WHEN Bernard Arnault, chairman and chief executive of French luxury group LVMH, showed up on the streets of Shanghai earlier last month, few were surprised he inspected his own company’s flagship stores such as Louis Vuitton and Dior. What raised eyebrows was his visit to Lao Pu Gold, a Chinese heritage jewelry brand, whose carved bangles and zodiac pendants once appealed mostly to grandparents.

The visit was more than a curiosity. It symbolized a market that is shifting under the feet of the European houses that have long dominated China’s luxury imagination.

As LVMH and its rivals deliver their weakest results in decades, a new wave of Chinese brands, including Lao Pu, handbag maker Songmont and toy collectibles giant Pop Mart, are pulling in consumers with products that cost less than a Birkin bag but carry equal social cachet.

The market is bruising for many foreign retailers. LVMH’s second-quarter revenue fell 4 percent, with its fashion and leather goods division slumping 9 percent, the steepest in nearly 30 years. Net profit in the first half plunged 22 percent to 5.69 billion euros (US$6.64 billion). Management blamed the poor performance on Asia, especially China, where spending by domestic shoppers and tourists has cooled. Similar pressure shows up in the numbers at Richemont, Kering and Hermès.

The problem is not that Chinese consumers have stopped buying luxury goods altogether, but more that their tastes are shifting.

Take Lao Pu Gold, often dubbed the “Hermès of gold.” Founded in 2009, the brand once leaned heavily on traditional motifs that younger buyers dismissed as old-fashioned. In recent years, it has reinvented itself with modern designs that emphasize cultural identify over nostalgia. The strategy has worked. Long queues often form outside its shops, while a limited network of only 41 outlets in top-tier malls creates a sense of scarcity.

The payoff shows in the numbers. Since its Hong Kong IPO last year, Lao Pu’s shares have surged more than 1,700 percent, lifting its market value above HK$121 billion (US$15.6 billion). The company forecasts 2025 profit of up to 1.5 billion yuan, more than triple the year before.

Analysts at Frost & Sullivan estimate its customer overlap with Cartier, Louis Vuitton and Hermès at 77 percent, underscoring how the same shoppers who browse Bulgari are also considering Lao Pu’s dragon bangles.

The appeal lies in what some call “status with roots,” the ability to display wealth while signaling pride in Chinese tradition. For a middle class squeezed by weaker disposable incomes, Lao Pu offers a way to trade not down but local, combining cultural resonance with luxury positioning.

Songmont is another Chinese newcomer that has built its reputation from scratch. Founded in 2013 by former Google designer Fu Song, the handbag maker targets the “lite luxury” niche with bags priced at 1,000-3,000 yuan — high enough to feel aspirational but low enough to attract China’s professional class.

The brand has built a following with a formula of premium leather, fashion-forward design and a touch of exclusivity that appeals to urban women seeking something beyond traditional imported logos. Carefully chosen brand ambassadors such as tennis champion Li Na and actor Jiang Qiming, both viewed as thoughtful and cultured rather than merely glamorous, have broadened appeal, helping Songmont reach male shoppers and wealthier clientele.

Founder Fu has spoken about designing her first bag, with the prototype hand stitched her mother, a trained seamstress. Early production was handled by grandmothers in her Shanxi Province hometown. Those humble origins, coupled with campaigns fronted by brand ambassadors, project both cultural pride and contemporary cool — a narrative European maisons struggle to replicate.

Songmont’s playbook mirrors that of Chinese consumer brands that are fast scaling up. Fueled by buzz on lifestyle platform RedNote and orchestrated influencer videos, the company has quickly opened flagship shops in prime retail locations and become a role model for other local business seeking to capture middle-class consumers weary of splashing out 5,000 euros for a foreign handbag.

Pop Mart might be the least conventional and arguably the discussed of the new breed of retailers. Its blind-box figurines, often priced under US$15, have sparked a collector frenzy that echoes fine art auctions. Limited editions resell at multiples. New store openings in Tokyo, Seoul and Los Angeles attract queues. And the company is now pushing into jewelry and higher-end collaborations, blurring the line between toys and luxury goods.

Skeptics may scoff at calling vinyl dolls “luxury,” but their popularity mimics luxury market factors like scarcity, resale value and social status. A rare Pop Mart figurine displayed in a WeChat post can generate the same enthusiasm as a Cartier ring. For Gen Z consumers eager to project individuality, Pop Mart scratches the itch.

What links Songmont, Lao Pu Gold and Pop Mart is not price but perception. They thrive on aesthetics that photograph well, a sense of fair value amid endless European mark-ups, and cultural or emotional resonance that foreign houses often struggle to capture.

Management consultant Bain & Co’s mid-year luxury report highlights the shift in consumer tastes.

“In China, the country’s key middle-class markets are in ‘wait-and-see’ mode,” the report noted. “Consumer interest for ‘new’ local luxury brands is progressively picking up, though still small in absolute terms.”

The shift from traditional luxury spending to one seeking cultural identity and design novelty may mean that a young woman might delay a Chanel purchase but happily queue for a Songmont tote, or balk at the price of a Cartier necklace and choose a Lao Pu pendant instead.

For LVMH and its peers, the threat is not that Chinese shoppers are abandoning luxury, but rather that they no longer define it by an origin in Paris, Milan or Geneva. A Songmont monogram can be as satisfying as one from LV.

Arnault’s visit to Lao Pu Gold captured this market tension. Global maisons can cut prices, redesign stores and double down on exclusivity. But they are no longer the only arbiters of taste. The lines of luxury spending are being redrawn in Shanghai or Beijing boutiques and in online communities. Europe’s giants still dominate in scale, but in influence, the contest is suddenly wide open.