Nothing gold can stay. Despite years of strong performance, the market for personal luxury goods is set to slow down this year for the first time since the 2009 Great Recession. Now, 50 million luxury consumers have either ditched buying designer bags, scarves, watches, and more—or have been priced out, Bain & Company’s new annual luxury report warns.
Only a third of luxury brands will end the year with positive growth, Bain posited, down from two-thirds last year.
Looking ahead, it said that to stay alive, brands need to reevaluate their value proposition—mainly for Gen Zers—and keep meeting their growing expectations.
As for how? Marie Driscoll, an equity analyst focused on luxury retail, told Fortune that reinvention is key.
“Get back to books, make products more inspirational, make the shopping experience marvelous,” Driscoll said. “You need to constantly meet consumers at a new angle and surprise and delight them.”
“A fabulous ice cream sundae is boring by the time you have it the fifth time,” Driscoll added.
On some level, brands have broken their promises to consumers, Driscoll said.
“Since 2019, there’s been a high price increase across luxury without a corresponding increase in innovation, service, quality, or appeal that a luxury brand should provide,” Driscoll added. “This year, that really hit consumers, and we felt the full impact.”
It perhaps explains why the luxury powerhouses, including LVMH (which owns Dior and Louis Vuitton), Burberry, and Kering (owner of YSL and Gucci), missed revenue targets this year. In fact, LVMH was dethroned as Europe’s most valuable company in September 2023 by Novo Nordisk, the maker of Ozempic.
Customers—beyond being hamstrung by eye-popping prices with which their salaries rarely keep pace—are likely growing unimpressed by the products these high-end brands have to offer.
Some more than others. Michael Kors, founder of his namesake brand, said during New York Fashion Week in September that he’s struggling with “brand fatigue” in an effort to explain 14% year-over-year revenue drops, pointing his finger at fast fashion and social media influencers keeping up with trends much, much faster.
“The luxury consumer wants something that is rare, unique, bespoke, beautiful and specifically theirs,” Hitha Herzog, a retail analyst, told Fortune. “While some luxury brands offer basic customization, almost all luxury brands have no way to make one-off pieces for their VIP clients, or create something so aspirational customers can strive to eventually own.”
