Luxury sales stagnate amid self-inflicted creativity crisis and price hikes, study finds

MILAN (AP) — The post-pandemic boom in global sales of luxury handbags, shoes and clothing is expected to stall this year amid a creativity crisis and price hikes as brands focus on biggest spending customers, a new study from consulting firm Bain. said Tuesday.

Bain forecasts stagnation in global luxury sales in 2024 after a slight decline in the first quarter, according to the study commissioned by the Altagamma association. The consultancy cited political uncertainty during a presidential election year in the United States as well as economic uncertainty in China that has caused a “luxury shaming” phenomenon.

Beyond socio-economic factors and growing geopolitical tensions, the slowdown is also partly “self-inflicted,” said Bain partner Claudia D’Arpizio.

She spoke of a “crisis of creativity” in the sector, as a number of major fashion houses change creative directors, and a new focus on very wealthy clients, to the detriment of the ambitious middle class and young people of Generation Z who drove growth before the pandemic.

“There is a lack of clarity for a lot of these brands. They are trying to refocus. There are five, six brands in the process of recovery, big ones. It doesn’t help the general enthusiasm,” D’Arpizio told the Associated Press. “This is a supply-driven industry. When brands are truly in tune with customer needs , they generally react quickly.

She said some “adjustments” were needed in terms of strategy and pricing, adding that “you can’t grow without the middle class and younger generations.”

Among the major fashion houses, Gucci and Moschino debuted on the catwalks with their new creative directions, while the new creative director’s first Valentino collection will be presented on the catwalks in September. Chanel has the position open after the incumbent resigned earlier this month.

Although inflation is a factor in rising prices, D’Arpizio said brands are also refocusing on the estimated 6 to 8 million consumers at the top of the pyramid, seeking better profit margins. At the same time, the offer has been less refreshed.

Large price increases for items that don’t demonstrate significant innovation and look like something they’ve seen before leave customers “upset and perplexed.”

Forecasts of stagnant global luxury sales follow a pent-up spending surge after the pandemic that pushed sales up 24% over the 2021-2023 period from 2019 levels.

Last year, sales of personal luxury items rose 4% to 362 billion euros (about $388 billion), up from 349 euros in 2022, largely driven by the resurgence of U.S. tourism and Asian towards Europe, which fuels purchases. Add in luxury travel, fine art, cars and yachts, and the vast global luxury market expanded to €1.5 trillion last year, highlighting a trend toward experiences rather than tangible goods.

Japan is a bright spot with the return of foreign tourists with the yen at its lowest level against the US dollar in 20 years, while Europe continues strong trends due to tourist spending and an increase in consumption local, particularly in French and Italian cities.