Luxury brands have lost about 50 million customers in two years as shoppers seek lower prices.
The Wall Street Journal reported on Wednesday (Nov. 27), citing data from consulting firm Bain, that demand for luxury goods is expected to remain flat in 2024, but these companies says it has lost more than 10% of its customer base.
This is the first time in memory that the number of customers in the industry has declined due to soaring prices for luxury goods. According to the WSJ, some of these shoppers will naturally exit due to inflation, while others will experience lower prices.
“It’s become virtually impossible to find a regular-sized (handbag) from a reputable brand for under $3,000,” said Luca Sorca, a luxury goods analyst at Bernstein.
Luxury brands are not only seeing fewer customers, but also selling significantly fewer items, with Bain predicting a 20% to 25% decline compared to 2022. If you subtract, that number is even higher, by a third. Products that continue to be in demand and more affordable, such as sunglasses and cosmetics.
As the price of luxury goods rises, cheaper brands and luxury resellers are benefiting. WSJ notes that challenger brands are trying to fill the low-priced hole left by high-end luxury brands.
For people looking to buy from top luxury brands without paying the prices charged in stores, there’s a second-hand market that has grown three times faster than the major luxury goods market over the past five years, WSJ says. said.
As PYMNTS wrote last month, pressure on the luxury goods sector has led industry players to embrace strategic alliances and mergers.
For example, Mytheresa recently announced the acquisition of YNAP from Richemont with the aim of creating the world’s leading digital luxury group. The partnership combines Mytheresa with YNAP’s well-known brands such as Net-A-Porter and Mr Porter, enhancing the luxury offerings available to high-end consumers.
On the collaboration front, there is the launch of Authentic Luxury Group (ALG), a joint venture between Authentic Brands Group and Saks Global, focused on luxury across multiple sectors, from fashion to hospitality.
“Retail analysts say such collaborations could lead to operational efficiencies, allowing luxury brands to streamline back-end functions and reach a wider range of customers.”PYMNTS is writing. “By sharing resources and insights, companies like Mytheresa and Authentic Brands Group are poised to thrive amid ongoing market challenges, and are a key enabler of innovation and adaptability in the future of the luxury sector. We are emphasizing our role.”
