Latest news with #Bain
Forbes
13 hours ago
- Business
- Forbes
Luxury Lethargy Sets In As The Market Braces For Up To A 5% Drop In 2025
Side view of crop anonymous female wearing blue dress and high heels while lying on sofa near coffee ... More table with potted plant and bag on sunny day The personal luxury goods market faces a decline of up to 5% this year as consumer enthusiasm wanes, according to the latest projections from Bain and Company in association with Altagamma. Not since the 2008-2009 financial crisis has the luxury market experienced such a significant contraction, except for the 2020 Covid pandemic. Besides the obvious flashpoints creating uncertainty in the market, including rising geopolitical tensions, currency fluctuations and volatile economic pressures, luxury consumers are disillusioned by the industry's offerings, particularly after post-pandemic price increases threw a monkey wrench into brands' traditional price-value relationship. 'There's a sense of emotional detachment, even among the wealthy, who can't explain why the same bag that cost $1,200 before now costs $2,000 – prices are too high for such a low level of creativity,' Bain's senior partner Federica Levato shared with me. 'The disillusionment and detachment we talk about is particularly noted among younger consumers.' Rising luxury consumer detachment was reflected last year, as the luxury market declined 1% at current exchange rates to $418 billion (€364 billion) – or remained flat at constant rates. Yet, most telling was that the luxury market lost some 50 million customers over the last two years. Today, the estimated number of luxury consumers worldwide is approximately 353 million, down from 400 million in 2022. 'This is true alienation, meaning many people are just not buying anymore,' she observed, adding that engagement with luxury brands across all demographics, not just the younger aspirational cohort, has declined since 2022. Brand-related searches and engagement rates are down more than 40% and social media follower growth has plummeted by 90% – 'largely due to price fatigue and stagnant creativity.' For an industry that thrives on artistic creativity, the growing churn in luxury brand senior executives and creative directors is taking its toll. Consumers may not be aware of what's going on behind the curtain, but they see it in the stores and the brands ultimately feel it on their top and bottom line. 'While companies are waiting for a new creative director to introduce a new collection, it can take nine months to a year for the transition – like giving birth to a baby,' Levato explained. 'Consumers may not know about the shifts, but they see it when no new products arrive and the brands are totally silent during the transition.' And she added, 'Then there's also a 50% probability that the new collection doesn't work, as has been the case for some brands in the recent past.' All this is sinking to luxury brands' bottom line. Bain notes that since 2021, margins (defined by earnings before interest and taxes) have either stagnated or declined, even among top industry performers, and margins are expected to erode further in 2025. 'All the macroeconomic uncertainties, tariffs, lower traffic, fewer new products – over 70% of luxury brands are pulling back volume from multi-brand retail platforms – have an impact on the topline, but have a more than proportional impact on the bottom line and on the EBIT,' Levato said. 'The message is to some extent is positive because brands are not hitting the brakes on investments in technology, marketing, clienteling and stores, but they still must absorb the costs,' she continued, adding further price increases are probably off the table in the current environment. Saying the luxury market faces 'far-reaching disruptions,' the Bain report also stresses the industry's proven resiliency, yet Levato stresses industry players can't rest on their laurels. 'As the industry faces an increasingly complex global landscape, luxury brands are entering a pivotal new chapter – one that demands sharper focus, greater cultural relevance, and growth rooted in purpose. 'At the heart of this transformation is a redefinition of value and meaning that resonates across all generations – with those shaping luxury today, and those who will define it tomorrow,' she observed. Because the U.S. is the world's richest market – last year 1,000 new millionaires were minted here each day, totaling nearly 400,000, and more than half of all new millionaires globally – and the largest personal luxury market by far – the Americas totaled about $115 billion last year with the lion's share in the U.S., compared to $51 billion in Mainland China – what happens here will have a profound impact on the global personal luxury market overall. According to the Affluent Consumer Research Company's May luxury tracking survey, luxury consumer fatigue is measurable. Specifically, 52% of the 300+ affluent Americans with incomes of $250,000 and above reported being disappointed with luxury options, and 46% were unable to justify new purchases. But most telling is that among those affluents who tend to opt for the luxury option most often, 55% said they're bidding their time, and the same 55% share signaled that the available options simply do not move them. 'Purchase hesitation isn't one-size-fits-all,' observed ACRC's founder and CEO Chandler Mount. 'At the top of the market, it's not about affordability – it's about emotional resonance. They're bidding their time, a signal of flexibility, not resistance. Yet, there remains a lack of enthusiasm and emotional draw for affluent consumers.' Note: I am professionally affiliated with ACRC. While Americans wait for luxury goods brands to present more compelling options, Bain reports that the luxury experiences market, including hospitality, fine dining, cruising and private jets, is 'flourishing,' as consumers prioritize meaningful experiences over goods, particularly among older consumers, where wealth tends to accumulate. At its core, luxury is a cultural construct rooted in personal meaning, social status, and an expression of self-worth. While owning an abundance of luxury goods can confer some of those advantages, increasingly affluent and high-net-worth individuals are turning luxury expression inward toward personal growth and well-being. This cultural shift in consumer consciousness has profound implications for the goods side of the luxury market. 