According to a study conducted by the global investment bank RBC Capital Markets, the luxury sector may experience a slowdown in 2024. Current economic conditions, characterized by widespread inflation and high interest rates, raise concerns about consumer demand in Europe, China, and the United States.
After several years of exceptional growth, the luxury industry may soon face a slowdown, according to indications from the global investment bank RBC Capital Markets. Early signs of headwinds are already visible, with the recent 7% drop in LVMH’s stock price the day after announcing its quarterly results, marking the largest decline since the beginning of 2020.
Analysts have also started revising their forecasts, anticipating a market correction that will result in slower growth over the next few quarters compared to the past three years.
The luxury market as a whole is currently about 25% above the 2019 level, with recent growth rates significantly above average for most companies. “This is not sustainable, and we expect more moderate revenue growth trends from now on,” RBC shares.
Targeting Consumers
A key factor contributing to this slowdown is the decline in “aspirational consumers,” individuals who are relatively less wealthy but for whom luxury purchases are a means to build their image. This group of customers, who typically make a few luxury purchases a year, tends to favor more affordable luxury items like accessories. Their reduced spending in the luxury sector this year has had an impact on most luxury houses. This trend is particularly evident in the United States since the beginning of the year, with companies like Kering and LVMH attributing their poor performance in the U.S. to a decline in demand from these aspirational consumers.
Once a major target, this group of customers appears to have been overlooked by luxury brands that continued to increase their prices, favoring consumers who can afford such purchases despite inflation. With the rising cost of living and the apprehension of a recession, aspirational consumers are now thinking twice before indulging in luxury purchases. This trend has a significant impact on luxury brands, as they represent 40% of the global luxury customer base.
Impact of Inflation
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Featured photo : ©Louis Vuitton
