Chanel store
The great conglomerates of luxury fashion, such as LVMH and Kering, are noticing descents in sales. The fashion of copies, the slowdown of Asian economies and the emergence of discrete luxury culture explain the break.
The alarm sounds throughout the high range sector. The year 2024 did not end as luxury brands expected, and the numbers published by the main conglomerates of the sector reveal a softening and some signs of exhaustion during the last quarter of 2024.
The weakening of the Asian market is one of the obvious causes, but the unusual reactions of consumers to the strong price climbs were also striking. Aspiration and distinction – which were part of the DNA of luxury marks until recently – are taking on new dimensions thanks to phenomena such as the fast-fashion and Culture “Dupe” (low cost products that are inspired or imitate luxury articles).
Bad results
The largest conglomerate of luxury goods, Louis Vuitton Moet Hennessey (LVMH) – 75 brands ownerincluding Louis Vuitton, Christian Dior, Moёt & Chandon, Hennessy and Veuve Clicquot – presented quarterly results showing only 3%growth, well below 14%recorded in 2023. In fashion, growth fell 5%, and in wines and witty drinks, 7%.
For Kering, the second largest company in the sector – whose portfolio includes brands such as Gucci, Balenciaga, Yves Saint Laurent and Bottega Veneta – revenues decreased 6% and 4% on a comparable base. The list of examples continues, with legendary houses like Burberry and Lanvin to publish similar numbers.
The results can be analyzed in light of last year’s growing global landscape. The year 2024 was marked by intense geopolitical agitation, with several serious and open conflicts, growing technological rivalries and more than 70 elections around the world. All this brings with it a strong degree of economic uncertainty.
However, we must not forget that the luxury market has been very resistant in times of crisis. The results of the sector after the COVID-19 crisis were surprisingly good: digitization accelerated and the dynamic behavior of consumers willing to squander-a phenomenon known as “revenge spending ” – It helped significantly.
The economies of Asian dragons are weakening
One of the decisive factors for these results is the weakening of the idea that China is a place of unstoppable growth.
In recent years, the Chinese market entry It was the main ambition for these brands, their natural place of expansion and growth. Between 2009 and 2019, for example, the LVMH group went from 470 points of sale in Asia to 1 453 (excluding Japan). The same applies to Kering, which went from 152 to 609 stores.
Collections and marketing strategies were also oriented for this market, aiming at a growing and prosperous middle class that seemed to end in sight. However, the economies of dragons now give signs of softening And in the luxury sector, the drop in sales is becoming quite accentuated.
In the numbers published by LVMH, a It remains of 16% in Asian sales (once again, excluding Japan). This fall is especially accentuated in China, which previously represented 50% of the growth of the French group.
The lack of consumer confidence and the containment of spending on luxury articles may explain this new perspective. But if China is no longer what it was, where can luxury brands find new winning strategies?
Increasingly high prices
The strategy of luxury groups has been based in recent years on an extraordinary price climb. The climb has been unstoppable, with the value of a bad Hermès to double And some Chanel bags reaching 10,000 euros. Some of these pieces also doubled their value in the second hand market. The price of watches is another clear example, with increases of over 20%.
It is natural that luxury brands use price as an input barrier for mass consumption and as a way of Preserve your exclusivity. It appeals to ultra or extremely rich, with the aim of creating eternal aspiration-the Veblen effect, where higher prices generate higher demand, has worked in this market.
The concept is named after Thornstein Veblen, economist and author of The Theory of the Leisure Class: An Economic Study of Institutions. In chapter seven of this work, entitled “Clothing as an expression of pecuniary culture”, Veblen explains that fashion and luxury are Statute Indicators. If aspiration is not built, luxury loses its meaning.
However, there seems to be other reasons for this impressive price increase. One of the widely disclosed reasons is the increase in the cost of raw materials, but geopolitical uncertainty and rampant inflation of recent years have also contributed to the increase.
The cost of distinction
The entry of new actors in the fashion world at the base of the pyramid has forced everyone to climb the hierarchy and find what distinguishes them. Fast-Fashion made the average range brands want to be viewed as more aspirationaland this movement, in turn, leads the luxury marks to look for a greater distance from the new competitors.
There are also those who point out the culture of the “dupes” as guilty about this constant progression of prices. To the Copies of luxury products -or imitations with slight modifications-flooded social networks, especially Tiktok, forcing brands to distance themselves even more from this type of consumption. Authenticity has a price.
The big question at this moment is knowing how far this pricing will be. There are those who ask if consumers aimed at these brands, however their fortune, also have reservations for spending for spending. In other words, Do you really find value in the product?
The discreet luxury: a new approach
It seems that it is no longer enough to position itself as a luxury brand-these companies also have to find a way to create and demonstrate value. Price increases have to be justified by two of the levers that have always been the essence of luxury: Creativity and Quality.
In addition, luxury is no longer synonymous with brands. The trend of discreet luxury shows the desire to distance from the visual aggressivenessavoiding or hiding any features or characteristic details that makes your brand obvious.
This means that brands are only recognizable by those who have a more cultivated knowledge of luxury products. Silent luxury potentially widen the market to customers who, besides the products themselves, are also interested in their own well-being and more relaxed way of life.
