**Luxury Brands Shift Strategy in China: Moving Away from Discounts**
Luxury brands in China are re-evaluating their pricing strategies, opting to reduce steep markdowns in a bid to restore their exclusive image and attract affluent consumers. This shift comes as wealthy shoppers remain less impacted by the economic downturn, prompting brands to focus on long-term brand loyalty rather than short-term sales.
Data from consultancy Re-Hub reveals that Kering SA’s Balenciaga did not offer any discounts on Tmall, China’s leading e-commerce platform, during the first quarter of this year or during the major online shopping festival in November. This is a significant change from the previous year, where the brand averaged a 41% discount on Tmall. Similarly, Versace, which is set to merge with Prada SpA following a $1.4 billion acquisition, reduced prices on only 3% of its products on Tmall in the first quarter, a stark contrast to the 12% discount rate in 2024.
Valentino Fashion Group SpA also joined this trend by decreasing the number of discounted items on Tmall in January and eliminating markdowns entirely in February and March. This strategic pivot, which may seem counterintuitive given the current sluggish demand, reflects a fundamental change in how luxury brands approach the Chinese market. Max Peiro, CEO of Re-Hub, noted that this transition signifies a move from prioritizing immediate traffic and revenue to fostering long-term brand affinity. Brands are now investing in relevance, desirability, and premium experiences to cultivate lasting loyalty.
The effectiveness of discounting in driving sales growth is diminishing, and it poses a risk to brand value. Even traditionally exclusive fashion houses like Hermes, Chanel, and Louis Vuitton, which have typically avoided online discounts, are enhancing their efforts to maintain an exclusive image among wealthy Chinese consumers. This includes offering VIP-only events and unique shopping experiences.
This strategic shift occurs as global fashion brands adapt to changing market dynamics in China, where a prolonged luxury boom fueled by the middle class is waning. A persistent property slump and slow post-Covid economic recovery have transformed once extravagant Chinese shoppers into more budget-conscious consumers. The middle class, a cornerstone of the luxury market, is increasingly gravitating towards athleisure and affordable alternatives, leading to a reported 20% decline in luxury market sales in China last year, according to Bain & Co.
As brands pivot their focus back to attracting wealthier consumers who are still willing to spend, success in China remains crucial. This is particularly important as luxury brands also face challenges in the U.S. market, where consumer sentiment has reached a near five-year low amid ongoing uncertainties.
**FAQ**
**Q: Why are luxury brands reducing discounts in China?**
A: Luxury brands are reducing discounts to rebuild their exclusive image and foster long-term loyalty among affluent consumers, shifting focus from short-term sales to brand desirability.
