Customers ‘Quitting Luxury Brands Amidst Price Hikes’
Luxury Brands Lose 50 Million Customers in Two Years
Luxury brands have lost approximately 50 million customers in the last two years, according to a report by consulting firm Bain. The secondhand market is gaining traction, particularly in the categories of jewellery and heritage apparel and leather pieces.
Flat Demand in 2024
Demand for luxury goods is expected to remain flat in 2024 at constant exchange rates, according to Bain. This is a significant decline from the growth seen in the past, particularly among the middle class. For decades, luxury brands have focused on attracting new middle-class consumers to expand their sales, a phenomenon known as the “democratisation” of luxury.
Price Increases Reverse the Trend
However, since 2022, luxury brands have lost more than 10% of their usual customer base, as reported by Xinhua. This is the first time in memory that the sector’s shopper numbers have shrunk. Price increases have reversed this long-term trend, as the cost of the average luxury product has risen sharply since the start of the pandemic, although with big variations across brands.
Customers Priced Out
Some customers may have pulled back anyway due to inflation eating into their disposable incomes. However, millions of others have been priced out of the market. The cost of the average luxury product has become increasingly unaffordable, leading customers to seek cheaper alternatives.
Fewer Sales, Fewer Products
Expensive brands aren’t only selling to fewer people – they are selling far fewer products. The number of units sold by the luxury industry this year is expected to be 20-25% lower than in 2022, according to Bain. This decline in sales is expected to continue in the near future.
Conclusion
The luxury industry has faced significant challenges in recent years, primarily due to price increases. As customers become increasingly cautious with their spending, luxury brands must adapt to new market realities. This includes offering more affordable options and focusing on customer loyalty and retention. Failure to adapt may lead to further declines in sales and market share.
FAQs
What is the extent of the decline in the luxury market? Luxury brands have lost approximately 50 million customers in the last two years.
What is driving this decline? The primary factor is the price increases across luxury brands. The cost of the average luxury product has risen sharply since the start of the pandemic.
What impact will this have on luxury brands? This decline is expected to result in a 20-25% decrease in unit sales by the luxury industry this year compared to 2022. Luxury brands must adapt to new market realities, including offering more affordable options and focusing on customer loyalty and retention.
Will this trend continue? Yes, the trend is expected to continue unless luxury brands adjust their pricing strategies and adapt to the changing market environment.