Gold can remain nothing. Despite years of strong performance, the personal luxury goods market has slowed this year for the first time since the Great Recession of 2009. Bain & Company’s new annual luxury report warns that now, 50 million luxury consumers have either stopped buying designer bags, scarves, watches, and more.
Only one-third of luxury brands will end the year with positive growth, Bain said, down from two-thirds last year.
Looking ahead, he said that to survive, brands need to reevaluate their value proposition — especially for Gen Xers — and continue to meet their growing expectations.
As for how? said Mary Driscoll, an equity analyst focusing on luxury retail good luck That renewal is key.
“Go back to the books, make the products more impressive, make the shopping experience great,” Driscoll said. “You need to constantly meet customers from a new angle and surprise and delight them.”
“A great ice cream sundae gets boring by the fifth time you get it,” Driscoll added.
Promises to buyers are broken.
At some level, brands have broken their promises to consumers, Driscoll said.
“Since 2019, luxury prices have increased dramatically without a corresponding increase in the innovation, service, quality, or appeal that a luxury brand should deliver,” Driscoll added. “This year, it really hit consumers, and we felt the full impact.”
That probably explains why luxury powerhouses including LVMH (which owns Dior and Louis Vuitton), Burberry, and Kering (which owns YSL and Gucci) missed revenue targets this year. In fact, LVMH was overtaken in September 2023 by Novo Nordisk, maker of Ozempic, as Europe’s most valuable company.
Customers—other than being swayed by eye-popping prices that rarely keep pace with their paychecks—may not be swayed by the products these top brands offer.
Some more than others. Michael Kors, the founder of his namesake brand, said during New York Fashion Week in September that he tried to explain the 14 percent year-over-year drop in revenue, pointing the finger at fast fashion and social media influencers. I struggle with “brand fatigue”. Keeping up with trends very quickly.
“Luxury consumers want something that is rare, unique, customized, beautiful and especially theirs,” explains Hetha Herzog, a retail analyst. good luck “While some luxury brands offer basic customization, almost all luxury brands do not have the means to create one-off pieces for their VIP clients, or to create something that aspiring customers will eventually own. can try.”
One big exception: Hermès, which has thrived this year while its industry peers have struggled. Herzog said that’s largely thanks to its Birkin bag, which “collects long waiting lists and needs and criteria for how much a customer would spend before talking to a store about buying a bag. is.” This feature, Herzog said, “creates a mystique about owning something rare, and gives it a sense of value when you look at the price tag.”
The influence of China
China has been driving luxury growth all the way from 2000 to the pandemic. “Global luxury growth benefited from the growth of the Chinese middle class, the aspirational class, and the millionaires,” Driscoll said.
LVMH, a bellwether for the big luxury space, posted a 3% drop in revenue last month, largely due to the continued impact of inflation on consumer behavior, particularly in the key Chinese market. For its part, Kering last month reported a 15 percent year-over-year decline.
Bain said the sharp drop in spending in China is due to a “lack of consumer confidence” and he is not alone.
Globally, the current economic environment has made many “aspirational” buyers more conservative in their spending, said Nicolas Linas-Carrizosa, a BCG partner who focuses on luxury. good luck “They are either prioritizing financial investments or spending in other categories that they consider more important to them.”
All of the luxury sectors are expected to decline by 2 percent through 2024, Bain said.
But that doesn’t mean consumers are curbing their spending altogether. The travel, fine wine and dining, and auto sectors both reported modest growth this year.
In addition, a “gradual recovery” in late 2025 is still likely in China, Europe, the US, and especially Japan—where buyers are the lucky beneficiaries of favorable currency exchange rates.
