50 million people have stopped buying luxury brands like Dior and Burberry after ‘broken promises’ to customers
Nothing of gold can remain. Although Years of strong performanceThe personal luxury goods market is expected to slow this year for the first time since the Great Recession of 2009. Now, 50 million luxury consumers have given up on purchasing bags, scarves, watches and more, or have priced them too expensive, says new Bain & Company. Annual well-being report warns.
Bain assumes that only a third of luxury brands will end the year with positive growth, down from two-thirds last year.
Looking to the future, she said that for brands to survive, they need to reevaluate their value proposition — especially for Gen Z — and continue to meet their growing expectations.
As for how? Mary Driscoll, an equity analyst focused on luxury retail, said: luck That reinvention is key.
“Go back to the books, make the products more inspiring, and make the shopping experience great,” Driscoll said. “You need to constantly meet consumers from a new angle and wow them and delight them.”
“A great ice cream sundae gets boring the fifth time you eat it,” Driscoll added.
Broken promises to shoppers
On some level, brands have broken their promises to consumers, Driscoll said.
“Since 2019, there has been a significant increase in the prices of luxury products without a corresponding increase in the innovation, service, quality or appeal that a luxury brand has to offer,” Driscoll added. “This year, it really impacted consumers, and we felt the full impact.”
This may explain why luxury goods companies, including LVMH (which owns Dior and Louis Vuitton), Burberry, and Kering (which owns YSL and Gucci), failed to meet revenue targets this year. In fact, it was LVMH Deposed As the most valuable company in Europe in September 2023 by Novo Nordisk, manufacturer of Ozempic.
Customers – besides being put off by eye-watering prices that their salaries rarely keep up with – are likely to grow unimpressed with the products offered by these high-end brands.
Some more than others. Michael Kors, founder of his namesake brand, said during New York Fashion Week in September that he was suffering from “brand fatigue” in an attempt to explain the 14% year-over-year revenue decline, pointing the finger at fast fashion and social media influencers. Keep up with trends much faster.
“The luxury consumer wants something rare, unique, bespoke, beautiful and made specifically for them,” said Hetha Herzog, retail analyst. luck. “While some luxury brands offer basic customization, almost all luxury brands don’t have a way to make one-off pieces for their VIP clients, or create something that aspirational clients can eventually strive to own.”
One major exception: Hermès, whose growth has soared this year while industry peers have struggled. This is largely due to the Birkin bag, which has “long waiting lists, requirements and standards around how much money a customer spends before they can talk to a store about purchasing a bag,” Herzog said. This exclusivity “creates a mystique about owning something that is rare, and gives it a sense of value when you look at its price,” Herzog said.
China influence
China had been driving luxury product growth from 2000 until the outbreak of the pandemic. “Luxury growth globally has benefited from the growth of the Chinese middle class, the aspirational class, and people who have become millionaires,” Driscoll said.
LVMH, a leader in the larger luxury space, published a Revenue decrease 3% last month, largely due to the continuing effects of inflation on consumer behavior – especially in the dynamic Chinese market. For its part, Kering I mentioned Down 15% year over year last month.
Payne said the sharp decline in spending in China was due to “weak consumer confidence” – and they are not alone.
Globally, the current economic environment has made many “aspirational” shoppers more conservative in their spending, said Nicolas Llinas-Carrizosa, a BCG partner who focuses on luxury products. luck. “They are prioritizing either financial investments or prioritizing spending in other categories that they deem more important to them.”
The overall luxury segment is set to decline 2% over the full-year 2024 period, Payne said.
But that doesn’t mean consumers are pausing their spending; The travel, fine wine, dining and automotive sectors registered modest growth this year.
In addition, a “gradual recovery” is still likely in late 2025 in China, Europe, the United States and especially Japan – where shoppers are the lucky beneficiaries of favorable currency exchange rates.
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