Luxury’s golden age is fading.
The personal luxury market has experienced a slowdown for the first time in the past decade.
Bain & Company’s luxury report for the year 2012 shows that 50 million luxury consumers either have abandoned their purchases, or are priced out, indicating a fundamental shift in industry dynamics.
Luxury brands are facing a bleak future
This report presents a rather grim picture of luxury brands.
The two thirds who achieved positive growth last year are not expected to do so this year.
The industry is facing challenges that are unique to an industry used to constant expansion.
In order to survive in the new environment, brands must reevaluate their brand values, especially for Gen Z, who have increasingly sophisticated tastes and high expectations.
Marie Driscoll is an equity analyst who specializes in luxury retail. She emphasizes reinvention. “Get back into books, make product more inspiring, and make shopping experience wonderful,” she said to Fortune.
You need to surprise your customers and keep them happy.
She uses a powerful analogy to illustrate her point: “A fantastic ice cream sundae becomes boring after the fifth serving.”
Promises broken and stagnation as a price
Driscoll highlights a fundamental disconnection between the price of luxury goods and their value.
She explains, “Since 2019 there has been an increase in luxury prices without any corresponding improvement to innovation, service quality or appeal, which a luxury brand is supposed to provide.”
This year’s impact on consumers was felt by all.
The current economic downturn is largely due to this perceived lack of trust between consumers and brands.
Hermes is the only luxury brand that thrives as other giants of the industry falter.
The financial performance of the luxury giants reflects this disconnect.
LVMH, Burberry and Kering – owners of YSL, Gucci and Dior – all failed to meet their revenue targets for this year.
In September 2023, LVMH lost the title of Europe’s largest company to Novo Nordisk.
Hermes, on the other hand, has seen a remarkable increase in sales, which can be attributed largely to its Birkin bag, as it is so exclusive and desirable.
Retail analyst Hitha Herzog explains this phenomenon to Fortune: “The luxury consumer wants something that is rare, unique, bespoke, beautiful and specifically theirs…That exclusivity…creates a mystique around owning something rare, and gives it a sense of worth when you look at the price tag.”
China’s influence on global expenditure
China, which has been a key driver in the luxury market for more than two decades, is experiencing a slowdown.
It is due in large part to a lack of consumer confidence amid a difficult economic climate.
LVMH reported a 3% drop in revenue last month. This was primarily due to the weakening of demand in China.
Kering reported an overall decline of 15% from one year to the next.
Nicolas Llinas Carrizosa is a BCG luxury partner. He told Fortune, that aspirational consumers are more conservative with their expenditures, and prioritizing investments in financial products or essentials.
Is there a glimmer on the horizon of hope?
Bain predicts a 2 percent contraction in the luxury industry by 2024, despite the general decline.
Other sectors such as fine dining, travel and automobiles have seen modest growth.
A “gradual” recovery in the luxury sector is expected to occur in late 2025 in China, Europe and the US. Favorable currency exchange rates could boost consumer spending.
Is this post the end of luxury? This post Why 50 Million Shoppers Say No to High-End Brands may change as new information unfolds
This site is for entertainment only. Click here to read more
