50 million consumers have stopped buying luxury brands like Dior and Burberry due to...

The market for personal luxury goods, which has shown strong performance in recent years, is set to slow down in 2024 for the first time since the 2009 Great Recession. A new report from Bain & Company warns that 50 million luxury consumers have either stopped buying or can no longer afford items like designer bags, scarves, watches, and more. This shift means that only a third of luxury brands are expected to see positive growth by the end of the year, a significant drop from two-thirds last year.

To stay relevant in this changing market, luxury brands need to reconsider their approach, particularly with Gen Z consumers, whose expectations continue to rise. Marie Driscoll, an equity analyst in luxury retail, suggests that reinvention is key. She recommends that brands "make products more inspirational" and enhance the shopping experience to surprise and delight consumers. She compares this to the idea that a "fabulous ice cream sundae" becomes boring after repeated experiences.

One of the reasons for the slowdown is that luxury brands have been increasing prices without offering corresponding improvements in innovation, service, or quality, leaving consumers dissatisfied. As a result, major luxury brands such as LVMH, Burberry, and Kering have missed revenue targets this year. In September 2023, LVMH was overtaken as Europe’s most valuable company by Novo Nordisk, the maker of the weight-loss drug Ozempic.

Luxury brands have also been struggling to keep up with changing consumer demands. Michael Kors, for instance, has seen a 14% drop in revenue, citing "brand fatigue" and the fast pace of trends driven by social media and fast fashion. Luxury consumers are increasingly looking for rare, unique, and personalized items. While some brands offer basic customization, few offer truly bespoke options, leaving customers wanting more.

However, Hermés has managed to thrive this year, largely due to the exclusivity of its Birkin bag. The long waitlists and requirements to spend large amounts of money before even being able to purchase the bag have created a sense of rarity and value, which has contributed to the brand's continued success.

The slowdown is also influenced by the changing economic landscape in China, which had been a major driver of luxury growth until the pandemic. Both LVMH and Kering have reported revenue drops in part due to reduced consumer spending in China, impacted by inflation and shifting consumer behavior.

In summary, luxury brands are facing significant challenges as their customers become more discerning, and the economic factors that once fueled growth are no longer as strong. To stay competitive, brands will need to innovate and offer truly unique experiences for their consumers.

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