Core Viewpoint - The luxury goods market is experiencing a downturn, particularly in China, as consumer behavior shifts towards more conservative spending due to economic instability and changing perceptions of value [5][10][32]. Group 1: Market Performance - Customer traffic at luxury retail locations, such as Beijing SKP, has decreased significantly, with reports indicating a two-thirds drop compared to three years ago [3][4]. - Major luxury brands like Hermès and LVMH have reported disappointing financial results, with Hermès achieving a revenue of €4.13 billion in Q1 2025, a 7% year-on-year increase but below market expectations [6][8]. - LVMH's revenue fell by 3% to €20.3 billion, while Kering's revenue dropped by 14% to €3.883 billion, with the Asia-Pacific market seeing a 25% decline [8][9]. Group 2: Consumer Behavior - The middle class, particularly represented by wage earners, is increasingly cautious, with many former luxury consumers now opting to only look rather than buy [14][16]. - A survey indicated that 65.95% of previous luxury consumers have reduced their purchasing frequency, with 81.25% citing a shift in consumption mindset towards value for money [19][20]. - Consumers are also more inclined to purchase luxury goods abroad due to lower taxes and favorable exchange rates, leading to a decline in domestic luxury spending [21][22]. Group 3: Brand Strategy and Market Adaptation - Luxury brands are facing challenges in maintaining their pricing strategies, as continuous price increases have led to a loss of entry-level consumers [25][26]. - Despite the challenges, brands like LVMH and Hermès continue to emphasize price increases, with LVMH indicating a 2% to 3% annual price increase potential [26][27]. - The rise of local brands and affordable luxury options, such as gold jewelry, is drawing consumers away from traditional luxury brands, prompting a need for luxury brands to adapt their strategies [27][30]. Group 4: Future Directions - To attract younger consumers, luxury brands are diversifying their product offerings, including entering the beauty market and collaborating with popular IPs [31][32]. - The shift in consumer preferences towards value and functionality suggests that luxury brands must rethink their marketing and product strategies to sustain growth in a changing market landscape [32].

Core Viewpoint - The luxury goods market in China is experiencing a significant downturn, primarily due to the decline of the middle class and changing consumer behavior, leading to reduced sales and cautious expansion strategies by luxury brands [1][4][6]. Market Performance - Customer traffic at Beijing SKP has decreased by two-thirds compared to three years ago, with a sharp decline noted at the end of last year [1]. - Hermès reported a first-quarter revenue of €4.13 billion, a 7% year-on-year increase, but below market expectations of €4.16 billion [2]. - LVMH's first-quarter revenue fell by 3% to €20.3 billion, with declines across nearly all business segments [3]. - Kering Group's revenue dropped by 14% to €3.883 billion, with a 25% decline in the Asia-Pacific market [3]. Consumer Behavior - The middle class, particularly represented by wage earners, is increasingly cautious, with many former luxury consumers now only purchasing classic items or refraining from buying altogether [4][6]. - A survey indicated that 65.95% of previous luxury consumers have reduced their purchasing frequency, with 81.25% citing a shift in consumption mindset towards perceived value [6]. Pricing Strategies - Luxury brands' traditional strategy of price increases to filter consumers is losing effectiveness, as rising prices exceed consumer psychological thresholds [5][6]. - Despite the downturn, LVMH and Hermès continue to emphasize price increases, with LVMH indicating a 2% to 3% annual price increase potential [8]. Market Dynamics - The rise of gold and light luxury brands is diverting consumers from traditional luxury brands, with significant interest in local brands noted [8][10]. - Coach's parent company reported a 7% increase in sales to $1.584 billion, with a 45% rise in net profit, indicating a shift towards more affordable luxury options [10]. Future Trends - By 2030, millennials are expected to contribute over half of luxury goods purchasing power, prompting brands to adapt their designs and marketing strategies to attract younger consumers [11]. - Luxury brands are increasingly exploring collaborations with popular IPs and expanding into beauty products to engage younger demographics [11].