'This isn't a trend – it's a complete reconstruction of how success is defined by the world's most affluent and influential consumers,' said Mark Miller, chief strategy officer at Publicis Groupe's Team One agency. 'It's a shift from building high-net-worth to pursuing high-life-worth.' He was speaking about Team One's latest study entitled 'Worth Beyond Wealth,' based upon research among its exclusive Global Affluent Collective. The collective represents the top 10% of global earnings across 22 countries and totals some 4,200 consumers aged 25 and above. 'The most provocative finding is how they've moved beyond asking 'What do I own?' to 'Who am I becoming?' This transformation demands an entirely new approach from premium brands,' he continued. Findings that popped in the study, which combined both qualitative and quantitative research, include: This shift toward pursuit of high-life-worth through meaningful experiences requires luxury goods brands adapt to a new 'return on worth' price-value framework. Miller described this as a selective abundance approach, where people with means will spend abundantly on things that have special worth and save abundantly, i.e. trade down, in purchases that are substitutable or replaceable. 'There's a strong need in this world of selective abundance for luxury goods brands to not just make things that are functionally excellent – consumers will know the difference – but to offer a value proposition that goes above and beyond the functional things they make,' he explained, stressing the need for greater high-life-worth storytelling, rather than relying on product features, benefits, brand heritage, design and quality. 'Luxury is no longer only about having exceptional things – it's about integrating excellence with impact. The best premium brands won't just sell luxury – they'll help architect high-worth lives,' shared Tahini Candelaria, Team One's director of cultural anthropology. Miller added, 'Luxury isn't just about possessions anymore. It's about acquiring the learning and relationships to become a more evolved version of who I aspire to be over time.' While the Bain study acknowledges some of this – 'Across generations, drivers linked with self-reward, status, personal identity and the celebration of achievements will continue to drive engagement, reinforcing and building the lasting relevance of luxury with the consumers' lives,' Claudia D'Arpizio said in a statement – Team One's perspective pushes the concepts of luxury as self-reward, status, personal identity and celebrating achievements further toward value beyond what money can buy. These insights require luxury goods brands to reframe their value proposition above the price-value relationship toward a return on worth. 'The notion of worth is becoming far more dominant in how affluent consumers express themselves. Luxury consumption is becoming more conscious, purposeful, meaningful and impactful with a long-tail orientation that looks to the future, not to the past,' Miller concluded.
Business Insider
14 hours ago
- Business
- Business Insider
The luxury market is poised for a big slowdown, but there are some areas where people are still willing to splurge
It's been a rough year for luxury retailers, as economic headwinds have reduced consumer demand, but there are still a few places where people are willing to spend money. Luxury brands could be facing their biggest setback in 15 years, according to a report published by Bain & Company and Italian luxury goods industry association Altagamma on Thursday. In addition to a global trade war, the industry is struggling to adapt to social and cultural changes. Demand in the US and China, the two biggest markets for luxury products, has been slowing. Some legacy companies are facing financial difficulties with debt and restructuring. Another challenge for the luxury market is Gen Z, a demographic with growing skepticism toward luxury goods, according to Bain. This younger generation of consumers prioritizes self-expression and creativity, and the luxury industry will need to successfully adapt its messaging if it wants to woo more Gen Z customers. Bain estimates that spending on personal luxury goods could be on track for a "continued slip." In a worst-case scenario, Bain estimates the market for personal luxury goods could shrink by 5% to 9%. Consumers are still splurging selectively However, that doesn't mean consumers are pulling back everywhere. Luxury experiences outperformed personal goods in the first quarter of 2025, and companies are leaning hard into "beyond product" experiences such as vacations and gourmet restaurants. Luxury hospitality — think White Lotus -esque resorts — is taking off, with this year seeing rising hotel occupancy rates and longer stays. While traditional luxury markets in the US, China, and Europe are stagnating, the Middle East, Latin America, and other parts of Asia are seeing increased demand from consumers seeking high-end tourism experiences. The UAE, Qatar, and Saudi Arabia are leading the charge in this new trend, according to Bain. Consumers are also eager for luxury cruises. Following the trend of increased personalization, they prefer slower, more immersive trips on smaller ships. Yachts and private jets are experiencing a backlog of demand. Fine dining and gourmet food rank high on consumers' radars, and they chase highly curated experiences. Some areas of personal luxury goods are also thriving. Demand for jewelry, apparel, and eyewear has been robust this year for both uber-luxury and aspirational offerings. Fragrances are a top-performing category due to their popularity with Gen Z and "premiumization." Luxury brands are elevating their perfume offerings by making them more exclusive, expensive, and experiential. Bain also identified some categories that haven't been doing so well: watches, leather goods, and footwear. Unless there's more innovation in these products, it's likely they'll continue to see declining demand. As luxury brands adapt to changing consumer preferences, Bain predicts the gap between the industry leaders and laggards will only become more pronounced. Luxury's winners will be the brands that offer the kind of personalization and novelty that convinces even cautious consumers to spend.
