A global spending downturn has affect biggest luxury brands
With a global downturn in spending, luxury companies are feeling the pinch, with the worst sales growth expected in the past five years. No doubt this is affected by the conflicts in the Middle East and Russia, the political upheavals in Hong Kong and downfall in demand by the Chinese.
Big brands have also been suffering from consumers’ growing appetite for smaller, less widely distributed labels, particularly in key markets such as China, which was the luxury goods industry’s main source of growth until 2012.
According to Reuters, Gucci, Burberry and Louis Vuitton have been rebuilding the aura of exclusivity they lost by going too mass market in the mid to late 2000s. A volume-based strategy is great for shareholders but not for image.
But while some brands manage to retain the aura of exclusivity, others, like Gucci, have suffered. Not since the Tom Ford era has Gucci managed to be on consumers' most wanted list.
And insiders are wondering if Prada could be next. Prada was one of the brands that opened the most shops last year, leading analysts to wonder if it was not starting to be over-exposed.
There has been little innovation at Gucci in the past few years and the company has raised prices too much, too quickly, nearly 40 percent in the past few years. Customers are being driven to more accessible luxury brands it appears.
“You cannot just keep reviving past icons, you also need to have breakthrough innovation,” Exane BNP Paribas luxury goods analyst Luca Solca said citing designer Hedi Slimane at Saint Laurent as a successful example.
There are no last seasons repeats at Hermès, for example. There is an apparent ban on re-launching old classics which have kept its Kelly and Birkin bags to be highly desirable, and for most, unattainable. That is the key to remaining exclusive.