Senior consultant Yves Hanania says it’s easier to expand than downsize (#1688489)

Yves Hanania, founder of the Parisian consulting firm Lighthouse, specializes in brand strategy and development and is the author of the Dunault Editions books Le Luxe Demain and Le Luxe contre-attaque. He is co-author of “The Luxury of the World”. For FashionNetwork.com, Hanania analyzed the main changes faced by the luxury goods industry in 2024, marked by rising geopolitical tensions and a severe economic crisis, and the challenges that lie ahead in 2025. .

FashionNetwork.com: What kind of picture will you paint in 2024?

Ibu Hananiah: The environment is very panicked. We’re seeing a general decline, with some very important regions like Europe, China and even South Korea slowing down, but these downturns are generally more It is a rare phenomenon because it is localized. I would even add the United States to the list of major regions experiencing setbacks. That being said, we need to differentiate between segments and labels. Decreasing consumption of a particular product may lead to a shift to new product segments as the assortment widens.

FNW: How would you describe this crisis?

YH: We are facing a prolonged economic slowdown. Growth continues, but in some cases has been halved. Even if Japan and the United States remain strong for the time being, this crisis is characterized by a convergence of structural and cyclical crises. On the one hand, the business model of the luxury goods industry is being questioned, and on the other hand, consumption (has been hit). Despite the resilience of luxury goods as drivers of social status, consumption has been affected. For example, China’s real estate crisis has significantly reduced the purchasing power of Chinese consumers. Inflation is a contributing factor. There is a clear impact on product costs, much of which is passed on to consumers. It is very likely that a fix will be made here.

FNW: Product prices have also increased significantly.

YH: They say labels aren’t forever, but luxury probably is. It all depends on how it is treated. If it’s endless luxury, coupled with overconsumption and overvaluation, we have a problem. And there was actual abuse. Sometimes the prices are prohibitive. In the past five years, they have doubled and even tripled, causing consumer fatigue and rejection, a kind of dissatisfaction. People also want to know their direction. You can’t buy a handbag just because it’s iconic. Many people can’t afford the most well-known brands and go down a notch, turning to more affordable or better value for money products. This also benefits the resale market, as vintage dates back to a time when luxury goods were not mass-produced, so part of its appeal is that it features unique products. It was a unique product that was made to order. Therefore, consumers can purchase unique pieces with their own history. Such items have a greater value attached to them and are more of a return to the original concept of luxury.

FNW: What role did the post-pandemic rebound play?

YH: It had a distorted effect, like a mirage. Watches, jewelry, and fashion were in such high demand during the post-pandemic period that they became difficult to obtain. For example, in certain categories, such as champagne,[producers]will not serve the French market. This was because all of the production was exported, which was more profitable. This resulted in distributors in some segments and countries feeling unfairly treated and refusing to buy. In the watch space, some brands went too far, putting pressure on retailers by forcing them to buy larger and larger quantities. Suddenly, we had excess inventory. During the post-pandemic recovery, retailers were overstocked in 2022 and 2023, and we are still paying the price.

FNW: How did the label react to the situation?

YH: The label adopted a strategy to simultaneously manage demand and reposition itself and growth rates in the markets in which it operates. We also had to reevaluate our sales channel landscape and understand how much business we should generate from wholesale, electronic sales, and direct sales.

demand challenge

FNW: What are the main challenges for 2025?

YH: One of the main challenges is to maintain a stable level of demand while repositioning to some extent to meet standards of accessibility and perceived value.

FNW: What measures should be taken?

YH: The label may expand its assortment and introduce more affordable products, such as entry-level handbags, or new categories. It’s a classic strategy. Diversification serves as a potential growth driver for strong brands through popular areas such as eyewear, fragrances, and beauty products. Diversification also means fostering more immersive experiences through a number of temporary venues, a number of which went live last summer in resorts such as Saint-Tropez and Capri. It is no longer a purely transactional relationship, but a deeper emotional relationship. relationship. Labels also need to reduce their reliance on very high-end products and rethink their price positioning, while maintaining brand consistency and popularity.

FNW: What else do you think is driving growth?

YH: One is geographic expansion. The other is innovation in brand image.[Labels]need to focus more on art, craftsmanship and tradition, while strengthening emotional bonds with customers, especially through storytelling. When it comes to value and authenticity, I think that’s where the real luxury lies. A further important element of this story is the respect for the values ​​of luxury. In addition to product quality, there’s a certain philosophy behind how the label makes handbags and more. Narrative elements that focus on the manufacturing process are becoming more important.

Change of assortment

FNW: How does sustainability impact the market?

YH: Sustainable development is not yet a reality. Probably in terms of procurement. There is a huge contradiction between runaway growth and declining production. It is easier to expand than to reduce. New strategies include volume adjustments. In some cases, a more elitist approach will be taken where large quantities of production are needed to meet economic or environmental demands. Over the next five years, labels will become increasingly constrained in selling new products. My prediction is that within 10 years, half of the in-store selection will consist of upcycled and used goods and services. It’s not just a sale, it’s something that could possibly be an e-tail share. As is already happening today, stores will be required to play a different role.

FNW: So what are the key issues from a sustainability perspective?

YH: Pressure on materials and producers to become more sustainable will increase, leading to short-term stress and necessary supply chain adjustments.

FNW: How will the luxury market be rewritten?

YH: There will be a dichotomy between the elite and the masses. Luxury goods were widely democratized. The majority of the industry’s products consist of products that are in any case affordable, if not entry-level. Demand will not decrease. In fact, it may grow and become stronger. What will change is how the label operates. Previously, they relied on growth and brand favorability, responding to demand rather than working on assortments. Going forward, labels will need to go back to the drawing board and strategically rethink how their brand is perceived. Especially since management is now focused on the short term rather than the strategic outlook. They are under so much pressure on the demand side that they may have lost their strategic perspective. Therefore, the need to regulate demand and certain practices will lead to readjustments. But in addition to maintaining demand, it’s also important that labels remain attractive.