The post-pandemic boom in global sales of luxury handbags, shoes and apparel is likely to hit a roadblock this year, according to a new study by the Bain consultancy.
The report – commissioned by the Altagamma association – cites a creativity crisis and price hikes as brands shift their focus towards high-spending customers. Bain predicts stagnant worldwide luxury sales in 2024 following a slight dip in the first quarter.
The study points to political uncertainty during a US presidential election year and economic instability in China leading to a trend of “luxury shaming.” Beyond socioeconomic factors and rising geopolitical tensions, the slowdown is also partly “self-inflicted,’’ said Bain partner Claudia D’Arpizio.
She mentions a “creativity crisis,” in the sector, as a number of major fashion houses are transitioning creative directors, and a new focus on the super-wealthy customers, at the expense of the aspirational middle class and Gen-Z youngsters who fueled growth before the pandemic.
She said; “There is a lack of clarity for many of these brands. They are making attempts to regain focus. It is five, six brands under turn-around, big ones. This is not helping the overall excitement. This is a supply-driven industry. When you have the brands really in tune with customer needs, it usually reacts quickly.”
She said some “tweaks” are needed on strategy and price points, adding that “you can’t grow without the middle class and younger generations.” High-profile fashion houses such as Gucci and Moschino have unveiled the new creative approach on their runways, while Valentino’s first collection from the new creative director will take the spotlight this coming September.
Chanel is seeking a creative head after the resignation of its incumbent earlier this month. While inflation is one key aspect of the escalating prices, D’Arpizio also shared that brands are refocusing their attention on the top 6 to 8 million shoppers in the luxury market, aiming for improved profit margins. Conversely, there has been a lack of novelty in the offerings.
Exorbitant price hikes for products devoid of significant innovation, cause customers to be both “upset and puzzled.” Forecasts for stagnant global luxury sales follow a period post-pandemic where bottled-up demand led to a surge in sales during the 2021-23 period, showing a 24% increase over 2019 levels.
Despite this, last year witnessed an increase in sales of personal luxury goods by 4%, reaching 362 billion euros (around $388 billion) from 349 euros in 2022. This was predominantly due to a revival of US. and Asian tourism resulting in boosted purchases across Europe.
When factoring in luxurious travel experiences, fine arts, cars, and yachts, the global luxury market expanded dramatically to 1.5 trillion euros last year – emphasising the trend towards intangible experiences rather than material acquisitions. Japan is a beacon of hope with the return of foreign tourists due to the yen being at its lowest level against the US dollar in 20 years, while Europe maintains strong trends thanks to tourist expenditure and a rise in local consumption, particularly in French and Italian cities.
