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50 million people have stopped buying luxury brands such as Dior and Burberry after “promises” to customers were broken

Nothing gold can stay. Despite Years of strong performanceThe personal luxury goods market will slow this year for the first time since the Great Recession of 2009. Meanwhile, 50 million luxury consumers have either stopped buying designer bags, scarves, watches and more – or overpriced them, Bain & Company has found Annual Luxury Report warns.

According to Bain, only a third of luxury brands will end the year with positive growth, compared to two-thirds last year.

Looking ahead, it said that to stay alive, brands must re-evaluate their value proposition – especially for Generation Z – and continue to meet their growing expectations.

And how? Marie Driscoll, an equity analyst focused on luxury retail, said Assets that reinvention is key.

“Go back to books, make the products more inspiring and make the shopping experience wonderful,” Driscoll said. “You always have to approach consumers from a new perspective and surprise and delight them.”

“A fantastic sundae is boring the fifth time you try it,” Driscoll added.

Broken promises to buyers

In some ways, brands have broken their promises to consumers, Driscoll said.

“Since 2019, there has been a sharp increase in prices in the luxury space, without a commensurate increase in the innovation, service, quality or desirability that a luxury brand should offer,” Driscoll added. “This year it really hit consumers and we felt the full impact.”

That perhaps explains why the luxury conglomerates, including LVMH (which owns Dior and Louis Vuitton), Burberry and Kering (owner of YSL and Gucci) missed its sales targets this year. In fact it was LVMH dethroned as Europe’s most valuable company in September 2023 Novo Nordiskthe manufacturer of Ozempic.

Not only are customers burdened by the eye-watering prices that their salaries can barely keep up with, but they are also increasingly unimpressed by the products of these high-end brands.

Some more than others. Michael Kors, founder of his eponymous brand, said during New York Fashion Week in September that he is struggling with “brand fatigue.” in an effort to explain the 14% year-over-year decline in sales, pointing the finger at how fast fashion and social media influencers are much, much quicker to catch up with trends.

“The luxury consumer wants something that is rare, unique, bespoke, beautiful and specifically theirs,” said Hitha Herzog, a retail analyst Assets. “While some luxury brands offer basic customization, almost all luxury brands have no way to create one-off pieces for their VIP customers or create something that discerning customers can eventually own.”

One big exception: Hermés, which has grew rapidly this year while its industry peers struggled. Herzog said this is largely thanks to the Birkin bag, which “accumulates long waiting lists and requirements and benchmarks for how much money a customer spends before they can talk to the store about buying a bag.” This exclusivity, Herzog said, “creates a mystique around owning something rare and gives it a sense of value when you look at the price tag.”

The China effect

China had driven luxury growth since 2000 and until the pandemic. “Global luxury growth benefited from the growth of China’s middle class, the emerging class and people becoming millionaires,” Driscoll said.

LVMH, a pioneer in the larger luxury space, released a 3% decline in sales This was due in large part to the ongoing impact of inflation on consumer behavior – particularly in the important Chinese market. Kering for his part reported a 15% year-over-year decline last month.

Bain said the sharp decline in spending in China was due to a “lack of consumer confidence” – and they were not alone.

Globally, the current economic environment has caused many “ambitious” buyers to become more conservative with their spending, said Nicolas Llinas-Carrizosa, a BCG partner specializing in luxury Assets. “They prioritize either financial investments or spending in other categories that they consider more important.”

All told, the overall luxury sector will shrink 2% for the full year of 2024, Bain said.

However, that doesn’t mean consumers will stop spending altogether; The travel, wine and dining industries, and the automotive industry each posted moderate growth this year.

Furthermore, a “gradual recovery” by the end of 2025 is still likely in China, Europe, the US and especially Japan, where buyers are lucky beneficiaries of favorable exchange rates.

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