What is "luxury shame" and why does it scare China

The “luxury shame” is a socio-cultural phenomenon where people from the upper-middle class, during times of economic crisis, tend to feel ashamed of showing their material possessions for fear of being judged negatively by those with fewer economic resources. This phenomenon was first identified during the 2008 financial crisis in the United States when the wealthy tried to draw as little attention as possible to themselves. In China, luxury shame entered the country's popular discourse last May, after the Beijing government took a firm stance against the display of luxury, on social media and offline. In the same week, influencers like Wang Hong Quanxing (nicknamed the "Chinese Kim Kardashian"), Baoyu Jiajie, and Bo Gongzi were shut down on Douyin and XiaoHongShu (the Chinese versions of TikTok and Instagram, respectively) for focusing their content on opulence. This was shocking news for most internet users, as these creators were among the most followed names on the Chinese social scene. At the same time, the daily newspaper Beijing News reported that the Party's reasons were well-founded, arguing that “once materialism starts to spread, it can have a bad influence on teenagers. Therefore, this trend of luxury on the Internet must be stopped.” And although it has not completely halted, luxury in China is experiencing a significant crisis in 2024, due to multiple causes. Among the main factors, one cannot ignore the macroeconomic ones: inflation, the housing and job crisis, and a general reduction in global spending. People everywhere now struggle to spend as they once did, especially on luxury goods. While unemployment has been a crucial issue for years in the West,  it has become a recent problem in China. After 30 years of economic boom, the country faces a serious employment crisis for the first time among people under 40. In a context where high-fashion brands have heavily relied on Chinese clientele, could "luxury shame" set new market rules? Gen Z might play a key role in this shift.

With the death of logomania and streetwear and the rise of quiet luxury, consumer behavior trends have changed. In the past, a monogram was an essential symbol of wealth in China, but now the country has embraced the simplicity and elegance of the "if you know, you know" mindset. Aaron Lau, founder and CEO of Gusto Collective, a company specializing in brand tech and marketing, stated that customers have become more mindful and selective, gravitating towards brands that offer recognizable and long-lasting value. Over the past year, major luxury groups have reported significant losses in the Chinese market: Kering and LVMH saw declines of 25% and 14%, respectively. Many of the brands from these two luxury giants were at the center of attention during the creative director crisis over the past year, affecting the already fragile creative stability. However, this contrasts with the two luxury powerhouses, Hermès and Chanel, which continue to rise steadily in China by staying true to their historical vision. While Gucci reported a 28% drop in sales in the country, Chanel saw double-digit growth in Asia, planning store and flagship expansions throughout the region. The reason? According to Chinese social media, the country's Gen Z is less inclined to spend their savings on trendy items, preferring to invest in pieces that retain their value over time.

Gracie Chen, the former fashion editor of Hypebae China, stated that «Chinese Gen Z is moving towards a more relaxed and understated style, distancing themselves from opulence», suggesting that the interest in luxury hasn’t disappeared but is simply changing shape. Brands like The Row, Jil Sander, Lemaire, and Bottega Veneta have experienced a surge in popularity in China over the past year. Bottega Veneta saw a 5% increase in in-store sales in 2023, thanks to the Chinese market's performance. Social media trends clearly reflect this shift: the hashtag #quietluxury has garnered more than 16 million views on XiaoHongShu. Users, through daily outfits and style inspiration, showcase how to dress simply and elegantly while investing in luxury brands. Another ultra-popular trend from the past year, also under the macro umbrella of quiet luxury, is the “relaxed white girl style” (“白女松弛感”), where netizens in the Middle Kingdom have started romanticizing the typical Western girl, wearing niche activewear for Pilates, with a smoothie in hand and a simple but neutral bag. A look that contrasts with the traditional display of luxury represented by brands like Dior and Louis Vuitton. According to Antonin Ficatier, Editorial Director of YPulse, a market research company, «Chinese Gen Z is more inclined to invest in experiences and objects that bring joy, rather than in flashy luxury goods».

It is undeniable that Beijing's policies have influenced this shift; many high-net-worth individuals now prefer to leave mainland China to invest and migrate to the strong economies of Singapore or Japan, as well as Southeast Asian regions with great luxury potential, such as Thailand. At the same time, however, the panic surrounding "luxury shame" and the luxury crisis in China seems increasingly rooted in temporary anxiety, as the Chinese market continues to record annual growth, albeit slowly. Finding the right strategy for luxury brands remains a jackpot: some prefer to play it safe and those who, at a time of such insecurity, go for the all-in.