China’s luxury brands are ready to elbow western rivals aside

{"text":[[{"start":4.58,"text":"A surprising divergence is emerging in China’s luxury market: spending is continuing to fall, yet some Chinese luxury brands are growing at extraordinary rates. For European luxury groups such as Kering, Hermes and LVMH, which blamed soft China sales for disappointing results, this raises the possibility that even when the market recovers, their own sales may not."}],[{"start":28.16,"text":"Kering’s stock slid more than 10 per cent on Friday as the Gucci owner said retail revenue in the Asia-Pacific region fell 8 per cent in the third quarter, year on year, highlighting China as a major headwind. LVMH’s sales in Asia, excluding Japan, fell 5 per cent excluding currency impacts. Even Hermès, whose exceptionally wealthy clientele is usually shielded from economic cycles, grew less than expected and said China was “very difficult.”"}],[{"start":55.48,"text":"There is clearly a macroeconomic trend at work. Bain estimates that mainland China’s personal luxury market contracted around 19 per cent in 2024 and as much as 5 per cent last year. Still, it is striking that in the meantime Chinese luxury brands have managed to expand sales and market share. Local handbag companies tracked by Bernstein, for example, have increased sales by about 51 per cent annually on the country’s leading ecommerce platform since 2021."}],[{"start":null,"text":"

"}],[{"start":83.52,"text":"The shift goes beyond handbags. Laopu Gold, a Chinese jewellery brand, has built a fast-growing business around distinctive design and premium pricing. Its sales more than tripled last year and rose another 61 per cent in the first half of this year. Laopu, dubbed the Hermès of Gold, has held its gross margin above 40 per cent."}],[{"start":104.08,"text":"Despite its growth and margins, Laopu trades at about 6 times forward earnings, a fraction of the valuation of European brands. Investors are questioning whether the appeal of homegrown Chinese luxury is a durable shift or a shortlived trend, and they are not giving any credence at all to the idea that Chinese companies’ domestic brand strength might eventually translate into global relevance."}],[{"start":125.76,"text":"But that understates China’s potential — and the threat to European brands. Granted, Chinese luxury is a long way from the European version’s global reach. And changing customers’ perceptions of what, exactly, a desirable product looks like may be slower in a low-tech, traditional sector like luxury than in, say, car making."}],[{"start":143.76,"text":"But the fate of European automakers such as BMW and Volkswagen is one with lessons for luxury behemoths, which historically saw China as their most promising market. Volvo’s shares fell as much as 30 per cent on Friday as it reported collapsing Chinese sales. LVMH, Kering and peers should keep carmakers’ sad trajectory in mind as they navigate this new trend."}],[{"start":171.8,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792823149_5119.mp3"}