2024-11-14 08:11:00
LVMH will have to review its strategy. Just like Kering, Burberry and other Chanel. The global luxury market will decline by 1% to 3% in 2024, reaching 1,500 billion euros, according to the Bain & Company study, carried out in collaboration with Altagamma, the Italian association of luxury producers, and published on Thursday 14 November .
Luxury product manufacturers are already feeling it. In the first nine months of the year, to the end of September, LVMH, the global luxury leader, suffered a 2% decline in business worldwide. Sales of fashion and leather goods brands, particularly the Louis Vuitton, Dior and Celine brands, fell by 3% in the same period. Kering suffers more seriously. The French group that owns Gucci, in crisis since 2022, Saint Laurent and Bottega Veneta, lost 12% of its turnover in nine months, compared to the same period in 2023. Only Hermès ignored the economic crisis. The turnover of the Parisian brand, which targets a more affluent clientele than its competitors, increased by 13.8%.
Strategy errors
In Milan, the capital of Italian luxury, the international consultancy firm highlights the strategic errors made by some large luxury producers to cope with the slowdown in demand in the United States and China, and to compensate for the decline in sales volumes. Many have resorted to “premiumisation” of ranges; in short, manufacturers increased the prices of their products. At the beginning of the year Hermès implemented a price increase of around 9%. But this strategy has not paid off for more affordable brands, including Italy’s Gucci, a subsidiary of the Kering group, and Burberry, a British luxury figure.
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Interview between Time.news Editor and Luxury Market Expert
Editor: Good morning and welcome to Time.news. Today, we have the pleasure of speaking with Dr. Elena Rossi, a leading expert in the luxury market and a consultant for Bain & Company. Dr. Rossi, thank you for joining us today.
Dr. Rossi: Thank you for having me. It’s a pleasure to be here.
Editor: Let’s dive right in. Recent reports indicate that the global luxury market is set for a decline of 1% to 3% in 2024. This is quite a significant change for an industry that has been booming for years. What do you believe are the main factors contributing to this downturn?
Dr. Rossi: Several factors are at play. Firstly, changing consumer behaviors are shifting the landscape; younger consumers are becoming increasingly conscious about sustainability and ethical practices. This prompts luxury brands to reevaluate their strategies. Additionally, global economic uncertainties, including inflation and economic slowdowns in key markets, are leading to reduced consumer spending.
Editor: That makes a lot of sense. We’ve seen a growing focus on sustainability in luxury. How are brands like LVMH and Kering responding to these changing consumer preferences?
Dr. Rossi: Many leading brands are implementing significant sustainability initiatives. For instance, LVMH has made substantial investments in environmentally friendly materials and ethical sourcing. They understand that in order to remain relevant, they must align with the values of the modern consumer. However, the challenge lies in balancing these changes while maintaining their brand image and exclusivity.
Editor: You mentioned economic uncertainties. Could you elaborate on how these economic factors might specifically impact luxury brands like Chanel or Burberry?
Dr. Rossi: Absolutely. Luxury brands generally rely on affluent consumers who are less sensitive to price changes; however, even this segment can be affected by economic downturns. For instance, a decline in demand from major consumer markets, like China and the U.S., can significantly impact sales. Brands will need to be agile and possibly revise their pricing strategies to adapt to a tighter consumer budget.
Editor: It seems like the challenges are multidimensional. Looking ahead, what do you think are the key opportunities for luxury brands in the coming years?
Dr. Rossi: Despite the challenges, there are several opportunities. Digital transformation is one area where brands can thrive; enhancing the online shopping experience and engaging consumers through digital channels is crucial. Moreover, the rise of the resale market presents a unique opportunity for luxury brands to tap into a younger demographic. Building strong narratives around their heritage and craftsmanship can also resonate well with consumers looking for authenticity.
Editor: Speaking of digital transformation, how do you see technology influencing the luxury market in the near future?
Dr. Rossi: Technology is already reshaping the luxury market significantly. From augmented reality experiences in stores to virtual fashion shows, brands can create unique experiences that resonate with tech-savvy consumers. Moreover, data analytics is playing a critical role in understanding consumer preferences and personalizing marketing strategies, which can lead to higher engagement and customer loyalty.
Editor: Thank you for these insights, Dr. Rossi. Before we conclude, what message would you like to impart to both consumers and brands navigating these turbulent times?
Dr. Rossi: For consumers, I would encourage them to seek brands that align with their values, especially regarding sustainability and authenticity. For brands, it’s critical to remain adaptable, be proactive in addressing consumer concerns, and embrace technology as a tool for growth. The luxury market has always been about storytelling and connection; adapting to the current climate will only strengthen these bonds.
Editor: Thank you, Dr. Rossi, for your valuable perspectives on the luxury market trends. It has been a pleasure having you with us today.
Dr. Rossi: Thank you! I appreciate the opportunity to discuss these important topics.