LVMH will have to review its strategy. Like Kering, Burberry and other Chanels. The global luxury market will decrease by between 1% and 3% in 2024, reaching 1.5 trillion euros, according to the study by Bain & Company, carried out in collaboration with Altagamma, the Italian association of luxury manufacturers, and published on Thursday, November 14.
The leather goods, ready-to-wear, jewelery and watches segment, which accounts for around a quarter of this amount, is expected to fall 2% year-on-year, at constant exchange rates. At the beginning, Bain & Company had a completely different scenario, with growth between 0% and 4%. But the decline in the Chinese luxury market, which has been felt since the end of the second quarter, forced the firm to revise its forecasts. “For the first time since the great recession of 2008, outside of the Covid period, the market will experience a slowdown”Claudia D’Arpizio, partner at Bain & Company, emphasizes in a statement.
Luxury product makers are already feeling it. In the first nine months of the year, at the end of September, LVMH, the world’s luxury leader, suffered a 2% drop in its global activity. Sales of its fashion and leather goods brands, particularly those of Louis Vuitton, Dior and Celine, contracted 3% during this period. Kering suffers more seriously. The French group that owns Gucci, in crisis since 2022, Saint Laurent and Bottega Veneta, lost 12% of its turnover in nine months, compared to the same period in 2023. Only Hermès ignored the economic crisis. The turnover of the Parisian brand, which targets a clientele with more money than its competitors, increased by 13.8%.
Strategy mistakes
In Milan, the capital of Italian luxury, the international consulting firm points out the strategic errors made by some large luxury manufacturers to face the slowdown in demand in the United States and China, and to compensate for the drop in sales volumes. Several have resorted to “premiumization” of ranges; In short, manufacturers have increased the prices of their products. At the beginning of the year, Hermès applied a price increase of around 9%. But this strategy has not paid off for the most affordable brands, including the Italian Gucci, a subsidiary of the Kering group, and Burberry, a British luxury figure.
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