French luxury brand Chanel is intensifying its layoffs in the Chinese market, with plans to cut nearly 20% of its workforce in China. In response to this, Chanel China has chosen not to comment. Meanwhile, the performance of American beauty giant Estée Lauder in the Chinese market has declined, with the continued softness of the high-end beauty market in China being one of the reasons.
Recently, French luxury brand Chanel further expanded its layoffs in the Chinese market, shocking the industry. On September 2nd, the Southern Metropolis Daily reported that Chanel has increased its layoffs in the Chinese market. According to multiple Chanel employees, the scope of this round of layoffs has expanded from contract expirations and performance losses to include senior executives with indefinite contracts, some of whom have been with the company for over ten years.
It is reported that Chanel’s China headquarters plans to reduce its workforce from around 460 people to about 370 people, with a layoff rate close to 20%, implemented in the form of labor contract termination agreements, with a compensation plan of “N+7”. Back-end functions such as technology, digitization, and human resources, with higher salary levels, have become the primary targets of this round of layoffs.
Facing media inquiries, Chanel China stated that they have chosen not to respond. However, their latest financial report has revealed the severity of the market situation: Chanel’s total revenue for 2024 decreased by 5.3% to $18.7 billion, and net profit decreased by 28.2% to $3.4 billion. This is the first significant drop in revenue for Chanel since 2020, lagging behind Hermes, LVMH, and Prada in terms of growth.
Since the closure of stores during the COVID-19 pandemic in 2020, Chanel’s brand has experienced a simultaneous decrease in both revenue and profit for the first time. The financial report shows that, by region, sales in the Asia market including China decreased by 9.3%, the Americas market declined by 4.3%, while sales revenue in the European market increased by 1.2%.
Chanel pointed out that the significant slowdown in sales in the Chinese market is a major reason for the pressure on performance, as this market accounts for approximately half of the group’s revenue. Analysts point out that as international brands enter a decline phase, after years of rapid growth, the Chinese market has bid farewell to the “easy win” era. Generational shifts in consumer patterns, upgraded consumer trends, and the rise of local brands are transforming it into a high-risk investment target that requires new strategies to address.
Nevertheless, Chanel still plans to open new stores in China this year. However, Bianchi, Deputy CEO of another French luxury giant, LVMH, warned that Chinese consumers have reduced spending on outbound travel and consumption recently. According to data released by LVMH, the group’s revenue in the Asia-Pacific region, including China, decreased by 11% in the first quarter.
Apart from Chanel, the financial reports of American beauty giant Estée Lauder also directly reveal the challenges of the Chinese market. Estée Lauder Group announced, as reported by Southern Metropolis Daily, that under the previously announced restructuring plan, as of August 13th, they have approved the layoffs of 3,200 employees globally, with severance pay and related costs reaching $747 million. According to the plan disclosed in February, an additional 2,600 to 3,800 employees will be laid off, with the goal of reducing 5,800 to 7,000 employees, accounting for approximately 12% of the total workforce. This restructuring will bring cost savings of $800 million to $1 billion annually, as part of the group’s “turnaround” strategy. In the 2025 fiscal year ending June 30, Estée Lauder Group’s net sales decreased by 8% to $14.326 billion, with a net loss of $1.133 billion.
In the financial report for the 2024 fiscal year, Estée Lauder mentioned that the decline in performance was due to the overall softness of the high-end beauty market in China, as well as the challenges faced by the Asia travel retail industry that put pressure on sales.
In the first quarter of the 2025 fiscal year, Estée Lauder’s net sales were $3.36 billion, a 4% decrease year-on-year. And in explaining the losses in the first quarter of the 2025 fiscal year, the continued softness of the high-end beauty market in China was cited as one of the reasons.
For the forecast of the third-quarter financial report ending in March 2025, Estée Lauder expects a net sales decline of 10% to 12%. The continued slump in the Chinese market remains the main reason.
Estée Lauder’s historical financial reports show that the performance of the Chinese market directly impacts the overall performance of Estée Lauder.
The collective “failures” of international giants in the Chinese market are not accidental but are rooted in the backdrop of the economic downturn in China and the downgrading of consumer spending.
Due to the macroeconomic downturn, the real estate crisis, and increased employment uncertainty, Chinese consumers’ disposable income and willingness to spend have decreased. People are turning to “precautionary savings,” reducing high-end discretionary spending on non-essential items.
In addition, Chinese domestic beauty brands have entered the market competition, seizing market share with products more tailored to local needs and more cost-effective prices. The decline in income among the public has led to a downgrade in consumption; they are no longer blindly pursuing international luxury brands but are more inclined towards affordable alternatives with better value for money.