As Chinese Preferences Shift, A Wakeup Call Awaits Luxury Brands

As Chinese Preferences Shift, A Wakeup Call Awaits Luxury Brands (Jing Daily)

• The article discusses the on-going shift among Chinese consumers away from Western brands, which started about three years ago and is now reportedly impacting the luxury segment as well.
• According to the author of a quoted Wall Street Journal article, “[a]s the Chinese economy shifts inward, McKinsey predicts between $22 trillion and $37 trillion of economic value—or between 15% and 26% of global gross domestic product—could disappear as supply chains shrink and other changes ripple through the global economy”.

Analysis and Comments

• This was a trend that some analysts talked about; there is a clear shift toward domestic Chinese brands.
• While this transition is at an early stage, and may still be reversible, it does raise some questions about how well some western brands are managing the transition in China.
• Part of the issue seems to be around age profile, with millennials & Gen Z apparently accounting for roughly 80% of luxury consumption. Another important factor could also be greater importance in China given to digital marketing (helped by the vertically integrated nature of Chinese digital ecosystems).
• Finally, it is not clear just how important the current trade dispute might be having at a social level, encouraging a shift from imported to domestic products.