There’s no money left. Despite strong performance in recent years, the personal luxury goods market is expected to slow this year for the first time since the Great Recession of 2009. 50 million luxury goods consumers have now given up on purchases of designer bags, scarves, watches and more, or have seen prices drop, warns Bain & Company’s new annual luxury goods report.
Bain predicted that only a third of luxury brands would end the year with positive growth, down from two-thirds last year.
Looking ahead, he said brands will need to re-evaluate their value proposition, primarily for Gen Z, and continue to meet rising expectations in order to survive.
how? Marie Driscoll, a stock analyst specializing in luxury retail, told Fortune magazine that reinvention is key.
“Let’s go back to the books and make our products more inspirational and our shopping experience great,” Driscoll said. “We must always approach consumers from new angles and surprise and delight them.”
“You can have a great ice cream sundae, but by the fifth time you eat it, you’re tired of it,” Driscoll added.
Driscoll said brands are, in some ways, breaking promises to consumers.
“Since 2019, the overall price of luxury goods has increased without a corresponding increase in the innovation, service, quality and appeal that luxury brands have to offer,” Driscoll added. “It hit consumers hard this year, and we felt the impact to the fullest.”
This perhaps explains why luxury brand giants including LVMH (which owns Dior and Louis Vuitton), Burberry and Kering (which owns YSL and Gucci) have missed their revenue targets this year. In fact, LVMH was dethroned as Europe’s most valuable company in September 2023 by Novo Nordisk, the maker of Ozempic.
Not only are customers being held back by shocking prices that their paychecks can barely keep up with, but they’re also likely to be unimpressed with the products these luxury brands offer.
Some more than others. During New York Fashion Week in September, Michael Kors, the founder of his eponymous brand, pointed to fast fashion and social media influencers and tried to explain a 14% year-over-year revenue decline by saying, “Brand fatigue.” He said he was suffering from “. You can keep up with trends much faster.
“Luxury consumers want things that are unusual, unique, tailored, beautiful, and especially their own,” retail analyst Hisa Herzog told Fortune. – You can turn off pieces for VIP clients or create something that aspiring customers can strive to eventually own. ”
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