ACCA insights Beyond Borders: From Mumbai to Tokyo - Asia's Luxury Resurgence Amid Global Downturns

As luxury brands around the world adorn their storefronts and digital spaces with holiday splendor, the season's festivities cast a contrasting light on the challenges faced by Western luxury powerhouses. Amidst the glittering decorations, a notable dip in sales for several Western brands prompts a closer look at the resilience and innovation characterizing the rise of Asian luxury markets.

In the ever-evolving landscape of the luxury market, major players in the Western hemisphere are encountering challenges in meeting their sales targets. The third quartile has witnessed a notable dip in sales, raising questions about the sustainability of their traditional approaches.

In the dynamic landscape of global finance, the ACCA community serves as astute observers, deciphering the intricate interplay of tradition and evolution. Amidst the sales challenges confronting Western luxury giants, our ACCA perspective sheds light on the resilience and ingenuity flourishing in the Asian luxury market.

Challenges Faced by Western Luxury:

Since the first quarter of 2023, most luxury brands saw a decline in sales in the United States & Europe. This luxury powerhouses includes: Kering , Burberry , Prada Group , Richemont , CHANEL and LVMH .?

However, Hermès was one of the few exceptions, with sales in the Americas rising 15.6%, and yet defying all the challenges in its sales routes at present third quarter. While?the more “Quiet” luxury brands that cater to top-tier clients, such as Hermès, Brunello Cucinelli, and Zegna, confirmed stellar financial results and strong demand in Q3, other brands like Gucci disappointed- the growth star of Kering reported for whopping 14% drop and 7% drop on a comparable basis.

Western luxury powerhouses all are grappling with a combination of factors, from shifting consumer preferences to economic uncertainties. The traditional approaches that once guaranteed success are now being reevaluated. Even LVMH's wines and spirits business has been the worst hit, seeing a 14% decline in revenue compared to the same period last year.

But the common reason among all these brands leading to such decline is the brand story campaign of an 'unapologetic expression of individualism and freedom' is not being coming across anymore. This is one of the biggest weaknesses of the current brand execution, as well as its biggest opportunity: the chance to?reinterpret the brand ethos for today’s clients in an unmistakable way.

"But when all of this was happening in the West, did you wonder what took place in the East?"

We all have might have seen the world famous movie 'Crazy Rich Asians', ever marveled at the jaw-dropping wealth. Well brace yourself, the opulence depicted in the movie might seem like a fantasy, but believe or not, Asia 'IS' turning those luxurious dreams into reality. Well how....then read ahead!

Rise of Asian Luxury: The past decade has seen a remarkable ascent of Asian luxury markets, particularly in China, Korea, and Japan. These nations, once considered consumers of Western luxury, have now become formidable players in their own right. The economic prosperity and a burgeoning middle class in these regions have significantly contributed to the surge in luxury consumption.

India - In a glamorous launch attended by India's elite, Jio World Plaza made a grand entrance as the epitome of luxury, sprawling across an impressive 750,000 square feet. Positioned as India's premier luxury destination, the Plaza unveiled an impressive lineup of 66 globally renowned brands, including powerhouses like Louis Vuitton, Gucci, and Cartier. This star-studded affair, featuring luminaries such as Valentino and Versace, marks the initiation of a new chapter in India's luxury narrative. Jio World Plaza is poised to redefine opulence for the discerning clientele, blending extravagance and exclusivity in a carefully curated space that befits the who's who of luxury aficionados in the country. It's not just tycoons. A new class of wealthy entrepreneurs, executives and dealmakers are muscling into India’s luxury market.

China - China’s recent reopening is expected to be a tailwind for the sector, especially as Chinese consumers are a major driver of luxury spending. But what are Chinese Shoppers are buying : 48% - Gold & Jewelry, 34% - Cosmetics, 13% - Apparel and 5% - Automobiles. However, many of the Chinese consumers are falling out of love with these foreign brands, as they are not into much aspirational luxury anymore. Thus the new trend of 'Quiet Luxury' has been very loud within the market. The economic deceleration in China has prompted Ultra High Net Worth Individuals (UHNWIs) to adopt a more subdued approach in showcasing their affluence. The inclination towards 'quiet luxury' transcends mere fashion preferences; it reflects a deliberate response to the prevailing economic conditions. In the face of financial uncertainties, these individuals are embracing discreet opulence, showing a preference for high-end brands that epitomize superior quality and craftsmanship rather than relying on conspicuous logos.

South Korea, Japan & Indonesia - Strategy to collaborate with the famous celebs have been seen very fruitful. From BTS member Jimin becoming the global brand ambassador for Dior to NewJeans’ members Hyein and Danielle becoming the face of luxury house Louis Vuitton, Korean celebrities have been dominating the fashion world for a long time. Furthermore, with Korean culture, particularly K-pop, along with Japanese, Indonesian culture gaining immense popularity in Europe and the USA, there is a growing trend of cultural exchange and appreciation. This global cultural phenomenon has the potential to further fuel the acceptance and adoption of digital brand ambassadors worldwide.

Artistry and design feature strongly amongst these stores, with artwork commissioned for exteriors and interiors elevating them against typical retail offerings, particularly in areas like Ginza, a popular location for luxury retail.

Japanese culture is also an influence as stores continue to adapt their branding and designs to fit in with their location and surroundings. In Tokyo at Ginza, a stunning artistic renovation on luxury jeweler Tiffany’s flagship store has recently made waves in Tokyo.

Iconic artist Damien Hurst has taken on an enormous project, hand-painting 292 panels with petals in pink, green, red and white, adorned on two trees, against a blue sky. This design continues inside the store, complementing the light, airy space and fixtures.

"But the thing to ponder upon is why tapping into Asia is being preferable by these brands rather than revitalizing themselves to improve its core product lines to reposition their product better to meet demands of the price conscious consumers in the west?" (Well that's where Hermès comes to play, but that's another matter to discuss will save it for later.)

Adaptability and Innovation in Asia: In conclusion, Asian luxury brands have showcased remarkable adaptability and innovation in navigating market shifts. From embracing e-commerce to leveraging social media influencers, these brands have swiftly embraced digital transformations. Additionally, the emphasis on sustainability and ethical practices has become a cornerstone of many Asian luxury brands, resonating well with the values of the contemporary consumer.

Thus more and more European originated brands are opening their flagship stores in Asia-Pacific region.