 "'Luxury shame' hits China's luxury market as elites dial down on austerity")
A recent wedding in one of India's wealthiest families turned into a spectacle that captivated the rich and influential around the world. Millions of Indians watched the clips of the extravagant affair with great enthusiasm.
The fact is, it is commonplace among the affluent to indulge in luxury collectibles and flaunt their wealth on social media in the country. However, a different scenario is unfolding in neighbouring China. The elite in the Land of the Dragon are keeping their luxurious lifestyles under wraps as the country faces economic challenges. A significant number of China’s wealthy are refraining from ostentatious purchases, putting the nation’s luxury market under strain.
According to a June report by consultancy group Bain and Company, the emerging trend of 'luxury shame' is now becoming evident, impacting consumption among not just the affluent but the middle class as well. While elite customers fear appearing ostentatious, the middle class is steering clear of aspirational spending.
Luxury shame
The term 'luxury shame' is not new; it gained traction in the United States following the Lehman Brothers crisis of 2008-09. Even those who could afford expensive items did not want to be seen using them. A similar trend is now taking root in China as the country’s GDP growth falls short of expectations, and the unemployment crisis is so severe that President Xi Jinping made it the 'top priority' in May this year.
Post-Covid, the Chinese economy has been under pressure due to slowing global demand, high debt in its real estate sector, and trade tensions with several Western nations. As the country grapples with multiple economic issues, the country's luxury market has contracted, with affluent shoppers diverting their funds to investment avenues that are 'more subtle' and 'less visible' amidst economic uncertainty.
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Communist crackdown
In China, nearly every aspect of life is influenced by the ruling Chinese Communist Party (CCP). Here as well, the political stance of the party has played a role in intensifying the 'luxury shame' trend. Discouraging any form of 'money worshipping', the CCP has reignited the concept of 'common prosperity'.
First introduced by Mao Zedong in the 1950s, the idea of creating moderate wealth for all has been actively promoted by the Communist Party since 2021, following the pandemic’s onslaught on numerous manufacturing jobs.
Earlier this year, the CCP even banned a few online influencers - often known for their lavish lifestyles - from Chinese social media platforms to curb displays of wealth.
Consumer rationale
Another consumer behaviour is reportedly contributing to the decline in luxury spending in the country: Chinese consumers, who were once willing to pay premium prices for foreign goods, now seek a clear correlation between a product’s price and its value.
According to the report, customers have become more 'sophisticated' and are now making purchases based on a product’s quality or the value proposition offered by a brand. This shift in consumer mindset, coupled with the socio-political and economic pressures, has created a complex landscape for luxury brands in China, forcing them to adapt to the new reality.