2024 has passed, but before the Q4 and full-year results are in, pundits are already looking to debrief the past year to find patterns and the way forward. For the luxury industry, some might conclude that 2024 was marked by a general decline as the market shrunk 2% and lost 50 million customers in the past 2 years. While others see it as a year of division for luxury. Brands, regional markets, and categories/sectors can cause vastly different results within the luxury industry.
Data shows that LVMH’s Q3 revenue dropped 3% year-on-year (YoY) to 19.08 billion EUR (19.52 billion USD), underperforming market expectations. Kering, on the other hand, dropped 15% YoY in Q3 with its 3.79 billion EUR (3.88 billion USD) revenue. Gucci and Yves Saint Laurent dropped 25% and 12% in the quarter. Meanwhile, Hermès and Miu Miu from Prada Group were the winners in Q3, growing 11.3% and 17.7% YoY respectively.
Region-wise, Asia, especially China, contributed much to the decline. The reason for this is two-fold: Economic uncertainty, of course, is one of the reasons China has been dealing with economic woes, arguably more severe than the global average. Another key factor is that with international travel resuming in 2023, many Chinese consumers have returned to buying abroad for lower prices or tax deductions.
Another division is between categories of luxury goods. Q3 saw beauty and jewellery growing across luxury brands. Meanwhile watches and alcohol have been under constraint in the third quarter of last year. Another interesting category is handbags, as leather goods are the bread and butter for many heritage luxury brands like Hermès, Louis Vuitton and Chanel. However, there have been reports of customer sentiment lacking in enthusiasm for handbags in 2024. Interviews show that consumers are shifting away from luxury brands such as Chanel, who raised its prices again last spring.
As in most economic downturns, the middle classes and aspiring customers such as young professionals, are seeking value for money. But 2024 saw another trend starting in China, the “emotional value”. Anecdotal interviews show that the need to satisfy oneself has driven young professionals to tea and coffee merch bags and “pain bags”. As luxury thrives on providing extra value with brand narrative and heritage, how to capture the hearts of Chinese consumers again is likely the big question that needs answering in 2025 for luxury brands. Incidentally, analysis from Deutsche Bank has found that H2 2025 may be the earliest that the global luxury industry can recover.
