Latest news with #FedericaLevato
Yahoo
a day ago
- Business
- Yahoo
Luxury's $1.7 trillion headache: The sector lost 50 million customers last year and is struggling with selfie-happy Gen Z
Luxury brands are retreating to exclusivity after years of trying to broaden their appeal, but they're now struggling to reconcile that elusiveness with younger consumers' desire to share and express identity online. With the luxury market shrinking—marked by a 3% dip in early 2025 and the loss of around 50 million customers—brands must urgently innovate to maintain relevance, exclusivity, and emotional connection in the social media era. Luxury brands have retreated back to their safe space of exclusivity, having explored new avenues to win customers during COVID. The only problem is, to win and retain the next generation of shoppers they must marry their need to remain elusive with a consumer who wants to share everything online. These companies have no time to waste. According to a spring update on the sector from Bain & Co, the industry is losing speed relatively quickly. The study released Thursday shows the sector's worth was €1.5 trillion ($1.7 trillion) in 2024, though for Q1 of 2025 estimates are shrinkage of 3% compared to last year. Even last year, personal luxury goods was one of the categories which marked the most notable slowdown, knocking from €369 billion in 2023 down to €364 billion in 2024. That marked its first contraction in 15 years—with the notable exception of the pandemic. And the gap between winners and losers in the luxury sector is also growing, added the author's writers Claudia D'Arpizio and Federica Levato. The gap between the top 75th percentile and the bottom 25th percentile performers increased by 1.5 times in Q1 2025 compared to a year earlier, with market leaders continuing to charge ahead while the bottom 20% to 30% of the sector continued to report a reduction in growth. Part of the problem is consumers are wrangling with what Bain & Co describes as the 'value equation'—basically, are they getting enough—be it experience, social and cultural kudos, or workmanship—out of the purchase for the elevated price they are paying? For a 'long period' luxury brands were trying to enlarge their customer base to be more inclusive, D'Arpizio tells Fortune. This was really reinforced in some categories with 'entry items like streetwear, sneakers, and even beauty—all the categories that could have been more relevant for young people, but also with people with less discretionary spending.' That strategy 'overcorrected' she added, with brands overly relying on iconic design or experiences, reducing their pace of innovation and hence, leading consumers to question if their spend is really worth it. 'So last year we had a big loss of customers—around 50 million less customers buying luxury product—in particular in the younger generation, and a big drop on customer advocacy,' D'Arpizio continued. 'What is happening now that the brands are trying to fix that, and trying to reignite this relationship with these customers without losing their exclusivity.' Shifting back to exclusivity is a more difficult ask when younger consumers are known as the social media generation for their propensity to post online. Gone are the days of galas with no cameras, of designer handbag back rooms with no filming allowed: It's all available on a For You Page within moments of ending. 'Luxury has always been about showing off,' D'Arpizio, who is Bain & Co's lead for the global fashion, luxury goods vertical, continued. 'The previous generation was showing off wealth and showing off accomplishments in life, now it's more showing off of your of your personality or your ability to choose your aesthetics, your quality of life. 'There is a big need, in particular in Gen Z, for sharing. This sharing means expressing their personality … but also a desire of conformity. These are two forces that are contradictory but in reality are a big driver for luxury consumption because luxury brands can provide this conformity, but then inside the luxury brand, mixing and matching, choosing your own style, developing your own style, creates your self-expression.' She continued: 'Social media has provided a huge impulse to luxury consumption because the potential of sharing with a larger audience has created both more customers but also in augmentation of their communication strategies and so they have a broader reach. 'So yes, they want to be exclusive, but they know the power of social media.' This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
a day 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 of Fashion
28-05-2025
- Business
- Business of Fashion
Can Jewellery Continue to Outshine Fashion?
