In the complicated world of business, the luxury market faces uncertain times. Sales growth reported in Q4 2023 by the leading companies in the sector (LVMH, Kering, Hermès, etc.) was 5%, compared to an average of 12.5% observed over the last five years.
In addition to tactical causes (economic stagnation in major luxury consumer economies, high interest rates, etc.), the sector faces much more strategic dilemmas and challenges. Luxury brands, which have always been synonymous with exclusivity, are grappling with a host of unpredictable changes, from how people shop to the very concept of "luxury."
Among the most interesting, three are worth highlighting:
- Technology: It is presented as a key tool in this uncertain journey. Luxury brands are advancing in online strategies, not only because the pandemic pushed them in that direction, but because they see an opportunity to reach more people. But is an online process capable of generating luxury experiences? How compatible is reaching more people when seeking exclusivity? To what extent is luxury associated with the "human" component?
- Sustainability is another important issue. Are luxury consumers really concerned about sustainability? Is it a differentiating factor? Is sustainability a new aspect of luxury?
- The very concept and definition of luxury: are all luxury consumers the same? What types of luxury consumers are there? What does each of them value? Is quiet luxury compatible with the influencer phenomenon? How does luxury deal with the shift "from having to living" that society is experiencing?
In summary, the luxury market faces a period of uncertainty, which is also full of opportunities to innovate and adapt. Brands that can accurately interpret the changes and quickly adjust their strategies will not only survive, but also navigate toward new and exciting frontiers in contemporary luxury.
Source: Bankinter: "Investing in the Luxury Sector: Current Situation and Outlook." January 16, 2024.
Photo by Michael Steinberg/Photo by Anna Nekrashevich
