Why are fashion labels ending discounts in China? Can this rebuild brand value?
Some luxury labels are pulling back from steep markdowns in China, seeking to rebuild an image of exclusivity to lure back wealthy shoppers whose spending remains less affected by economic slowdown.
None of the products sold by Kering SA's Balenciaga on Tmall, China's dominant e-commerce platform, were discounted in the first quarter of this year – or even during China's biggest annual online shopping festival in November – according to data consultancy Re-Hub.
That's a marked contrast to the brand's average discount of about 41% on Alibaba Group Holding Ltd's-owned Tmall during the same periods the year before.
Versace, set to become part of Prada SpA after a US$1.4bil (approximately RM6.1bil) acquisition, cut prices for an average of just 3% of its products on Tmall in the first quarter, compared to 12% in 2024 – and the discounts weren't as steep.
Italian luxury house Valentino Fashion Group SpA also lowered the number of discounted products available on Tmall for January, and pulled markdowns entirely in February and March.
The avoidance of discounts, which appear counter-intuitive given the market's sluggish demand, marks an about-turn in luxury labels' strategy in China.
"It's a move from chasing traffic and short-term revenues to cultivating long-term brand affinity,' Re-Hub's chief executive officer Max Peiro said.
"This shift is not merely operational-it's foundational. Brands are investing in relevance, desirability, and premium experiences to foster long-term loyalty.'
Read more: Stakes are high for luxury fashion, as brands reshuffle their head designers
Discounting is proving less effective in driving sales growth and risks undermining brand value, he added.
Even the most exclusive premium fashion houses – including Hermes, Chanel and Louis Vuitton, which have typically eschewed online discounts – are stepping up efforts to maintain their exclusive images among wealthier Chinese, including offering more VIP-only events and shopping experiences like in-store museums.
The pivot away from discounts comes as global fashion houses reshape their strategies in China, where a decades-long luxury boom driven by the middle class is coming to an end as a persistent property slump and anemic post-Covid economic growth turns once-spendthrift Chinese shoppers into cost-conscious bargain hunters.
The country's middle class – a pillar of the world's luxury market – is turning to athleisure and cheaper dupes of the luxury brands it used to covet, or holding off on purchases at all.
Their pullback helped lead to an up to 20% drop for China's luxury market sales last year, Bain & Co estimates.
That's leading brands to shift their focus back to luring wealthier Chinese who'll still be willing to splash out despite the increasingly shaky consumer sentiment.
Success in China is critical for luxury brands, which are also facing challenges in their other largest market – the US, where consumer sentiment has slumped to an almost five-year low amid uncertainty from Donald Trump's tariffs.
Balenciaga, Versace, Valentino and Alibaba didn't respond to requests for comment.
Tmall's changing role
The changing pricing strategy also reflects luxury labels' new understanding of Tmall and the crucial role it plays in shaping consumer perceptions about a brand in the mainland, said Jacques Roizen, managing director of China consulting at Digital Luxury Group.
As Tmall becomes more important for sales, brands' pricing on the platform can help telegraph wider shifts in their China strategies.
While ultra-premium brands including Hermes and Chanel still make most of their sales from physical stores, online channels are gaining increasing importance for lower-tier luxury labels.
The ecommerce market accounted for 46% of China's total luxury sales last year and is expected to surpass offline sales in three to five years, according to consultancy Yaok Group.
As products return to full price, pressure will grow for some labels over how to offload excess stock, after some of last year's deep Tmall discounts reflected panic over unsold inventory.
Read more: Hermes overtakes LVMH to become the most valuable luxury fashion company
And not all high-end brands are pulling back from sales – some, like Richemont's Chloe and Capri Holdings Ltd's Michael Kors, are offering markdowns on Tmall similar to those that were available in 2024.
Chloe and Michael Kors didn't respond to requests for comment.
Still, by curbing price cuts on the platform, a growing number of luxury brands are bringing their China pricing strategy more in line with their global approach – where they clear stock via discreet, private sales events that take place only limited times a year and there's little visible public discounting.
"While smaller discounts may pressure short-term inventory clearance capabilities, the shift ensures a consistent brand message across all consumer touchpoints,' Roizen said.