For aspirational Millennial shoppers, a handbag was often their first significant luxury purchase. Now, Gen-Z is increasingly eyeing jewellery as its first big splurge and buying handbags secondhand. Jewellery is proving to be luxury's most resilient category amidst a broader downturn that has seen even fashion and leather goods stalwarts like Chanel and LVMH report falling sales. Last year, while the luxury market as a whole declined 1 percent, jewellery still managed modest growth of as much as 2 percent, reaching €31 billion ($35 billion), according to Federica Levato, senior partner at Bain & Company. High jewellery performed particularly well. Though still much larger, the market for leather goods, by contrast, shrank about 3 percent to €78 billion. 'We're entering a trend of jewellery outperforming leather goods,' said UBS luxury analyst Zuzanna Pusz, who has been tracking the shift towards jewellery for years. 'Jewellery is not making the mistakes fashion is making.' These mistakes include a lack of ingenuity as luxury fashion slumps under creative fatigue, quality concerns that are flooding social media — see the recent viral TikTok about Chanel's footwear — and exaggerated price hikes that have prompted a shopper backlash. Jewellery, by contrast, is nailing luxury's values of quality, craftsmanship and customer service better than many fashion brands. The category's resilience was evident in Richemont's recent earnings, with the Swiss company's jewellery sales soaring 11 percent in the quarter. 'The appeal of Richemont's main jewellery brands, Cartier and Van Cleef & Arpels, remains clear and untarnished by the aggressive post-pandemic price increases implemented by other luxury brands,' wrote Bernstein analyst Luca Solca in a note following Richemont's results. But jewellery is facing challenges that could dim its lustre. The tariffs unleashed by US president Donald Trump have ushered in widespread economic uncertainty that threatens to dampen luxury sales further while simultaneously hitting European brands selling in the US with levies of up to 50 percent, according to Trump's most recent threats. The Chinese market also continues to lag, and jewellery makers are watching as prices for gold — one of their most important raw materials — skyrocket. Goldman Sachs analysts have forecast that gold prices will reach record highs this year as investors flock to it as a haven from economic volatility. Even with these headwinds, however, jewellery still seems set to continue outshining fashion. 'I've been saying that jewellery will outperform fashion since 2022 and that won't change anytime soon,' Pusz said. Why Jewellery Feels More 'Worth It' One of the key reasons jewellery is gaining ground lies in its perceived value. As Pusz pointed out, fashion brands like Louis Vuitton and Chanel aggressively increased prices post-2020 — up to 10 percent or more — while jewellery brands like Cartier remained more restrained, with price hikes closer to 3 percent. As a result, a Cartier Love bracelet feels less expensive compared to a Chanel Classic Flap bag than it did a decade ago, suggesting a better price-to-value tradeoff in the minds of consumers. Online chatter about the plunging quality of luxury bags, shoes and clothes hasn't helped their value proposition. Social media is now flooded with complaints about deteriorating craftsmanship, particularly in leather goods. Chanel, once considered a paragon of craft, has been slammed with criticism for declining quality, even as prices climbed. The author has shared a TikTok. You will need to accept and consent to the use of cookies and similar technologies by our third-party partners (including: YouTube, Instagram or Twitter), in order to view embedded content in this article and others you may visit in future. Jewellery hasn't received the same rebukes online. At the same time, the big names in luxury fashion have been criticised for backing away from creative experimentation, but that isn't an issue jewellery is facing. 'There's been much more innovation and variation in SKUs in jewellery, also at lower price points, allowing aspirational consumers to buy as well,' said Pusz. This increased accessibility has unlocked a wave of younger buyers, particularly in China and Europe. It isn't just women who are interested. More men are buying fine jewellery for themselves than in the past, opening up the category's customer base. 'We noticed men purchasing more items like bracelets recently,' said Raphael Gübelin, president of Swiss jewellery brand Gübelin. Tailwinds and Headwinds The category has other winds blowing in its favour. Women's earning power continues to grow, for instance, and over the years women have purchased more jewellery for themselves rather than waiting to receive it as a gift. It's boosting both small and large names alike and sparking trends like jewellery stacking, layering, personalising and venturing into more playful options in terms of colour and shape. Jewellery players aren't sitting back and waiting for consumers to come to them, however. A number are investing in hyper-local marketing, like when Tiffany & Co. featured German actress Nilam Farooq, speaking in German, in the campaign for their store opening in Düsseldorf. 'That shows commitment to the cities they're in, even when retail has struggled in the past. By investing and connecting locally, customers feel proud of their city being promoted by a jewellery brand with global recognition,' said Oisin James Deady, co-founder of creative agency Twelve AM that produced the Düsseldorf campaign and several other hyper-local promotional campaigns for Tiffany & Co. and other jewellery brands. But the sector does face some challenges. The price of gold is up more than 25 percent since the start of the year, and, even if it hasn't had a huge impact on prices on the consumer end yet, the surging cost may pressure margins. Still, Pusz notes that many brands — even Cartier — are exploring alternative materials like platinum, silver, and diamond-forward designs, noting that diamond and platinum prices have come down recently. Gübelin is similarly looking to options beyond gold. 'We have been much more experimental and creative with materials, like titanium, and are seeing a real surge in interest in colourful gemstones,' said Gübelin. The Chinese customer is still a sore spot for luxury overall. Jewellery, however, is less affected than fashion-centric brands or heavily China-focused categories like watches. From a geographic standpoint, Richemont most recently saw double-digit growth across nearly all regions, even though Chinese demand is temporarily softer. Perhaps more concerning for Switzerland-based Richemont are Donald Trump's fluctuating tariffs. Switzerland is currently subject to a 10 percent US tariff, but the levy could go up to 31 percent. Richemont chief executive Johann Rupert has stated clearly, and repeatedly, that the company wants to avoid sharp price hikes. If jewellery is able to maintain its current pricing, it would help to further cement jewellery's value perception. 'I don't believe you should only increase prices because you are a luxury brand,' Gübelin said. 'You should fairly price your products. If prices go down, you should also adjust.'
