Another category where demand is expected to soften? That would be handbags, which are suffering from a combination of lower consumer confidence among first-time buyers, particularly in China, and substantial price increases over the past two to three years, which have made certain styles less attainable.
Top customers will get all the attention
While “aspirational” and first-time luxury shoppers are zipping their wallets shut, luxury executives say that their loyal customers continue to splash out — and will thus remain a priority in 2024.
That will mean more high-end, limited-edition product; more extravagant shows; and greater investment in events and private shopping spaces dedicated to wooing VICs (Very Important Clients).
Price hikes will continue — but at a slower rate
When the 2008 global economic recession hit, brands were forced to slash prices to move inventory — kick-starting a discount cycle that took the better part of a decade to recover from, particularly in the US. (One reader recently regaled me with an account of the “significant boost” her Chanel jacket collection received “during the Saks fire sales of that time”.)
Most major luxury brands have since reduced their exposure to department stores and other channels where their wares might be sold at a discount, and such drastic price cuts are unlikely to come around in 2024, analysts say.
Instead, inflation — which the IMF forecasts will drop from 6.8 per cent in 2023 to 5.2 per cent in 2024 — is likely to drive prices up again next year, albeit at a lower rate than years previous.
While top spenders might be able to absorb the increases, analysts say brands need to think hard about what products they can offer at the entry-level. Mini bags, T-shirts and trainers have become both more expensive and received less creative attention amid a hyper-focus on top-end customers, says Bain’s D’Arpizio. That could result in the introduction of new entry-level categories such as tech accessories and fashion jewellery.
That may be one of the silver linings of the slowdown, executives at smaller, more traditional heritage brands say. After years of snapping up trendy, logo-heavy products marketed via celebrities and big-budget campaigns, they believe customers are poised to become more discerning about the quality and longevity of the individual items they’re spending their money on — which is where they believe they have an advantage.
Lauren Indvik © 2023 The Financial Times
This story was originally published in The Financial Times