The past year has been a challenging one for the global luxury goods market, with consumers cutting back on luxury retail spending due to macroeconomic uncertainty and continued price increases among brands. According to a recent report by Bain & Company, global sales of personal luxury goods are expected to decline by 2% in 2024, with China, a key market, seeing a decline of 20-22%. Major luxury brands such as Richemont Luxury, LVMH, and Moncler Group have reported slight earnings declines, while Kering has seen more significant declines. However, outliers like Hermes and Prada Group (which also owns Miu Miu) have seen double-digit earnings growth.
Despite these challenges, Singapore remains an important market for luxury brands, with Euromonitor reporting an 11% growth in luxury goods sales in 2023, reaching a total of $9.1 billion.
In recent years, luxury brands such as Dior, Chanel, and Louis Vuitton have begun to adopt robust digital strategies, including e-commerce and digital marketing, to engage customers. This is crucial in a world where consumer behaviors, expectations, and preferences are constantly evolving. However, luxury brands also recognize the importance of creating offline shopping experiences to build closer connections with their customers.
Moreover, luxury brands have also been embracing the strategy of creating unique experiences for their top-tier clients. Flagship stores are getting bigger and bolder, such as Louis Vuitton’s new 690 sq m “apartment concept” space at Ngee Ann City dedicated to its “VICs” (very important clients). Burberry has also reopened its extensively renovated stores at Marina Bay Sands and Paragon this year, showcasing its rich British legacy and blending tradition with innovation. Other luxury brands like Yves Saint Laurent, Richard Mille, and Balenciaga have also opened new stores in Singapore, featuring unique and innovative concepts.
Spending on luxury goods is expected to grow in 2025 and beyond, driven by factors such as the steady growth of high-net-worth individuals (HNWIs), the growing interest of Millennials and Gen Z, the resurgence of Chinese tourists, and the continued growth of travel retail. To cater to these changing trends and capture new markets, luxury brands are focusing on personalization and customization, leveraging AI and digital experiences, and exploring emerging markets.
Some brands are already leading the way in utilizing innovative AI, such as Dior’s Astra platform, which extracts data from various channels to understand customer preferences. Balenciaga’s Paris Fashion Week show for its Winter 2024 collection also went viral for its immersive and digitally enhanced set. Furthermore, brands like Brunello Cucinelli have created a separate website powered entirely by generative AI.
While 2024 has been a challenging year for the luxury goods market, growth is expected in 2025 and beyond as luxury brands continue to expand their store count, build larger flagship stores, and create elevated experiences for their top clients. With Millennials and Gen Z being the largest customer group, luxury brands will also continue to embrace digital technology and omnichannel strategies to attract and engage these younger consumers.
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