Study Finds Global Luxury Sales Flattening Amid Self-Inflicted Creativity Crisis and Price Hikes
The immediate aftermath of the pandemic saw an explosive growth in the demand for luxury goods, including high-end handbags, shoes, and apparel. However, this trend is expected to come to a halt, with global luxury sales projected to level off this year. The forecast comes from a recent study by the consultancy firm Bain, which was commissioned by the Altagamma association. Bain anticipates a standstill in worldwide luxury sales in 2024, after witnessing a slight decline in the first quarter.
Bain pins the expected stagnation on several factors, including political uncertainty in the United States during an election year and economic unpredictability in China, which has given rise to a trend known as “luxury shaming.” The firm also points to rising geopolitical tensions and socioeconomic factors contributing to a more challenging environment for luxury brands.
A significant portion of the slowdown can be attributed to internal challenges within the luxury sector itself. “This slowdown is partially self-inflicted,” explained Claudia D’Arpizio, a Bain partner. One of the critical issues she identified is a “creativity crisis” facing the industry. This crisis comes as numerous prominent fashion houses are in the midst of a transition, seeking new creative directors and trying to redefine their creative vision. At the same time, luxury brands have shifted their focus toward catering exclusively to their highest-spending clientele, neglecting the aspirational middle class and the Gen-Z demographic that previously drove substantial growth.
“There is a lack of clarity for many of these brands as they make attempts to regain focus. With five or six major brands undergoing significant turnarounds, the overall excitement in the luxury industry is dampened,” D’Arpizio added. She emphasized the importance of brands staying in tune with customer needs for the industry to quickly respond and thrive.
In terms of strategy, D’Arpizio suggests that addressing the pricing strategy and point is crucial. With a keen eye on growth, she notes that “you can’t grow without the middle class and younger generations.” This comment comes at a time when brands like Gucci, Moschino, and Valentino are unveiling new creative directions, each looking to re-establish their appeal to a broader audience.
Inflation and a strategic shift toward the luxury market’s zenith, focusing on the 6 to 8 million top-tier consumers, are driving prices up. However, this comes at the cost of less innovation in product offerings, leaving many customers feeling “upset and puzzled” by steep price increases for products that seem overly familiar.
Despite these challenges, the luxury goods sector has seen significant growth during the 2021-23 period, with a 24% increase in sales over 2019 levels. Last year, the sale of personal luxury goods rose by 4% to 362 billion euros, driven in part by a rebound in tourism, particularly in Europe, where U.S. and Asian tourists have been flocking.
Looking ahead, Japan presents a promising outlook for the luxury sector, benefiting from an influx of foreign tourists attracted by the weak yen. Similarly, Europe’s luxury market continues to show robust trends, thanks in large part to increased tourist spending and rising local consumption, with cities in France and Italy leading the charge.
As the luxury sector navigates these complex challenges, the emphasis on creativity, innovation, and broadening customer appeal will be crucial for sustainable growth. The focus will not only be on maintaining the allure for the highest spenders but also on recapturing the attention of the global middle class and younger generations, whose enthusiasm and purchasing power have historically propelled the market forward.
