Opinion: Challenging times ahead for luxury brands in 2024

As we step into the new year, the luxury industry stands at a pivotal moment. Having experienced a rollercoaster ride through the pandemic years, the luxury sector is now preparing to confront a new array of challenges and opportunities. Here are my top five predictions for the luxury market in 2024. Market growth to slow significantly The last two quarters of 2023 served as a precursor to what lies ahead. In 2024, a notable deceleration in market growth is anticipated across all regions, stabilizing at historical rates of approximately 4-7 percent. This estimation, provided by Équité Research and aligned with forecasts from Bain and other consultancies, marks a normalization, signifying a departure from the unprecedented appetite for luxury that characterized the post-pandemic era. Brands are now strategizing for steady, sustainable growth. Many brands are already grappling with a harsh reality. As luxury clients reassess their brand investments, those with a proven track record in building long-term brand equity are emerging as winners, while those that pursued easy growth paths and lacked excellence in execution are facing losses. What we are witnessing is not merely a market slowdown but a significant recalibration. Luxury brand expectations on the rise Amid the significant price hikes implemented by numerous brands during the pandemic, consumers are growing increasingly discerning. Given the elevated price points, clients expect to receive considerably more value — an expectation that many brands are struggling to meet. Conversations with the leadership teams of various brands and ultra-high-net-worth individuals globally reveal a common sentiment: many client experiences are falling short of the promises made by brands. This disparity not only affects service delivery but also extends to product quality and craftsmanship in some cases. Many brands have attempted rapid growth by cutting corners, neglecting the essential task of creating brand substance. This strategy is now backfiring, as clients rigorously scrutinize brands, demanding value and authenticity in exchange for their loyalty and investment. This shift indicates a move away from impulsive purchases toward more thoughtful consumption. Clients are rigorously scrutinizing brands, demanding value and authenticity in exchange for their loyalty and investment. This shift indicates a move away from impulsive purchases toward more thoughtful consumption. This trend is also a clear indication of the increasing influence of Gen Z in luxury purchases. Beyond being the most digitally connected generation, their expectations surpass those of their predecessors. Furthermore, they display lower loyalty to established brands, seeking a clear personality — in other words, a distinctive brand story — that aligns with their own. In recent years, numerous brands have grown complacent, prioritizing their established clients and overlooking Gen Z. However, given that this demographic now constitutes over 20 percent of luxury purchases worldwide and around 30 percent in China, brands that fail to connect with these young consumers could face significant challenges. Turnaround brands will face challenges For brands currently undergoing a reset, such as Gucci, Burberry, Ferragamo, 2024 will likely be a tough year. These brands, still in the process of strengthening their brand equities, may find it difficult to compete against others whose brand identities and values are more firmly established in the minds of consumers. Many underperforming brands are also relatively overexposed to multibrand retailers. A case in point is Farfetch, which is grappling to stay relevant in a rapidly changing world of client expectations. This compounds the challenges for luxury brands significantly, as they must simultaneously address issues related to brand storytelling, client relevance, sales channels, quality improvement, and brand experiences, all while striving to inspire their audiences. In my observation, a lot of the brands that are doing a reset now are playing it too safe. And in luxury, playing it safe has always meant playing to lose. What's lacking is the audacious, daring, and distinctive creative approaches. It seems like creativity is amiss for numerous luxury brands, and in this industry, being perceived as boring is akin to a death certificate. In this industry, being perceived as boring is akin to a death certificate. Leading brands will emphasize cultural capital and core values While underperforming brands strive to get their affairs in order, industry leaders are firing on all cylinders and expanding their lead. Louis Vuitton is excelling in all areas, and the appointment of Pharrell Williams has proven to be a catalyst in creating cultural capital. Meanwhile, Hermès, with its iconic Birkin bag, stands as an almost certain winner in times when clients seek products they can trust as long-term investments. The best-performing brands in 2024 are expected to concentrate on reinforcing their core values and articulating their brand storytelling with precision. This strategic focus aligns with the changing consumer mindset, where authenticity, brand heritage, and a unique narrative are increasingly valued. In this landscape, brands that stay true to their essence while innovatively expressing their values are poised to take the lead. The continuous rise of quiet luxury Quiet luxury, characterized by a recalibration towards quality and substance over ostentation, is poised to prevail throughout 2024. This trend mirrors a growing consumer preference for refinement, craftsmanship, and core values, marking a departure from the fast and conspicuous consumption patterns of the past. Be excellent or die 2024 will redefine the meaning of luxury. The winners will be those who inspire and create cultural relevance, in addition to delivering on craftsmanship and brand experiences that are both relevant and distinctive. For those seeking easy growth, dark clouds loom ahead. Luxury clients now expect significantly more, and brands must rise to the occasion. This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders to Watch.” Executive professor of luxury strategy and pricing at Pepperdine University in Malibu and professor of luxury at NYU, New York, he’s authored best-selling books on luxury management, and is a respected global keynote speaker and sought-after luxury expert, appearing on platforms like Bloomberg TV, Forbes and The Economist. Holding an MBA and a PhD in luxury management, Langer has received education from Harvard Business School. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily. Follow him: LinkedIn: www.linkedin.com/in/drlanger Instagram: @drdaniellanger

Opinion: Challenging times ahead for luxury brands in 2024

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Published January 08, 2024

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Opinion: Challenging times ahead for luxury brands in 2024