Otago Daily Times
15 hours ago
- Entertainment
- Otago Daily Times
Bain's dedication, hours devoted to pipes recognised
Alexandra and Districts Pipe Band Drum Major Ken Bain, of Millers Flat, leads the band at the head of the Blossom Festival parade. Mr Bain has been made a life member of the pipe band. PHOTO: JULIE ASHER Joining a pipe band might have been a dream come true but the band was equally fortunate when Ken Bain turned up for practice at the Alexandra and Districts Pipe Band for the first time. This month Mr Bain was made a life member of the band, recognising his dedication and countless hours devoted to the pipes. Mr Bain, of Millers Flat, began playing the pipes as a young lad growing up in the Teviot Valley. In 1954, neighbour Arthur Frame, of Dumbarton, brought then 13-year-old Ken a silver-and-ivory mounted set of pipes from a trip to Scotland. Tutoring from Charlie Sutherland, at Ettrick, and then Alan Porteous while attending Otago Boys' High School set him on his musical path. Ken Bain playing the pipes in 2008. PHOTO: SUPPLIED However, farming and raising a family meant the pipes were put away for many years. It was not until Mr Bain and his late wife, Dawn, retired from their farm to Millers Flat that he began playing again. After tutoring from Roxburgh's kilted pharmacist, Alistair Forbes, who plays outside his shop every Friday afternoon, Mr Bain joined the Alexandra and Districts Pipe Band in 2002. "It was a dream come true," he said. For the next 23 years Mr Bain drove to Alexandra every week for band practice and spent many more hours travelling to perform. "I wore out a car with the travel," he quipped. Taking up the pipes again was hard as it was more difficult to memorise the music when he was older, he said. Presenting the life membership, pipe band secretary Barbara Blackler said Mr Bain was always ready with a joke or funny yarn. He was an enthusiastic member and always keen to put up his hand and be involved in a performance whether for the blossom festival, Anzac parades, fundraising or community events. Nominated drum major in 2021, a position he still holds, Mr Bain was also president in 2009-11. Mr Bain had always been very supportive of new members and had a vision for the future of the band, especially involving young people, Mrs Blackler said. He was also responsible for her holding the role as secretary. After so many years of driving an hour and a-half every week for practice Mr Bain now heads up the road every second week. "I've never been a great piper but I love it."
16 hours ago
- Business
Tariff threats, wars will slow but not collapse global luxury sales in 2025, new study shows
MILAN -- Global sales of personal luxury goods are 'slowing down but not collapsing,' according to a Bain & Co. consultancy study released Thursday. Personal luxury goods sales that eroded to 364 billion euros ($419 billion) in 2024 are projected to slide by another 2% to 5% this year, the study said, citing threats of U.S. tariffs and geopolitical tensions triggering economic slowdowns. 'Still, to be positive in a difficult moment — with three wars, economies slowing down, inequality at a maximum ever — it's not a market in collapse,'' said Bain partner and co-author of the study Claudia D'Arpizio. 'It is slowing down but not collapsing.' Alongside external headwinds, luxury brands have alienated consumers with an ongoing creativity crisis and sharp price increases, Bain said. Buyers have also been turned off by recent investigations in Italy that revealed that sweatshop conditions in subcontractors making luxury handbags. Sales are slipping sharply in powerhouse markets the United States and China, the study showed. In the U.S., market volatility due to tariffs has discouraged consumer confidence. China has recorded six quarters of contraction on low consumer confidence. The Middle East, Latin America and Southeast Asia are recording growth. Europe is mostly flat, the study showed. This has created a sharp divergence between brands that continue with strong creative and earnings growth, such as the Prada Group, which posted a 13% first-quarter jump in revenue to 1.34 billion euros, and brands like Gucci, where revenue was down 24% to 1.6 billion euros in the same period. Gucci owner Kering last week hired Italian automotive executive Luca De Meo, the former CEO of Renault, to mount a turnaround. The decision comes as three of its brands — Gucci, Balenciaga and Bottega Veneta — are launching new creative directors. Kering's stock surged 12% on news of the appointment. D'Arpizio underlined his track record, returning French carmaker Renault to profitability and previous roles as marketing director at Volkswagen and Fiat. 'All of these factors resonate well together in a market like luxury when you are in a phase where growth is still the name of the game, but you also need to make the company more nimble in terms of costs, and turn around some of the brands,'' she said. Brands are also making changes to minimize the impact of possible U.S. tariffs. These include shipping directly from production sites and not warehouses and reducing stock in stores. With aesthetic changes afoot 'stuffing the channels doesn't make a lot of sense,'' D'Arpizio said. Still, many of the headwinds buffering the sector are out of companies' control. 