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.
As Chinese Preferences Shift, A Wakeup Call Awaits Luxury Brands
