LVMH will have to review its strategy. Just like Kering, Burberry and other Chanel. The global luxury market will decline by 1% to 3% in 2024, reaching 1.5 trillion euros, according to the Bain & Company study, carried out in partnership with Altagamma, the Italian association of luxury manufacturers, and published, Thursday November 14.
The leather goods, ready-to-wear, jewelry and watches segment, which represents around a quarter of this amount, is expected to be down 2% year-on-year, at constant exchange rates. Initially, Bain & Company was counting on a completely different scenario, with growth of between 0% and 4%. But the downturn in the Chinese luxury market, felt since the end of the second quarter, forced the firm to review its forecasts. “For the first time since the great recession of 2008, outside of the Covid period, the market will experience a slowdown”underlines, in a press release, Claudia D'Arpizio, partner of Bain & Company.
Luxury product manufacturers are already feeling this. Over the first nine months of the year, at the end of September, LVMH, the world leader in luxury, suffered a 2% decline in activity worldwide. Sales of its fashion and leather goods brands, particularly under the Louis Vuitton, Dior and Celine brands, contracted by 3% over this period. Kering suffers more severely. The French group which owns Gucci, in crisis since 2022, Saint Laurent and Bottega Veneta, lost 12% of turnover in nine months, compared to the same period in 2023. Only Hermès ignored the economic downturn. The turnover of the Parisian brand, which targets a clientele with more money than its competitors, increased by 13.8%.
Strategy errors
In Milan, the capital of Italian luxury, the international consulting firm points out the strategic errors made by certain large luxury manufacturers to cope with 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 start of the year, Hermès implemented a price increase of around 9%. But this strategy has not paid off for more affordable brands, including the Italian Gucci, a subsidiary of the Kering group, and Burberry, a British luxury figure.
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