Luxury brands are also facing a problem with younger consumers. Last year, sales to Gen Z fell 7%, or $5.7 billion. That’s the biggest decline of any generation. They appear disillusioned with luxury goods after viral stories on social media about supply chain abuses and inflated prices.
Luxury brands are struggling to understand why sales have slumped so much when we are not in the midst of a financial crisis. Is the luxury industry experiencing a temporary slump or is it something more serious? Bernard Arnault, the billionaire owner of Louis Vuitton and more than 70 other luxury brands, says the current sales slump will pass. But investors are worried that something is amiss. When LVMH reported results recently, it said sales in its fashion and leather goods division fell 9% in the second quarter from a year earlier, worse than expected. Management blamed the decline in tourist spending on weak demand for brands such as Louis Vuitton and Christian Dior.
Consumers may still be hoarding everything they bought during the pandemic luxury “fever.” But something doesn’t seem right. This year, Bernstein estimates, sales across the luxury industry are expected to be flat. That’s unusual, as the industry typically grows at twice the pace of global economic growth, and this will be the second consecutive year of weak demand: 2024 was the sector’s weakest performance since the 2008 global financial crisis, although there was no recession.
The data doesn’t show that big luxury brands are losing market share to smaller, newer brands. But some types of luxury goods have fallen out of fashion. Handbag prices have skyrocketed during the pandemic, and consumers have shifted their spending to categories they see as more valuable. Luxury brands are also facing a problem with younger consumers. Last year, sales to Gen Z fell 7%, or $5.7 billion. That’s the biggest decline of any generation. They appear disillusioned with luxury goods after viral stories on social media about supply chain abuses and overpriced products went viral. And if the younger generation, who are the future, don’t like luxury goods, how will this story play out?