The author shared a podcast.To view embedded content in this article and other articles you visit in the future, you must accept and consent to the use of cookies and similar technologies by our third-party partners such as YouTube, Instagram, and Twitter.accept
Subscribe to the BoF Podcast here.
background
For nearly a decade, the luxury goods sector has experienced unbridled growth as brands like Louis Vuitton, Gucci and Chanel drive up the prices of their products and consumers pay more. But recent quarterly reports show an abrupt shift, with even industry giants reporting disappointing earnings. Luxury Editor Robert Williams explains: Whether a consumer ultimately pulls the trigger has a lot to do with financial confidence, the feel-good factor. Will things be better next month than they are today? ”
This week, BoF Editor-in-Chief Brian Baskin and Luxury Editor Robert Williams discuss the drivers of the downturn, the impact on top brands, and the potential opportunities luxury goods companies are considering to reignite growth. Discuss strategy.
key insights
Global economic uncertainty is hitting luxury spending in the US and Europe hard. “Whether or not you ultimately pull the trigger[on a big-ticket purchase]depends on your confidence in the economy,” Williams explained, noting that factors like inflation, wage stagnation, and election cycles are pushing consumers to make big purchases. He pointed out that he was putting off shopping for the time being. Similar issues exist in Europe, with its proximity to conflicts in the Middle East, Ukraine and Russia further impacting consumer sentiment and purchasing power. But Williams said the biggest problem is that China is rolling back this kind of spending. China’s luxury goods market has always been a driver of growth, but changing economic sentiment and reduced travel due to the coronavirus pandemic are impacting luxury goods sales. “[Chinese consumers]are holding out until the economy improves. Prices for luxury brands are higher in China than in most parts of the world, so they’re waiting for when they feel like they can get a deal. ,” Williams said. Many consumers are dissatisfied with the rapid increase in prices, as seen with the Dior lady. Dior bags have increased in price by 76 percent since 2019. “Customers are getting pretty fed up with the constant price increases on similar products,” Williams said, adding that consumers often feel like they’re “spending too much.” More is not necessarily better. ” Even if the quality has not declined, the perception has, especially as social media focuses on many issues. “The way our internet culture works, when someone has a problem with a product, they kind of make it public, and it really disillusiones a lot of people and their audience, and it’s not worth this high price. “After years of rapid growth and price hikes, we are facing a saturated market with stagnant or negative sales in 2025 and 2026 as well.” Many people are predicting that the time will come. “Even if it wasn’t just a question of price or other macroeconomic factors, there was a sense that the market was saturated, people needed to get a little tired of fashion in order to rediscover it.” There may be a feeling that. that. If you have the next big idea, you never know if it’s the right time to implement it,” says Williams. “Because if you’re part of a brand that’s seeing really negative sales…then how much can you really invest in telling the world that you have the next big idea? ”
additional resources
Inside the luxury throwdown. Economic headwinds, high prices and a lack of innovative designs are weighing on what has traditionally been fashion’s most dynamic sector. How deep is the economic slowdown and how long will it last? Why some luxury goods groups are doing better than others. The slowdown in demand for luxury brands is hitting the sector unevenly, as evidenced by the polarizing third-quarter results reported this week by the likes of Hermès and Kering.
