50 million people stopped buying luxury brands like Dior and Burberry after ‘broken promises’ to customers
Nothing golden can stay. Even though year of strong activityThe personal luxury goods market is expected to slow this year for the first time since the Great Recession of 2009. Now, 50 million luxury consumers have stopped buying handbags, scarves, watches, and watches. designer watches, etc.—or overpriced, new product from Bain & Company annual luxury report warning.
Bain said only one-third of luxury brands will end the year with positive growth, down from two-thirds last year.
Looking ahead, they say that to survive, brands need to reassess their value proposition—mainly for Generation Z—and continue to meet their evolving expectations.
As for how? Marie Driscoll, an equity analyst focusing on luxury retail, told Luck That regeneration is key.
“Go back to the books, make the products more inspiring, make the shopping experience better,” Driscoll said. “You need to constantly meet consumers from a new perspective and surprise and delight them.”
“A great cake gets boring by the fifth time,” Driscoll added.
Broken promises to buyers
To some extent, brands have broken their promises to consumers, Driscoll said.
Driscoll added: “Since 2019, prices for luxury goods have soared without a corresponding increase in innovation, service, quality or appeal that a luxury brand should offer. grant”. “This year, it really resonated with consumers and we’re already feeling the full impact.”
Perhaps it explains why powerful luxury houses, including LVMH (owner of Dior and Louis Vuitton), Burberry and Kering (owner of YSL and Gucci), missed its revenue target this year. In fact, LVMH has uncrowned is Europe’s most valuable company in September 2023 by Novo NordiskManufacturer Ozempic.
Customers—in addition to being deterred by aggressive prices that their salaries can rarely keep up with—may be increasingly unimpressed with the products these luxury brands have to offer.
Some more than others. Michael Kors, founder of the brand that bears his name, said during New York Fashion Week in September that he Struggling with “brand fatigue” in an attempt to explain the 14% year-on-year revenue decline, pointing the finger at fast fashion and social media influencers who are keeping up with trends much faster.
“Luxury consumers want something that is rare, unique, bespoke, beautiful and uniquely theirs,” says Hitha Herzog, a retail analyst. Luck. “While some luxury brands offer basic customizations, almost all luxury brands have no way of creating one-off pieces for their VIP customers or creating something unique. something that ambitious customers can strive to own.”
One major exception: Hermés, yes growth skyrocketed this year while companies in the same industry are facing difficulties. Herzog says this is largely thanks to the Birkin bag, which has accumulated “long waiting lists and requirements and standards for how much customers spend before they can talk to a store about buying one.” bag”. That exclusivity “creates a mystique around owning something rare and gives a feeling of value when you look at the price tag,” Herzog said.
China effect
China drove the growth of luxury goods from 2000 until the pandemic. “Global luxury growth is benefiting from the growth of the Chinese middle class, the aspirational class and those who have become millionaires,” Driscoll said.
LVMH, the leader in the larger luxury space, posted one Revenue decreased by 3% last month, largely due to the continuing impact of inflation on consumer behavior, especially in the important China market. For my part, Kering reported down 15% year-on-year last month.
Bain said the sharp drop in spending in China is due to “lackluster consumer confidence”—and they are not alone.
Globally, the current economic climate has caused many “aspirational” shoppers to be more cautious with their spending, said Nicolas Llinas-Carrizosa, a luxury-focused partner at BCG. Luck. “They are prioritizing financial investments or prioritizing spending on other categories that they consider more important to them.”
All told, the entire luxury sector will contract 2% for the full-year 2024 period, Bain said.
But that doesn’t mean consumers are pausing spending altogether; The travel, wine and fine dining, and auto sectors all reported modest growth this year.
Additionally, a “gradual recovery” by the end of 2025 remains likely in China, Europe, the US and especially Japan – where shoppers are the lucky beneficiaries of the exchange rate. Favorable exchange.
