Starting this month, Chinese shoppers can snap up a small beige, crocodile-patterned version of Balenciaga’s iconic Hourglass handbag for $1,947, or 35% off on the mainland’s dominant e-commerce platform, Alibaba Group Holding Ltd.’s Tmall. That price is cheaper than what’s listed on the brand’s official websites globally and major luxury platforms including Farfetch. 

Balenciaga — part of French luxury giant Kering SA — averaged a 40% discount on sale items in three of the first four months of 2024, according to people familiar with the matter, who asked not to be identified discussing private data. 

The brand has also more than doubled its number of discounted products on Tmall, accounting for more than 10% of its inventory on the platform from January to April, the people said.

During the same period last year, Balenciaga only discounted items in January, and at an average of roughly 30%, according to the people. It had no markdowns at all in the first four months of 2022, they said. 

A similar trend can be seen for other labels. Capri Holdings Ltd.’s Versace, LVMH’s Givenchy and Burberry Group PLC have all slashed prices, some by more than half, on Tmall and other domestic platforms this month. Versace’s average discount jumped from roughly 40% at the start of 2023 to over 50% this year, according to the people familiar.  

Versace and several other premium brands have also offered discounts for longer periods of time so far this year than they did in 2023, the people said. The number of products on sale shot up to the hundreds in the first four months from only a few last year, they added.

The price war would have been unthinkable just a few years ago for labels whose growth stems from an image of exclusivity and products that keep their value. It’s rare to see luxury brands, which usually try and clear stock out of sight in outlet malls or through private sales, put such deep discounts front and center on a flagship platform. 

“What I find surprising and frankly ill-advised is that these discounts are being offered on the most visible consumer touch point in the world, which is Tmall,” said Jacques Roizen, managing director of China consulting at Digital Luxury Group. It’s “the equivalent of hosting a public sale on Fifth Avenue or the Champs-Élysées.”

Kering declined to comment, while Capri and LVMH didn’t respond to requests for comment. Burberry didn’t comment on the discounts. 

The strategy underscores the predicament global fashion houses face in the mainland as an economic slowdown erodes household wealth. While upscale labels are counting on China to boost revenue and improve performance, the country’s middle class — a pillar of the global luxury market — is growing increasingly frugal, holding out for sales or backing away altogether from major purchases. 

Compounding some luxury brands’ pain are high return rates on Tmall, fueled by the platform’s promotional campaigns allowing people who meet certain spending thresholds to obtain discounts — even if they later return some of their purchases. That’s led some shoppers to game the system, ordering expensive items just to secure rebates.

Underscoring the challenging environment, Richemont’s luxury e-commerce platform Net-A-Porter is pulling out of China, with its operator in the country — a joint venture between Richemont and Alibaba — announcing internally that the firm will soon shut down, industry media including WWD reported Friday. 

Richemont and Alibaba didn’t immediately respond to requests for comment. 

Meanwhile, labels at the highest end of the luxury market, including Hermes International SCA, Chanel and LVMH’s Louis Vuitton, appear to be faring better. They’ve foregone discounts, limited e-commerce exposure and focused on cultivating high net worth clients, making them more immune to economic downturns. 

Some brands, including Kering’s Gucci, Prada SpA and sister brand Miu Miu, also refrain from offering public discounts on China’s e-commerce platforms, said the people familiar. 

While discounts might help clear inventory in the short term, frequent price cuts could make brands appear too accessible and drive away coveted VIP clients, said Angelito Perez Tan, Jr., co-founder and CEO of RTG Group Asia, whose businesses include a luxury consultancy. Some high-end labels discount merchandise around events like Black Friday, but markdowns are usually lower than the current China sales, he said. 

Online orders made up nearly half of China’s luxury revenue last year, according to consultancy Yaok Group, with Tmall capturing the majority of that spending.  

Faltering demand from the Chinese market has already hurt luxury earnings. Kering warned in April of a potential first-half profit drop of as much as 45%, hurt by weak Gucci sales in China. Burberry’s stock has more than halved in the past year off weak demand in China and the US. Chanel cautioned that conditions, even at the higher end, are growing more challenging. 

Japan’s weak yen is also contributing to slowing sales in China, as people flock there seeking out the lowest prices they can find.

“It seems natural that, given this context, brands that are selling less than they had anticipated try to monetize their inventory and offer promotions,” said Sanford C. Bernstein retail analyst Luca Solca.