"Brands that adapt early to this strategy are likely to lead the market recovery.' – Bloomberg
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Sun
3 hours ago
- The Sun
Asean's ambition of being world's fourth biggest economy by 2030 well within reach: Tengku Zafrul
KUALA LUMPUR: Asean's ambition to become the world's fourth-largest economy by 2030 is well within reach, provided the region sustains an annual gross domestic product (GDP) growth rate between 4% and 5%. Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz highlighted the region's robust growth prospects at the official launch of the Asean Economic Community (AEC) Strategic Plan today. 'Our economists have thoroughly analysed the growth projections for all Asean economies under current conditions, and we are confident that the targets are indeed achievable,' he said. Tengku Zafrul noted that the Asean Secretariat projects regional GDP growth at 4.7% for 2025, as presented at the latest Asean Economic Ministers' Meeting. 'But things are very dynamic. It depends on the global economic situation. The IMF (International Monetary Fund) will also produce their forecast of global growth,' he said, stressing the need for vigilance amid shifting external factors. Tengku Zafrul emphasised the AEC Strategic Plan's role in keeping Asean's policies current and responsive to evolving business needs and emerging challenges. 'As the first instalment of this long-term vision, the plan serves as a comprehensive roadmap that outlines a clear and actionable path forward,' he said. The plan has been carefully crafted to implement the economic aspects of the Asean Community Vision 2045, leveraging the region's vast opportunities and potential. A key pillar of the plan is the establishment of a forward-looking digital economic framework, which is expected to double Asean's digital economy to US$2 trillion (RM4.5 trillion) by 2030. The focus on digital transformation, alongside sustained economic integration and resilience, positions Asean to not only achieve its growth targets but also to strengthen its global influence. On the domestic front, Tengku Zafrul sees positive signals from foreign investors in Malaysia, with no indication of existing investors withdrawing their commitments despite ongoing global uncertainties. 'So far, no existing investors have expressed any intention to exit Malaysia. They remain committed to their investments, and no cancellations have been announced.' However, he observed that new investors are adopting a more cautious, 'wait and see' approach, influenced by heightened geopolitical tensions – particularly between the United States and China – and broader global volatility. Looking ahead, Tengku Zafrul said his trade negotiations in Washington on June 18 will focus on reducing tariffs on Malaysian exports. 'The negotiations are essentially to address the current tariff structure, where the US has imposed a 24% tariff on Malaysia. Our first goal is to bring that down.' The second objective is to identify key sectors where Malaysia believes tariffs should be reduced even below the 10% floor, targeting industries important to both Malaysian exporters and the US economy. In April, the US government announced new tariff measures affecting more than 60 countries, including Malaysia. The implementation of these tariffs has been paused for 90 days to allow room for negotiations.
The Star
3 hours ago
- The Star
European foreign ministers ready to toughen action against Russia
Germany's Minister of Foreign Affairs Johann Wadephul, Poland's Minister of Foreign Affairs Radoslaw Sikorski, European Union High Representative for Foreign Affairs and Security Policy Kaja Kallas, Ukraine's Foreign Minister Andrii Sybiha, Italian Foreign Minister Antonio Tajani and NATO Secretary General Mark Rutte attend a joint press conference, on the day of a meeting to discuss the latest developments in Ukraine and security in Europe, at Villa Madama in Rome, Italy, June 12, 2025. REUTERS/Guglielmo Mangiapane ROME (Reuters) -Foreign ministers from large European countries said on Thursday they were ready to step up pressure on Russia, "including through further sanctions" involving the energy and banking sector, to weaken Moscow in its war with Ukraine. The meeting in Rome involved representatives from France, Germany, Italy, Poland, Spain, Britain and the European Union. NATO Secretary General Mark Rutte and a Ukrainian representative also joined the talks. "We are determined to keep Russian sovereign assets in our jurisdictions immobilised until Russia ceases its aggression and pays for the damage it has caused," the countries said in a statement. (Reporting by Angelo Amante, editing by Gavin Jones)
New Straits Times
3 hours ago
- New Straits Times
BlackRock aims to grow revenue to US$35bil and more by 2030
NEW YORK: BlackRock said on Thursday it was aiming to grow its revenue to US$35 billion and more by 2030, as the asset management giant expands its foothold in private markets. The New York-based firm, which reported revenue of US$20 billion for 2024, will hold an investor day on Thursday that is expected to provide insight into the firm's strategic priorities and its growing focus on private markets. The world's largest asset manager, overseeing US$11.58 trillion as of the end of the first quarter, last year expanded its presence in private markets through a series of acquisitions that BlackRock's boss Larry Fink said were transformational for the New York-based firm. BlackRock spent about US$25 billion in 2024 on infrastructure investment fund Global Infrastructure Partners and private credit business HPS Investment Partners. It also struck a US$3.2 billion deal to acquire UK data provider Preqin. That acquisition officially closed in March this year. BlackRock is also aiming to double its market cap to US$280 billion and targeting US$400 billion of cumulative fundraising in private markets by 2030, it said in an investor presentation on Thursday. "I think investors are going to want more granular details and more colour on BlackRock's strategy to increase exposure to alternative assets," said Cathy Seifert, an analyst at CFRA Research who covers BlackRock. Private assets generate significantly higher fees than exchange-traded funds (ETFs), a core part of BlackRock's business through its iShares franchise. BlackRock is aiming for its private markets and technology businesses to make up 30 per cent or more of the firm's total revenue by 2030, up from 15 per cent in 2024. In his 2025 annual chairman's letter to shareholders, BlackRock's chairman and CEO Fink said protectionism had returned with force as a result of a wealth divide that could be countered by offering more investors access to high-return private markets such as infrastructure and private credit. Ben Budish, an analyst at Barclays, said he expected updates from the company on potentially creating indexes based on private markets after the acquisition of private markets data provider Preqin. "Looking at what BlackRock did with iShares and ETFs, is there a way to do that with private markets? … I'm sure there's more details to come on that," he said. Private credit, where non-bank institutions lend to companies, has experienced significant growth in recent years due to stricter regulations that have increased the cost for traditional banks to fund higher-risk loans. But broader market volatility caused by US President Donald Trump's aggressive stance on tariffs has led to slower dealmaking in private markets in general, raising some concerns there may be a mismatch between money available for private lending and not enough places to invest it. Investors may also look for any signs regarding succession at the firm. Fink, 72, has led BlackRock since co-founding it in 1988. A recent wave of senior executive departures has reignited speculation about his eventual successor, even as Fink has signalled no immediate plan to step down. "The firm would do itself a favour by highlighting the depth and breadth of their management bench, particularly since the company's business model is expanding and potentially becoming more complex," said Seifert.
