Storefronts of Dolce & Gabbana, Tiffany & Co. and Patek Philippe are shown as people enter Icon Siam, a luxury shopping mall along the Chao Phraya River, in Bangkok, Thailand, June 12, 2024.
Lauren DeCicaghetti Images News | Getty Images
The personal luxury goods market slowed this year for the first time since the global financial crisis, as macroeconomic uncertainty and a notable slowdown in China weighed on consumer spending, according to Bain & Company’s annual luxury goods report. It is expected that they will face the
Wednesday’s survey results showed that demand for personal luxury goods, including clothing, bags, jewelry and cosmetics, has slumped for the first time in 15 years, excluding the coronavirus lockdown period.
Rising costs and declining customer loyalty are likely to drive shoppers away from luxury brands in 2024, putting pressure on corporate profits and causing the sector to contract by an expected 2% for the full year, the report shows. Ta.
The report shows that overall luxury goods spending will remain flat year-on-year in 2024 at around 1.5 trillion euros (1.5 It is expected to remain at $90 million.
China’s weakness weighs heavily
Global economic uncertainty and inflationary pressures have emerged as common themes in luxury brand earnings reports this year. LVMH, burberry And the owner of Gucci kering Every post repeatedly misses out on revenue.
But falling demand from the key Chinese market is particularly worrying for the sector as the economy struggles to recover from the coronavirus-era slowdown.
Even Cartier owners Richemontan outlier amid a broader sector downturn, last week reported a 1% decline in sales for the first half of its fiscal year, due in part to weaker demand from China.
“Mainland China has experienced a sharp economic slowdown, which worsened over the course of the year as weak consumer confidence reduced domestic spending,” Bain & Company said.
The report said a sustained weakness in the Chinese market could weigh on the luxury goods sector further in 2025, but it still cited this as a unlikely outcome and instead suggested a more “realistic” outcome. As a scenario, it points to a gradual recovery in the second half of next year. ”
Luxury demand in Europe and the United States has shown signs of gradual improvement on a quarter-on-quarter basis this year, with Japan leading the way thanks to favorable exchange rates. As such, the report expects the sector to grow slightly next year, barring major headwinds in the economy.
pocket of growth
The report also points to a bright spot in luxury cars, hospitality, fine wine and gourmet restaurants, which have recorded growth this year.
Luxury travel has emerged as a particular growth area, with consumers increasingly shifting their spending towards experiences, social events and wellness.
The report said small personal items such as eyeglasses and beauty products also increased as shoppers opted for “small luxuries” over big purchases.
Nevertheless, luxury brands need to do more to attract and retain an increasingly fickle consumer base, especially among the younger Generation Z, which includes those born between 1997 and 2012. pointed out.
“Over the past two years, 50 million luxury consumers have exited or been forced to exit the luxury market, a signal for brands that it is time to recalibrate their value proposition. ,” says partner Claudia Dalpizio. Bain & Company and lead author of the study.
“To win back customers, especially young customers, brands need to lead with creativity and expand the conversation topics. At the same time, they must keep their top customers at the forefront, surprising and delighting them while providing one-on-one We have to rediscover relationships,” she added.
