). Simultaneously, the second-hand luxury market is undergoing rapid expansion, with June 2025 data showing unprecedented price pressures and a fundamental restructuring of retail dynamics (Inside Retail, June 2025). Finally, the global rise of Chinese brands, marked by digital innovation and international expansion, underscores the sector’s adaptability and influence, as reported in January 2026 (The Economist, January 2026).

Bain reports that Chinese customers are increasingly selective, and buying domestically