Luxury Market: Challenges, Trends, and Post-Pandemic Outlook

A Luxury Market Under Pressure in 2024

After a decade of continuous growth, the luxury market experienced stagnation in 2024, impacted by several concurrent factors, notably the slowdown in Chinese demand, increasing inflationary pressures, market polarization, and changes in international tourist flows.

Chinese demand, a crucial driver for the sector, did not rebound as expected following the lifting of Covid-19 restrictions. Chinese consumers now favor local purchases and domestic travel, adversely affecting the Fashion & Accessories and Cosmetics segments.

Simultaneously, rising costs of raw materials and transportation have squeezed margins, compelling some brands to adjust their pricing strategies. The market has consequently polarized between ultra-luxury brands emphasizing rarity and exclusivity, and "masstige" brands facing increasing pressure on average prices.

Digitalization: A Critical Growth Lever

The share of luxury sales attributable to e-commerce continued to rise, reaching nearly 25% in 2024. Brands such as L'Oréal and Estée Lauder lead the sector, converting over 40% of their customers online, whereas ultra-luxury houses like Hermès still prioritize in-store experiences.

Nevertheless, all market players are intensifying digital investments, adopting technologies like augmented reality and personalized services to attract younger consumers (Gen Z and Millennials), now indispensable for future growth.

Environmental and Social Responsibility: New Imperatives

The emphasis on CSR (Corporate Social Responsibility) has become unavoidable. Hermès and LVMH notably stand out with their commitments to material traceability and carbon footprint reduction, incurring approximately €800 million annually and potentially impacting short-term margins.

Sustainability has emerged as a critical purchasing criterion for about 30% of luxury consumers, making CSR both a strategic lever and a structural constraint for companies.

Market Consolidation and Increased Competition

Competition has intensified with major mergers and acquisitions, such as LVMH acquiring a majority stake in Richemont, creating a powerful horological duopoly. Additionally, strategic partnerships, like that between Kering and Coty, aim to optimize distribution networks in response to underperformance by certain luxury labels.

Furthermore, tech companies like Apple and Google entering the market with crypto-payment solutions have pushed traditional luxury brands to accelerate their technological adaptation.

Strategic Perspectives for the Future

To sustain growth, groups must diversify geographically, strengthening their presence in Asia-Pacific despite the Chinese slowdown and exploring underexploited opportunities in Latin America and Africa.

A targeted product diversification, particularly into men's beauty and accessible fine jewelry, is also recommended. Additionally, brands should invest in enriched customer experiences within physical boutiques while developing seamless omnichannel strategies to maximize interactions between physical and digital channels.

Accelerating the Ecological Transition and Optimizing Logistics

Luxury must also hasten its ecological transition by adopting sustainable materials and circular economy initiatives, such as certified resale programs for second-hand products.

Finally, partial reindustrialization in Europe, intra-group logistics pooling, and the use of blockchain technology to guarantee traceability and minimize counterfeiting are key strategies to control costs and boost the appeal of "Made in Europe" products.

Conclusion

Despite its post-pandemic resilience, the luxury market must urgently adapt to ecological, technological, and geopolitical challenges to ensure sustainable growth. Innovation, diversification, and omnichannel integration are thus essential strategic keys to maintaining a robust competitive advantage in the long term.

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