The luxury industry is slowly adjusting to a changing economic landscape in China, with new insights provided by Bulgari’s CEO, Jean-Christophe Babin. According to Babin, the luxury market in China is likely to witness a recovery within the next two years. This prediction comes during a challenging time for many luxury brands operating in the region.
Babin articulated these views during a roundtable discussion at the annual China International Import Expo held in Shanghai. He noted that while Bulgari, owned by the LVMH group, is experiencing a downturn in its physical retail stores, online channels have proven more resilient. The shift towards digital sales platforms allows brands to engage with a broader customer base, including those in smaller municipalities. This shift is crucial, especially as traditional retailers grapple with evolving consumer behavior.
The luxury market in China has been historically robust, but the post-COVID-19 economic environment has dramatically shifted consumer spending habits. Data shows that LVMH’s sales in the region—including China—fell by 16% in the third quarter of 2024, following a 14% drop in the previous quarter. Similarly, Kering SA, which operates brands like Gucci, has warned of a significant decline in profits, indicating that its comparable sales plummeted by 25% during the same period.
These statistics illustrate a broader trend affecting luxury retailers, which are increasingly finding it challenging to attract China’s affluent consumers. Babin emphasized that the unique market conditions mean luxury brands must adapt to a more frugal consumer mindset, shifting from previous characteristics of label-obsession towards acquiring fewer high-quality goods.
The Bulgari CEO indicated that the brand’s focus on the women’s watch segment has provided a stabilizing effect during these unpredictable times. Notably, Bulgari produces most of its own components, such as cases, dials, and movements. This vertical integration allows the company to adjust its manufacturing processes, giving it an edge over competitors who may rely more heavily on external suppliers.
One notable aspect of Bulgari’s approach is its strategy emphasizing “Less But Better,” as outlined by Babin earlier this year. This philosophy resonates with consumers looking for value in their purchases, particularly as they navigate economic uncertainty. By allowing customers to invest in fewer but higher-quality items, Bulgari aligns itself with contemporary consumer expectations while fostering brand loyalty.
Furthermore, Babin cited that Bulgari is witnessing ‘more than double-digit’ growth, fueled by “natural upselling” requested by clients, signaling an inherent demand for luxury products despite the challenges faced in the broader market. This growth underlines the potential for recovery as brands recalibrate their strategies in accordance with evolving consumer behaviors.
As we analyze the current state of the luxury sector, it becomes evident that adaptability is key. Companies like Bulgari, armed with innovative approaches and a focus on quality, appear well-positioned to navigate the complexities of the market. The combination of online retail strategies, vertically integrated manufacturing, and a refined understanding of customer needs will likely play a critical role in shaping the future of luxury in China.
The next two years will undoubtedly be pivotal for luxury brands in China as they seek to reclaim their status within an altered economic environment. By prioritizing consumer insight and leveraging the power of digital engagement, these companies can foster resilience and ensure a fruitful recovery.
