Alarm bells are ringing in the exclusive world. 2024 did not end as expected by luxury brands. The results of the main conglomerates in this segment presented a picture of slowdown and some signs of exhaustion in the last quarter of the year.

Among the obvious causes is the weakening of the Asian market. But also striking is the unusual reaction of consumers to sharp price rises. The aspiration to achieve a differential status, which until recently was part of the DNA of luxury, is taking on new nuances with the rise of phenomena such as ultra-fast fashion and dupe culture (low-cost products inspired by luxury goods).

The leading luxury goods group , Louis Vuitton Moet Hennessey (LVMH), owner of 75 brands such as Louis Vuitton, Christian Dior, Moёt & Chandon and Hennessy or Veuve Clicquot has presented quarterly results showing a growth of only 3 %, well below the 14% of 2023. In fashion, the drop was 5%. In the field of wines and spirits, the decline reached 7%.

For Kering, the second group in the competition and with brands in its portfolio such as Gucci, Balenciaga, Yves Saint Laurent or Bottega Veneta, revenues decreased by 6% and 4% on a comparable basis. The list of examples goes on and on, and also includes legendary houses such as Burberry or Lanvin, among others.

The results have been analyzed through the prism of global instability in 2024: a turbulent geopolitical context with serious open conflicts, growing technological rivalry, a record year with more than 70 elections around the world and the ensuing economic uncertainty.

However, let's remember that the luxury market has been very resilient in times of crisis and the post-Covid results were surprisingly good, digitalization accelerated and the joyful behavior of a consumer eager to splurge, the so-called "revenge spending", helped significantly.

So what can this change in consumption mean, and what lessons can we learn from it? There are several interesting factors that suggest a transformation in the world of luxury and predict different strategies for companies.

One of the decisive factors in interpreting these results is that the myth of China as a place of unstoppable growth has been deflated.

In recent years, the Chinese market has been the ambition of all brands, their place of expansion and natural growth. For example, between 2009 and 2019, the group LVMH went from having 470 outlets in Asia to 1 453 stores (excluding Japan). The same happened with Kering, which went from 152 to 609 stores.

Collections and marketing strategies also turned towards this market, looking for a growing class average booming that seemed to have no end. However, the dragon sample signs of exhaustion, and in the luxury sector, the drop in sales is becoming quite pronounced.

The same data published by LVMH forecasts a 16% drop in Asian sales (again excluding Japan), especially B in China, which previously accounted for 50% of the growth of the French group .

The lack of consumer confidence and a restraint in the expense of this subject of goods point as explanations for this new context. But if China is not what it used to be, where can luxury brands find new winning strategies?

The strategy of luxury groups has been based in recent years on an extraordinary price increase. The escalation has been unstoppable, doubling the value of an Hermès bag. For its part, a Chanel model has reached 10,000 euros. On the second-hand market, some of these pieces have doubled in value. The price of watches is also another good example, with increases of more than 20%.

entrance It is natural that the world of luxury uses price as a barrier for mass consumption and as a way to preserve its exclusivity. It would thus be a luxury that appeals to the ultra-rich or wealthy, underlining the eternal aspirational mode of luxury. The Veblen effect, according to which higher prices generate higher demand, has worked in this market.

The concept takes its name from Thornstein Veblen, economist and author of Theory of the Leisure Class: An Economic Study of Institutions. In chapter seven of that work, graduate "Dress as an Expression of the Pecuniary Culture," Veblen explains that fashion and luxury are indicators of status. If aspiration is not built, luxury becomes meaningless.

However, there appear to be other reasons for this striking price increase. One widely publicized reason is the higher cost of raw materials. Geopolitical uncertainty and runaway inflation in recent years have also been factors behind the rise.

On the other hand, the entrance of new players in the fashion world from the more leave part of the pyramid has forced all players to move up the ladder to find their differentiation. Thus, ultra fast fashion has made mid-segment brands want to be perceived as more aspirational, and this movement in turn leads luxury to a need for greater distance from new competitors.

There are also those who point to dupe culture as the culprit for this steady price progression. Versions of luxury products or knockoffs with a certain level of mutation have filled social networks - especially TikTok - forcing brands to further separate themselves from this consumer subject . Authenticity comes at a price.

The big question right now is how far this price escalation will continue to progress. There are those who wonder whether the consumer targeted by these brands, no matter how much fortune they accumulate, also has reservations at expense for expense. In other words, whether they really find value in the product.

It seems that it is no longer enough to position oneself as a luxury brand. You have to find a way to create value and know how to show it. In other words, price increases must be justified by two of the levers that have always been the essence of luxury: creativity and quality.

What's more, luxury is no longer synonymous with brands. The so-called silent luxury is imposed, which advocates a desire to move away from the aggressiveness of branding, by removing any logo or characteristic detail that makes evident the signature to which the articles belong. A scenario where the codes of interpretation are only recognizable by those who have a more cultivated speech on luxury. Something that broadens the sphere of a customer who, beyond the product, looks to their well-being and a more relaxed way of life.