---
title: "A luxury 'phobia' is gripping these consumers. It's a red flag for brands like Chanel and Gucci."
description: "A shift in consumer behavior in China is leading to a decline in demand for Western luxury brands like Chanel and Gucci, as a phenomenon termed \"luxury-phobia\" emerges. Consumers are favoring local br"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/274392394.md"
published_at: "2026-01-31T15:15:15.000Z"
---

# A luxury 'phobia' is gripping these consumers. It's a red flag for brands like Chanel and Gucci.

> A shift in consumer behavior in China is leading to a decline in demand for Western luxury brands like Chanel and Gucci, as a phenomenon termed "luxury-phobia" emerges. Consumers are favoring local brands that offer better value and cultural resonance. The economic backdrop includes a stagnant property market and a growing social stigma against ostentatious spending. As a result, brands that adapt to local preferences and prioritize utility over status are thriving, while traditional luxury brands face challenges in this new landscape.

Tanner Brown In China, conspicuous consumption is out, and 'local heroes' are in Lengthy queues outside boutiques operated by Western luxury brands in China were, in years past, a not-uncommon occurrence. For a decade, the global luxury industry operated on a simple axiom: As China goes, so goes the bottom line. But, as we've moved into 2026, that engine of aspirational spending hasn't just slowed; it has fundamentally recalibrated. In the high-end shopping districts of Shanghai's Jing'an and Xintiandi, the queues that once snaked around Louis Vuitton and Chanel have thinned. The era of 'easy growth' for Western consumer brands in China is over. Taking their place is a phenomenon economists are calling "luxury-phobia," a psychological and financial retreat from overt status symbols in favor of "local heroes," homegrown brands that prioritize cultural resonance and extreme value over European heritage. The wealth effect in reverse The shift is rooted in a brutal mathematical reality. For the average middle-class household in Shanghai or Shenzhen, the "wealth effect" of the 2010s has evaporated. With nearly 70% of Chinese household wealth tied to a property market that remains in a multiyear corrective phase, the appetite for $3,000 handbags has vanished along with home equity. "In 2021, a luxury purchase was a reward for an appreciating asset," says Li Guwen, a 32-year-old marketing professional who recently traded her Porsche Macan for a top-of-the-line Xiaomi SU7 Ultra. "In 2026, it feels like a liability. I want technology and utility, not a logo that reminds me of how much my apartment value has dropped." This "consumption downgrade" is not a move toward poverty but toward a militant form of rationalism. Total retail-sales growth slowed to a tepid 0.9% in December 2025, but underneath that figure a violent rotation is occurring. Don't miss: China has been open to Western consumer brands for decades. Those brands still have a lot to learn about Chinese consumers. The rise of the 'local heroes' While LVMH (FR:MC) (LVMHF), parent to Louis Vuitton, Dior, Loewe and other famed "maisons," and Gucci and Saint Laurent, et al., parent Kering (FR:KER) (PPRUY) navigate a "challenging environment," China's so-called local heroes are reporting record numbers. Brands like Songmont (handbags), Laopu Gold (jewelry) and Li-Ning (apparel) have successfully decoded the "Guochao" 3.0 trend - a blend of high-tech manufacturing and traditional aesthetics that feels more "authentic" to Gen Z consumers in China than Western imports do. 'China's shoppers are becoming more deliberate in how they balance value, convenience and experience.'Bruno Lannes, Bain & Co. The dominance of new-energy vehicles, or NEVs, serves as the blueprint. By the end of 2025, NEVs accounted for 60% of all passenger-car sales in China. Domestic giants like BYD (CN:002594) (HK:1211) and NIO (NIO) didn't just compete on price; they outinnovated the German legacy automobile makers on software, interior "living room" experiences and localized AI. Now, that same disruption is hitting the vanity sector. Why buy a Swiss watch when a Huawei smartwatch offers a comprehensive health ecosystem integrated with your smart home? Why buy a French moisturizer when a local "C-beauty" brand like Proya offers the same active ingredients for a third of the price, delivered to your door in 30 minutes via Meituan? From the archives (July 2025): Western brands still carry cachet in China's lower-tier cities. So that's where they're turning their attention. The social stigma of spending There is also a growing social dimension to luxury-phobia. In an era of "common prosperity" and a tightening labor market for youth, ostentatious displays of wealth have become viewed as tone-deaf. On platforms like Xiaohongshu, the trending aesthetic is "quiet quality" - marked by high-quality, unbranded goods that signal intelligence and savvy rather than raw purchasing power. Pedestrians take shelter from the rain at the entrance of a Gucci store in Shanghai. "China's shoppers are becoming more deliberate in how they balance value, convenience and experience," says Bruno Lannes, a senior partner with Bain & Co.'s consumer-products and retail practices. Policy vs. psychology Beijing is acutely aware of the drag this caution places on the economy. The government's 15th Five-Year Plan, which officially launched this month, focuses heavily on "investing in the person" through expanded social safety nets. The logic is clear: If the state covers more healthcare and pension costs, households will feel safe enough to stop their "precautionary saving" and start spending again. However, the 2026 consumer remains unpersuaded. Deflationary pressures - with inflation hovering near 0.8% - have created a "wait and see" mentality. If a refrigerator or a smartphone will be cheaper in three months, why buy today? Investor takeaway For global investors, the takeaway is stark. The era of "easy growth" for Western consumer brands in China is over. The companies winning today are those that have localized their supply chains and their design language to match a more frugal, nationalistic and tech-savvy consumer. The "downgrade" isn't a temporary dip - it's a structural evolution. China is no longer just the world's factory, it is now its own toughest competitor, and it's the local heroes that are winning the battle for the Chinese wallet. Tanner Brown covers China for MarketWatch and Barron's. More Tanner Brown dispatches: China's reclusive young 'rat people' stay in bed all day and gnaw away at the country's economic prospects Penny pinchers are putting the squeeze on the all-powerful Chinese central government Weight loss has become the hottest new Chinese consumer craze How China's aging boom turned into an investment story -Tanner Brown This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 01-31-26 1015ET

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.