Chinese Luxury Spending Pivots to Prestige Beauty Over Designer Bags

Chinese consumer appetite for luxury is evolving, with prestige skincare and cosmetics now outperforming high-end handbags and leather goods. This shift comes as a prolonged property market downturn and weaker economic confidence make even affluent shoppers more price-conscious, favoring attainable luxuries over high-ticket discretionary items.

A Shift in Spending Habits

Analysts observe that China's aspirational middle-class consumers are not necessarily trading down to cheaper alternatives but are reallocating their spending. Instead of purchasing entry-level items from top-tier luxury houses, they are opting for premium products in more affordable categories like beauty.

"The aspirational (Chinese) consumer has not traded down. She has moved to the top of a category she can comfortably afford, instead of the bottom of one she cannot," said Jacques Roizen, co-founder of Shanghai-based Foresight Performance Partners. This trend is supported by research from consultancy Oliver Wyman, which found that 37% of affluent Chinese consumers intend to spend more on prestige beauty in the next year, compared to just 4% for leather goods.

Skincare is seen as a recurring, justifiable expense for self-care, making it resilient during periods of economic uncertainty. "Leather goods are the opposite: high-ticket, discretionary, and easy to postpone," noted Oliver Wyman principal Kenneth Chow.

Diverging Fortunes for Brands

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The performance gap between beauty specialists and traditional luxury conglomerates is widening. Companies focused on high-end cosmetics are reporting robust growth in China, while those reliant on leather goods are seeing demand stagnate.

• L'Oreal: The company's Luxe premium business grew 10% in China last quarter, with CEO Nicolas Hieronimus noting that luxury and dermatological skincare brands are growing at around 7% in the country.
• Estée Lauder: CEO Stephane de la Faverie said the company anticipates prestige beauty's growth to accelerate in its 2027 fiscal year, with mid-single-digit percentage growth expected in China.
• LVMH: The Louis Vuitton owner reported that Chinese spending was "essentially flat" in the first half of the year, according to finance chief Cecile Cabanis.
• Kering: The Gucci owner stated its China sales were still down in the second quarter. CEO Luca de Meo described the market as "one of the most challenging and competitive in the world."

Market Outlook and Context

After a sharp downturn in 2024, China's luxury market has experienced a choppy recovery. Executives from traditional luxury houses remain cautious. Hermes CEO Axel Dumas said he did not see "any tremendous improvement" in China, describing the market as stable rather than recovering.

This paradigm shift suggests that the boom years driven by entry-level luxury purchases may not return in the same form. Analysts believe brands waiting for that specific consumer to return may be disappointed. As Roizen of Foresight Performance Partners put it, the Chinese middle class has shifted its luxury mindset from "YOLO (you only live once) to YONO - you only need one."