Retaining Consumer Loyalty in 2025

We've built 7 of our own brands since 2017 & helped build a 100+ others; and most of these have been building premium brands. However, 2024 has been the year when the luxury goods sector is experiencing unprecedented challenges, with significant implications for high-end fashion and retail brands.

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A recent Bain & Company report reveals a critical turning point: 50 million luxury consumers have either abandoned or been priced out of the market, signaling a profound transformation in consumer behavior and brand expectations.

The Key Factors:

Revenue Decline: The luxury retail market is projected to contract by 2% in 2024, marking its first downturn since the 2009 Great Recession. And just 30% of luxury brands are expected to achieve positive growth - a dramatic decrease from 55+% last year. Some of the largest industry players like LVMH (3%) and Kering (15%) have already experienced substantial revenue drops!

Consumer Confidence: Another major factor is our neighbor - China. Historically, the Chinese consumers have been a primary driver of the luxury market growth. However, the current economic environment has dramatically altered this dynamic. "Lackluster consumer confidence" has led to a sharp decrease in luxury spending, forcing brands to reevaluate their strategies.

Broken Promises: Marie Driscoll, an equity analyst, highlights a critical issue: "Since 2019, there's been a high price increase across luxury without a corresponding increase in innovation, service, quality, or appeal." Consumers are increasingly demanding more than just a prestigious label. One of the key consumer expectations mentioned is "Demonstrable Innovation".

Generational Shift: The luxury market must urgently adapt to Gen Z's distinct preferences. These consumers seek:

• Rare and exclusive items
• Personalization
• Authenticity
• Brands that align with their values

Success Story & Strategic Adaptation

Let's look at one of the biggest success stories from Hermès:

While many luxury brands struggle, Hermès has achieved remarkable growth by leveraging exclusivity. Their Birkin bag, with its stringent purchasing requirements and extensive wait lists, exemplifies a strategy of creating mystique and perceived value.

Recommendations for Luxury Brands

1. Reinvent the Value Proposition

- Continuously surprise and delight consumers

- Invest in meaningful product innovation

- Create unique, personalized experiences

2. Embrace Customization

- Develop capabilities for one-off, bespoke pieces

- Offer meaningful personalization options

- Create aspirational pathways for consumers

3. Strategic Pricing

- Align price increases with tangible value

- Demonstrate innovation and quality

- Provide transparent justification for premium pricing

Future Outlook

Despite the current challenges, the luxury market shows promising signs with growth in travel, fine dining, and automotive sectors. There is an anticipated gradual recovery in key markets like China, Europe, the U.S., and Japan in late 2025

To conclude, the luxury goods market stands at a critical crossroads. Brands that can authentically reinvent themselves, prioritize genuine innovation, and create meaningful connections with consumers—especially younger generations—will be best positioned to thrive in this new landscape.

This is true for any industry today. Luxury is no longer just about price and prestige, but about creating unique, personalized experiences that resonate with increasingly discerning consumers.

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