Luxury in trouble: 50 million customers lost and volumes down -25% in two years

Fifty million consumers lost and a drop in volume production of between 20 and 25 per cent compared to two years ago. That 2024 had been - is, since it is still ongoing - one of the toughest and most complex years for the luxury industry as a whole was already clear from the performance of the large groups such as Lvmh, Kering and Richemont whose turnovers have been falling.

A decline that, although there are also big differences in the performance of companies, is reflected in the sector's turnover figures: according to the Luxury Goods Worldwide Market Study Altagamma-Bain, presented during the Altagamma Observatory 2024, luxury as a whole will reach EUR 1,478 billion at the end of 2024, down 2 per cent at current exchange rates on 2023, thanks to the driving force of experiences, and luxury personal goods will stand at EUR 363 billion, compared to EUR 369 billion in 2023, also down 2 per cent.

The Monitor, however, goes beyond the turnover figures to to narrow the focus on two key elements: the consumer base, which has shrunk under the weight of economic and geopolitical uncertainties but also of price rises that are not always 'justified' in their eyes; the fragility of the supply chain, which is largely localised in our country and, especially in certain areas such as footwear and leather goods, both of which are in decline, is suffering greatly. "We are facing the first slowdown in the sector in 15 years, excluding Covid. The 2025 performance will also depend a lot on brands: they must strengthen entry items to respond to a market that exists but has been alienated," said Claudia D'Arpizio, senior partner at Bain&Co and author of the study together with Federica Levato. The theme of prices, which according to Bain-Altagamma are set to grow by 20% between 2021 and 2023, emerges on several fronts: in the decline in purchases by Gen Z, who have less disposable income; in the success of off-price sales channels such as outlets or formulas such as second hand that combine lower cost with a sustainable approach to shopping; the success of categories such as beauty and eyewear "without which the drop in production volumes would be even more marked", explained Levato, senior partner at Bain. Notwithstanding the fact that six to seven million very import clients make purchases equal to 45% of total sales, for the analysts, opening up to a more heterogeneous clientele is crucial in a scenario in which, within the next five years, the world will have 300 million new middle class members, 150 million of whom will be in China.

The industry, for its part, is reflecting: "If we talk about prices, it means that we have not succeeded in making people fall in love with our products," explains Andrea Guerra, CEO of the Prada Group, one of the few that is growing this year, "if our consumers feel betrayed because they believe that the value of the product does not reflect the price, I think it is the failure of our work. Of course, mistakes have been made in the industry over the last seven or eight years: prices have shifted upwards because it was easy to raise them. But I don't think it is solved by lowering prices or by bringing products to market at lower prices, but by increasing credibility'.

Bringing consumers and their needs back to the centre, but also products and the savoir faire that distinguishes them are key strategic elements for a sector that is expected to return to tepid growth in 2025. According to the Altagamma Consensus, in 2025 there will be "moderate market growth," explained Stefania Lazzaroni, general director of Fondazione Altagamma, "of about 3%, with the Middle East registering +5%, the United States, where we expect purchases to resume, at +3.5%, and Europe at +2% driven by tourist spending, including Americans who remain a pillar of luxury spending. The needle of the scales will be Asia and China, where we expect growth of 3 per cent". According to the survey, which "cross-references" the opinions of Altagamma's partner companies and analysts, the categories that will register the best performance are cosmetics (+6%) and jewellery (+4.5%), while footwear and watches will be the most suffering categories (+1%)". The Ebitda of companies in the sector will also increase slightly: it is expected to grow by 3%, also thanks to greater efficiency and cost rationalisation.