The Vanishing Red Silk: How Western Luxury Lost China

Between 2017 and 2021, the Chinese luxury market tripled in size. LVMH, Gucci, Burberry — everyone looked East and saw a gold mine. Then something broke: Chinese buyers walked away from Western brands in their millions. Gucci's revenue plunged from €10.5 billion to €6 billion, Burberry shed 17%, and 50 million people dropped out of the global luxury market — China was the single biggest source of that exodus. Those who stayed increasingly turned to Chinese brands — gold, handbags, cosmetics. What changed in China, and why?

1. The Fall of the Gucci–Burberry–LVMH Triumvirate

The numbers speak for themselves. Gucci's global revenue peaked in 2022 at €10.5 billion; by 2024, it was down to €7.7 billion, and by 2025, to just €5.99 billion (Luxury Tribune, 2026 — based on Kering annual results). A 43% collapse in three years.

Burberry fared little better. The British house lost 17% of its revenue in the 2024/25 financial year, while its sales in China fell by 15% (Burberry, 13 May 2025).

Even the industry's giant, LVMH (owner of Louis Vuitton, Dior, Fendi and others), could not ride out the storm. Revenue ran at €86.2 billion in 2023, fell to €84.7 billion in 2024, and to €80.8 billion in 2025 (Fortune, 11 February 2025). Net profit dropped from €15.95 billion in 2023 to €12.96 billion in 2024, and to €11.22 billion in 2025 — a 30% fall over two years.

2. 50 Million Buyers, Gone

The luxury industry's most unsettling number is not the revenue decline but the exodus of consumers. According to Fortune magazine, 50 million consumers have left the luxury market over the past two years — not only in China but globally, though China accounted for the bulk of it (Fortune, 11 February 2025).

They were, for the most part, young, ambitious middle-class buyers who had previously been luxury brands' most important demographic in China. Youth unemployment — the 16–24 bracket — ran above 15% from mid-2024 (Fortune, 11 February 2025).

"Since 2019, prices have risen sharply across the luxury sector without matching innovation, service quality, or brand pull. In 2024, this truly hit consumers, and we felt the full impact."

— Marie Driscoll, equity analyst specialising in luxury retail (Fortune, 11 February 2025)

The luxury houses brought much of this on themselves. Dior handbag prices have risen 76% since 2019 without any matching improvement in quality or design (Istituto Marangoni, 26 March 2025).

3. Guochao 3.0: When Homegrown Became Cooler Than the West

What makes Western luxury brands' Chinese decline truly serious is not that consumers are spending less — they are spending differently. By 2024, the guochao (国潮, "national wave") movement had matured into a structural market realignment.

The scale of this shift is clear from one figure: domestic brands had already captured a 76% share of the fast-moving consumer goods (FMCG) market by 2024, and won further share from foreign brands in nearly half the tracked categories (Bain & Company – Kantar Worldpanel: China Shopper Report 2025).

The most striking example is Laopu Gold (老铺黄金), a Chinese goldsmithing brand that marries traditional metalworking with modern design. The company's revenue surged 251% in the first half of 2025, while net profit leapt 286% (China Temper, 14 February 2026).

3.1. The "Consumption Downgrade" Myth

The Chinese luxury market's decline is often explained through the "consumption downgrade" narrative. This explanation is partly true but largely misleading.

China's CPI came in at -0.1% year-on-year in the first ten months of 2025, pointing to deflationary pressure (World Bank, 5 December 2025).

4. What Remains for Western Luxury?

Western luxury brands' position in China has not vanished entirely — but the rules have changed. Hermès has remained strong because its products — the Birkin bag above all — retain investment value and frequently sell above their original price on the secondary market (Istituto Marangoni, 26 March 2025).

In early 2026, Kering took a minority stake in ICCF Group, parent of Chinese cashmere brand Icicle (之禾) — a clear signal that Western luxury houses now see growth potential in Chinese brands themselves (Caixin Global, 16 April 2026).

5. The Counter-Case: Is Western Luxury's Fall in China Permanent?

The story so far has emphasised domestic brands' strengths and Western houses' weaknesses. But a careful reader might justifiably ask: is it not an exaggeration to say the era of Western luxury in China is over?

First, and most importantly: the current decline owes more to China's temporary economic slowdown than to any failure of the brands themselves. Once China's property market stabilises, consumer confidence recovers, and young people's labour-market situation improves, luxury consumption could return.

Second: brand loyalty to Western names has not disappeared. Consumers who grew up with Louis Vuitton and Gucci in the 2010s may not turn away from them permanently. The Hermès example shows that true luxury — artisanal quality, scarcity — weathers cyclical swings.

Third: the successes of Chinese domestic brands carry risks of their own. The breakneck growth of Laopu Gold and Pop Mart (251% and 185% respectively) looks unsustainable on these numbers alone — these figures are more reminiscent of the early stages of a bubble. Chinese brands' European expansion is no guaranteed success either: EU protective tariffs, safety regulations and a lack of brand awareness pose significant obstacles.

"Alongside consumer uncertainty, Chinese shoppers are also facing the government's stance against excessive consumption, the maturation of urban consumers — who are shifting from accumulating material goods to prioritising experiences — and the 'Guochao' phenomenon, which encourages buyers to favour local brands over international ones."

— Istituto Marangoni analysis, March 2025 (Istituto Marangoni, 26 March 2025)