How 'dupes', fast fashion and China's economic downturn spell disaster for the luxurious sector

Alarm bells are ringing throughout the high-end sector. The yr 2024 didn’t end as luxury brands had hoped, and the figures released by the industry's most important groups painted an image of slowdown and a few signs of exhaustion in the ultimate quarter of 2024.

The weak Asian market is an obvious cause, but the weird consumer reactions to sharp price increases are also striking. Sophistication and differentiation – until recently a part of the DNA of luxury brands – are taking over latest dimensions because of phenomena equivalent to ultra-fast fashion and “dupe” culture (low cost products inspired by or imitating luxury goods).

Poor financial results

The largest luxury goods group Louis Vuitton Moët Hennessey (LVMH) – owner of 75 brands including Louis Vuitton, Christian Dior, Moët & Chandon, Hennessy and Veuve Clicquot – has reported quarterly results showing growth of just 3%, well below the 14% in 2023. The growth was in fashion down by 5%. and for wines and spirits 7%.

For DryThe industry's second-largest company – whose portfolio includes brands equivalent to Gucci, Balenciaga, Yves Saint Laurent and Bottega Veneta – saw like-for-like sales fall 6% and 4%, respectively. The list of examples goes on, with legendary houses like Burberry and Lanvin publishing similar figures.

The results might be analyzed in light of the growing panorama of worldwide instability over the past yr. The yr 2024 was marked by intense geopolitical turmoil, with several serious open conflicts, burgeoning technological rivalries and greater than 70 elections world wide. All of this brings with it a high level of economic uncertainty.

However, we must not forget that the luxurious market has proven to be very resilient in times of crisis. The sector's results after the COVID crash were surprisingly good: digitalization accelerated, and the buoyant behavior of consumers with a desire to spend money – a phenomenon generally known as “revenge spending” – contributed significantly.

What could this modification in consumption mean and what lessons can we learn from it? There are several essential aspects that may herald a change in the luxurious world, and corporations' strategies may have to alter in the event that they need to sustain.



Asian dragon economies are weakening

One of the important thing aspects behind these results is the fading perception of China as a spot of unstoppable growth.

Slump lately the Chinese market was the most important goal of those brands, their natural place of expansion and growth. Between 2009 and 2019, the LVMH Group grew from 470 branches in Asia to 1,453 (excluding Japan). The same applies to Kering, whose number rose from 152 to 609 stores.

Collections and marketing strategies also shifted to this market, targeting a growing and thriving middle class that looked as if it would don’t have any end in sight. However, that’s Dragon Economies are actually showing signs of slowing down and the decline in sales in the luxurious sector is becoming increasingly clear.

In figures released by LVMH, sales in Asia (again excluding Japan) are forecast to fall by 16%. This is especially pronounced in China, which has to date accounted for 50% of the French group's growth.

Lack of consumer confidence and restrained spending on luxury goods could explain this latest outlook. But if China isn’t any longer what it once was, where can luxury brands find latest strategies for fulfillment?

Prices go up and up

The luxury corporations' strategy lately has been based on a rare price increase. The escalation was unstoppable: the worth of a Hermès bag doubled and a few Chanel bags reached 10,000 euros. Some of those pieces have also doubled in value on the used market. Another clear example is the costs of watches, which have increased by greater than 20%.

It is natural for luxury brands to make use of price as a barrier to entry into mass consumption and as a method of maintaining exclusivity. It appeals to the ultra-rich or extremely wealthy with the aim of inspiring everlasting aspiration – the Veblen effect, whereby higher prices create higher demand, has worked on this market.

The concept is known as after Thornstein Veblen, economist and creator of The Theory of the Leisure Class: An Economic Study of Institutions. In the seventh chapter of this work, entitled “Clothing as an expression of pecuniary culture,” Veblen explains that fashion and luxury are status indicators. If the claim shouldn’t be constructed, luxury becomes meaningless.



However, there also appear to be other reasons for this significant price increase. A widely cited reason is higher raw material costs, but geopolitical uncertainty and rapid inflation lately have also contributed to this increase.

The cost of distinction

The entry of recent players into the style world is at an end the pyramid has forced everyone to climb the ladder and discover what sets them apart. Ultra-fast fashion has led to mid-market brands wanting to be perceived as more sophisticated, and this movement in turn is leading luxury brands to hunt greater distance from latest competitors.

Some also point this out “Impostor” culture because the perpetrator for this constant price increase. Copies of luxury products – or imitations with minor modifications – have flooded social media, especially TikTok, forcing brands to distance themselves more from this sort of consumption. Authenticity has its price.

The big query in the intervening time is how far this price increase will go. Some people have asked whether the consumers targeted by these brands, no matter their wealth, even have reservations about spending for money's sake. In other words, do they really find value within the product?

Quiet luxury: a brand new approach

It seems that positioning themselves as a luxury brand isn’t any longer enough – these corporations also need to seek out a solution to create and display value. Price increases have to be justified by two levers which have all the time been the essence of luxury: creativity and quality.

Furthermore, luxury isn’t any longer synonymous with brands. The trend of quiet luxury shows a desire to distance itself from conspicuous aggressiveness by avoiding or hiding any logo or distinctive detail that makes its brand obvious.

This implies that brands are only recognizable to those that have a more sophisticated knowledge of luxury products. Quiet luxury potentially expands the market to customers who’re occupied with their very own well-being and a more relaxed lifestyle, beyond the products themselves.

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