Luxury brands are turning to China to drive sales, but failing to adapt to shifting consumer expectations puts them at risk.

WHAT HAPPENED: With China on a faster road to recovery than Europe and the U.S., global luxury brands are relying on China to drive sales. 

WHY IT MATTERS

European luxury players, now more prevalent in China than ever, are struggling as the cost of doing business in the country continues to swell. With a growing reliance on this market, they are facing increased competition from local digitally-native brands and pressure to create unique digital strategies. While sales in China made up one-third of total sales for Hermès and Burberry last year, 70% of Chinese consumers made their luxury purchases abroad or in Hong Kong. With travel expected to remain stagnant until 2023, it’s unclear how many high-ticket luxury purchases will be made locally in China. Part of European heritage brands’ appeal to Chinese consumers is the ability to purchase products abroad that weren’t available at home. But now that luxury brands have expanded their physical footprint in Asia, they will need to create branded digital experiences to stand out—both in China and other global markets.