Luxury brands have shed roughly 50 million customers over two years as shoppers seek lower prices.
A report Wednesday (Nov. 27) by The Wall Street Journal — citing data from consulting firm Bain — says that while luxury demand is expected to be flat for 2024, these companies have lost more than 10% of their customer base.
It marks the first time in memory this industry’s customer numbers have fallen, thanks to sharp rises in the cost of luxury products. While some of those shoppers would have naturally pulled back because of inflation, others have been priced out, the WSJ said.
“Finding regular size [handbags] at less than $3,000 from reputed brands has become virtually impossible,” said Luca Solca, luxury-goods analyst at Bernstein.
And luxury brands aren’t just seeing their customer numbers fall, they’re also selling considerably fewer items, with Bain projecting a 20% to 25% drop compared to 2022. That number climbs even higher — as much as a third — when subtracting more affordable products that continue to be in demand, like sunglasses and cosmetics.
With prices for luxury goods climbing, cheaper labels and luxury resellers are benefiting. Challenger brands, the WSJ notes, are trying to fill the lower-priced void left by the higher-end luxury labels.
For people who still want to buy from top luxury brands without paying the prices charged in their stores, there’s the secondhand market, which has expanded at a rate three times that of the main luxury market over the past five years, the WSJ said.
As PYMNTS wrote last month, pressures on the luxury sector have led industry players to embrace strategic partnerships and mergers.
For example, Mytheresa recently announced its acquisition of YNAP from Richemont, with the aim of creating a leading global digital luxury group. This deal combines Mytheresa with YNAP’s renowned brands, including Net-A-Porter and Mr Porter, strengthening the luxury offerings available to high-end consumers.
On the collaboration side of things, there’s the launch of Authentic Luxury Group (ALG), a joint venture by Authentic Brands Group and Saks Global focused on luxury across multiple sectors, from fashion to hospitality.
“Retail analysts note such collaborations can lead to operational efficiencies, enabling luxury brands to streamline back-end functions and reach a broader audience,” PYMNTS wrote. “By sharing resources and insights, companies like Mytheresa and Authentic Brands Group are positioning themselves to thrive amid ongoing market challenges, underscoring the critical role of innovation and adaptability in the luxury sector’s future.”
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