As China’s economic growth slows down and consumer confidence remains low, the luxury goods market is facing an unprecedented chill. Global luxury giant Gucci, after closing its iconic stores at Shanghai New World Daimaru and Ruco Line earlier this year, recently announced the closure of its Aoyama store at Shanghai Bicester Village on June 2nd. This series of store closures has raised deep concerns in the industry about the future outlook of the luxury goods market in China.
According to reports from “China Business News,” consumers have recently received closure notices from Gucci’s Bicester Shanghai Village store employees.
It is worth noting that the Aoyama store was one of the most outstanding stores in the Shanghai Bicester Village, and its closure undoubtedly intensifies concerns about Gucci’s performance in China. This also signifies that Gucci’s strategic contraction in the Chinese market is accelerating.
In fact, Gucci’s store closure actions did not start this year. Since the second half of 2024, the brand has made significant adjustments to its store layout in China, closing stores in Fuzhou, Dalian, Shenyang, Taiyuan, and other locations.
In February of this year, Gucci also simultaneously closed its Ruco Line store and New World Daimaru store in Shanghai, reducing the number of its stores in Shanghai to 7. This means that on the renowned luxury goods shopping street Nanjing West Road, Gucci now only has one store in Shanghai’s Grand Gateway Plaza.
Starting its rapid expansion in 2010 with over 80 stores at one point, Gucci is now facing an overall contraction of its business in China. Kering Group, Gucci’s parent company, has stated that the main reasons for Gucci’s declining performance include weak consumption in the Chinese market, brand transformation adjustments falling short of expectations, and changing consumer demands, among other factors.
CEO of Shenzhen’s Siqisheng Company, Wu Daiqi, previously stated that the downturn of high-end luxury brands is related to both the overall economic environment and the decreasing importance of these brands among the new generation of Chinese consumers.
Gucci’s plight is just a microcosm of the current cold winter in the Chinese luxury goods market. Other luxury giants are also facing severe challenges.
Richemont, the world’s second-largest luxury goods company based in Switzerland, closed all its online platforms in China under its e-commerce platform Yoox Net-a-Porter on March 20, including its Tmall stores, WeChat mini-programs, Xiaohongshu, and Douyin flagship stores, and terminated after-sales services on April 22, marking its complete withdrawal from the Chinese market.
The latest financial report from the world’s largest luxury goods company, LVMH, showed a marginal 1% year-on-year revenue increase in 2024, while the revenue in the Asian region including China (excluding Japan) declined by approximately 11%.
According to Bain & Company’s “2024 China Luxury Goods Market Report,” the sales volume of the mainland China personal luxury goods market is expected to decline by 18% to 20% in 2024. The report indicates that a lack of consumer confidence and cautious spending are the main reasons for the market contraction. Even high-net-worth customers are becoming more conservative, choosing to shift their consumption towards assets with investment value.