“Luxury shame” is spreading in China, famous brands under pressure
Wealthy Chinese are becoming increasingly wary of flaunting their wealth as the economy faces headwinds, putting the luxury goods market under pressure.
There are signs of the so-called “luxury embarrassment” in China due to a challenging macroeconomic environment, weak GDP growth and low consumer confidence, which has negatively affected middle-class spending, according to a report by consulting firm Bain & Company.
“It’s not that they’re not willing to spend on luxury – in fact, we’re still seeing very strong results in China from some of the leading players, but people are becoming more cautious about aspirational spending and that’s going to continue,” said Derek Deng, senior partner at Bain & Company.
“Wealthier buyers are afraid of being seen as too lavish or too flashy,” said Claudia D’Arpizio, partner and global fashion and luxury manager at Bain & Company.
It is important to note that this concept is not new. “We call it luxury shame, similar to what happened in the USA in 2008-2009. year”, said D’Arpizio. “Even people who can afford these products are less inclined to do so, so as not to be seen as buying or wearing very expensive products.”
“quiet luxury”
Instead, Chinese consumers are increasingly choosing a style of “quiet luxury,” investment pieces and luxury products that are “more subtle” and “less visible,” she added.
China is the world’s second largest economy and home to more than 98,000 ultra-wealthy individuals – those with a net worth of more than $30 million, second only to the United States. However, the economy is under pressure post-Covid, with expectations of slower growth and weak spending.
As the country continues to struggle with high youth unemployment and struggling housing markets, some Chinese buyers are turning their backs on luxury amid economic uncertainty.
Although the global personal luxury goods sector is expected to grow moderately, up to 4 percent or as much as $420 billion, the luxury market in China is “struggling” and “generally shrinking,” according to a Bain & Company report.
“Shared Prosperity”
China’s political stance has also played a role in the “luxury shame” felt by Chinese consumers. “People are more subtle in these times,” Kenneth Chow, general counsel at Oliver Wyman, told CNBC. “Government encourages common prosperity and discourages any worship of money.”
“Shared prosperity”, first mentioned in the 1950s by Mao Zedong, the term has been brought back into play by the Chinese government in 2021 with the goal of creating moderate wealth for all.
In May, China began cracking down on “displays of wealth” and banned several online influencers – often known for their lavish lifestyles – from Chinese social media.
“I think this has a lot to do with the government’s attitude,” D’Arpizio said. The Shared Prosperity campaign created a psychological impact on the Chinese, as some of the wealthier individuals began to move money out of the country, she added.
“Also, during times when the economy is more uncertain, which has been seen in other countries, the wealthier and more affluent population is hesitant to publicly display their wealth,” Chow said.
Chinese consumers are becoming more sophisticated, said Bain & Company’s Deng. While before they were more willing to pay a premium for foreign brands, today many of them make purchasing decisions based on the quality of the product or the value that the brand offers.
Source: Business diary
Photo: unsplash
Source: bizlife.rs
