The post-pandemic luxury market was unstoppable. Record profits driven by China’s reopening and the revenge-on-lockdown ‘urge to splurge’ sent profits at all the major luxury brands to unbelievable highs. Briefly, it looked as though the upswing was going to stick, with pundits – and papers – asking if it would ever end.
Now, results season has put a string of high-profile downturns in the news : profits at Burberry, Gucci and LVMH have all struggled to reach anything like their 2022 and 2023 highs. What’s more, brands have started to roll out 50 per cent discounts on goods, in a dire sign for an industry that’s been able to force through huge price hikes over the past few years. During the boom, many brands pushed up prices, but without really bringing anything radically new or different to the markets.
Now, they are facing the consequence of the post-pandemic bloat. “[Brands] find themselves trapped in an ivory tower with disappointing demand in China..
. [and] aspirational consumers being priced out,” Manfredi Ricca, Global Chief Strategy Officer at global brand consultancy Interbrand, said. They have turned to discounts to placate investors and turn a profit, but Ricca said this risks ostracising the rarity-conscious, high-net-worth consumer.
Offering discounts is at odds with a luxury brand’s USPs and will only erode the brand in the long term. Brands are faced with a choice. Reduce prices and market to the aspirational consumer or become one of a very.