Luxury Brands Face Price Resistance
Major Western luxury brands are reportedly struggling after implementing price hikes of 40-50% over the past few years. The increases are pricing out aspirational consumers, with some groups like Kering seeing their stock fall significantly since 2022.
- The global personal luxury goods market is projected to decline by 2% in 2024, marking the first slowdown since the 2008 recession, excluding the COVID-19 pandemic. This is attributed to macroeconomic uncertainty, price increases, and a shrinking customer base, particularly among younger consumers. - Price increases for some iconic items have significantly outpaced inflation; for example, a medium Chanel Classic Flap bag's price more than doubled from $4,900 in 2016 to $11,300 in 2025. This strategy has been driven by a combination of rising production costs, global demand, and a desire to increase exclusivity. - The trend of "quiet luxury," which prioritizes craftsmanship and subtle branding over logos, is gaining traction as a response to digital fatigue and a shift in consumer values toward longevity and discretion. Brands like Loro Piana and Brunello Cucinelli, which embody this ethos, have seen strong growth even as the broader market slows. - High-net-worth individuals are increasingly prioritizing spending on luxury experiences like fine dining and travel over goods. In Europe, spending is predominantly on experiences, while the Middle East shows strong demand for goods like clothing and watches. - Major luxury conglomerates are feeling the impact of the slowdown. LVMH reported a 3% drop in organic sales for the third quarter of 2024, citing slowing demand in China. For the first half of 2025, LVMH's profits declined by 15% amid weakening global demand. - While aspirational buyers are being priced out, the secondhand market for luxury goods is growing. Consumers are turning to resale platforms for value, particularly for jewelry and heritage apparel. - The slowdown is polarizing the market, with an estimated one-third of luxury brands expected to see positive growth in 2024, down from two-thirds the previous year. Jewelry has been the most resilient category, particularly in the high-jewelry segment and the U.S. market. - Looking ahead, the personal luxury goods market is forecast to see modest growth of 0% to 4% in 2025, with a more positive long-term trajectory not expected until 2030. Future growth will likely depend on brands' ability to focus on craftsmanship, creativity, and personalized customer experiences.
