Brunello Cucinelli on the future of luxury: Navigating rebalancing and sustainable growth in China
Brunello Cucinelli, the founder of the Italian luxury group Brunello Cucinelli SpA, recently shared his insights on the luxury goods sector and the Chinese market. In an interview with Bloomberg, he stated that the significant price rises in the luxury market over recent years were largely due to consumers becoming wealthier and able to afford higher prices, rather than solely because of increasing energy and raw material costs.
Over the past four years, the luxury industry leveraged the post-pandemic landscape to sharply raise prices, only to face significant repercussions in 2024. China’s luxury market, experiencing its most severe downturn to date, has weighed down the entire industry’s profitability. Even Hermès, with double-digit revenue growth, saw a 200-basis-point drop in operating profit margins in the first half of the year, with sales in the Chinese market unexpectedly declining in the third quarter.
Burberry expects to report a loss in the first half of the year, an unusual event in the past two decades of the luxury sector. Gucci’s parent company, Kering SA, anticipates a 45% decrease in operating profits for 2024, marking a historic low in its journey to become a luxury-focused group. Meanwhile, Louis Vuitton’s parent company, LVMH SE, has reported two consecutive quarters of record-poor performance in the Asia-Pacific region, excluding Japan, with declines of 14% in the second quarter and 16% in the third.
In contrast, Brunello Cucinelli SpA remains the only publicly traded luxury brand to have achieved growth in every independent market this third quarter. Last week, Brunello Cucinelli attended his brand’s fashion show in Zhangyuan, Shanghai. He still sees considerable potential in China but cautioned that a highly interconnected market like China is one where “the higher you climb, the harder the fall” for luxury brands.
Cucinelli believes that only brands catering to the wealthiest clients—such as Brunello Cucinelli, Loro Piana, Cartier, and Hermès—will perform well. Using high-quality materials and craftsmanship, he added, helps preserve a brand’s uniqueness. He also emphasised that popularity and exclusivity are distinct, noting that brands with broad consumer bases that relied on price rises to drive sales are now feeling the impact.
In previous performance meetings, Cucinelli expressed that he did not want his brand to become one where a single customer purchases fifty items annually, as it would quickly lose its allure. He reiterated that opening just one or two stores per year in China is more sustainable for a luxury brand, stressing that overexposure can reduce a brand to mere products.
Cucinelli also stated that he avoids excessive brand exposure, does not seek influencers, and refrains from bold logos on his products. His brand does not incentivise sales staff to push clients aggressively through commission-based incentives.
On the issue of industry price hikes, Cucinelli explained that recent increases were not solely due to rising energy and raw material costs, but rather because wealthier consumers could afford pricier goods—although this does not mean they are indifferent to spending. Government stimulus policies during the pandemic in the United States and Europe raised inflation, but in most countries, income growth outpaced inflation. Furthermore, inflation boosted corporate profitability, which was reflected in stock markets. Stock markets in the United States, Japan, Europe, and Southeast Asia remained robust over recent years, reaching record highs.
领英推荐
The United States, with its strong inflation and stock market performance, is currently the largest market for luxury goods and has shown the strongest growth in recent quarters. Its incremental growth has outpaced that of all other major markets, partially reflecting the decline in mainland China and Hong Kong, which were previously the top two markets for Swiss watches but have now fallen behind due to a prolonged downturn in those regions.
Cucinelli argues that the luxury sector is not in crisis but is rather undergoing a “rebalance” in the post-pandemic world. Brunello Cucinelli’s rapid growth and expansion began with the post-pandemic demand for quiet luxury. Recently, the brand has also slowed its expansion as part of a “readjustment” and “rebalance.” Cucinelli advises against viewing China as the ultimate determinant for luxury brands, maintaining his belief in the market’s potential. In an era of “quality consumption” and “emotional value,” it is crucial for a brand to deliver a resonant narrative to Chinese consumers. The renewed focus on China, signalled by the Shanghai event, may be another strategic step for Brunello Cucinelli in this direction.
Image and information source:
#luxury #china #italian #design #quality #heritage #interview #shanghai #fashionweek
Supporting a socially and environmentally responsible Tibetan yak leather value chain can have significant benefits for both local communities and the environment.
2 周Interesting