'Many of these (negative) aspects are not going to change soon. What can change is more clarity on the tariffs, but I don't think we will stop the wars or the political instability in a few months,'' she said, adding that luxury consumer confidence is tied more closely to stock market trends than geopolitics. President of Italian luxury brand association Altagamma Matteo Lunelli underlined hat the sector recorded overall growth of 28% from 2019-2024, 'placing us well above pre-pandemic levels.' While luxury spending is sensitive to global turmoil, it is historically quick to rebound, powered by new markets and pent-up demand. The 2008-2009 financial crisis plummeted sales of luxury apparel, handbags and footwear from 161 billion euros to 147 billion euros over two years. The market more than recovered the losses in 2010 as it rebounded by 14%, with an acceleration in the Chinese market. Similarly, after sales plunged by 21% during the pandemic, pent-up spending powered sales to new records.
17 hours ago
- Business
Tariff threats, wars will slow but not collapse global luxury sales, new study shows
MILAN -- Global sales of personal luxury goods are 'slowing down but not collapsing,' according to a Bain & Co. consultancy study released Thursday. Personal luxury goods sales that eroded to 364 billion euros ($419 billion) in 2024 are projected to slide by another 2% to 5% this year, the study said, citing threats of U.S. tariffs and geopolitical tensions triggering economic slowdowns. 'Still, to be positive in a difficult moment — with three wars, economies slowing down, inequality at a maximum ever — it's not a market in collapse,'' said Bain partner and co-author of the study Claudia D'Arpizio. 'It is slowing down but not collapsing.' Alongside external headwinds, luxury brands have alienated consumers with an ongoing creativity crisis and sharp price increases, Bain said. Buyers have also been turned off by recent investigations in Italy that revealed that sweatshop conditions in subcontractors making luxury handbags. Sales are slipping sharply in powerhouse markets the United States and China, the study showed. In the U.S., market volatility due to tariffs has discouraged consumer confidence. China has recorded six quarters of contraction on low consumer confidence. The Middle East, Latin America and Southeast Asia are recording growth. Europe is mostly flat, the study showed. This has created a sharp divergence between brands that continue with strong creative and earnings growth, such as the Prada Group, which posted a 13% first-quarter jump in revenue to 1.34 billion euros, and brands like Gucci, where revenue was down 24% to 1.6 billion euros in the same period. Gucci owner Kering last week hired Italian automotive executive Luca De Meo, the former CEO of Renault, to mount a turnaround. The decision comes as three of its brands — Gucci, Balenciaga and Bottega Veneta — are launching new creative directors. Kering's stock surged 12% on news of the appointment. D'Arpizio underlined his track record, returning French carmaker Renault to profitability and previous roles as marketing director at Volkswagen and Fiat. 'All of these factors resonate well together in a market like luxury when you are in a phase where growth is still the name of the game, but you also need to make the company more nimble in terms of costs, and turn around some of the brands,'' she said. Brands are also making changes to minimize the impact of possible U.S. tariffs. These include shipping directly from production sites and not warehouses and reducing stock in stores. With aesthetic changes afoot 'stuffing the channels doesn't make a lot of sense,'' D'Arpizio said. Still, many of the headwinds buffering the sector are out of companies' control. 'Many of these (negative) aspects are not going to change soon. What can change is more clarity on the tariffs, but I don't think we will stop the wars or the political instability in a few months,'' she said, adding that luxury consumer confidence is tied more closely to stock market trends than geopolitics. President of Italian luxury brand association Altagamma Matteo Lunelli underlined hat the sector recorded overall growth of 28% from 2019-2024, 'placing us well above pre-pandemic levels.' While luxury spending is sensitive to global turmoil, it is historically quick to rebound, powered by new markets and pent-up demand. The 2008-2009 financial crisis plummeted sales of luxury apparel, handbags and footwear from 161 billion euros to 147 billion euros over two years. The market more than recovered the losses in 2010 as it rebounded by 14%, with an acceleration in the Chinese market. Similarly, after sales plunged by 21% during the pandemic, pent-up spending powered sales to new records.
