The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
Over the past 20 years, the business of luxury has transformed dramatically, as family-run heritage brands became multi-billion dollar fashion powerhouses, expanding the luxury goods customer base far further than Louis Vuitton and his steamer trunks could have ever imagined. In 2019, the market for personal luxury goods was worth €281 billion (about $310 billion at current exchange), according to Bain & Company, up from €116 billion (about $128 billion) in 2000.
That's our new normal. But before the crisis turned the world upside down, luxury goods purveyors, including French conglomerates LVMH and Kering, as well as Swiss group Richemont, had won over a generation of consumers obsessed with newness, exclusivity and glamour. Success came from high-touch retail experiences and endless streams of novel products that ranged in price from prohibitively expensive for most to downright affordable for many. But that love affair has also been kindled by the digital age, which has allowed shoppers to engage with their favourite brands whenever and wherever they want.
In 2010, €4.3 billion (about $4.7 billion) worth of personal luxury goods were sold online, and Net-a-Porter was the most trusted digital seller of luxury goods, not to mention the hottest fashion start-up in the business. That year, Richemont acquired a majority stake in the business for £350 million (about $434 billion).
Multi-brand retailers are now competing for customers in a fashion market where supply outweighs demand. Discount culture has taken hold, especially in the US, where stores online and off routinely slash their prices (and margins), forcing some retailers into bankruptcy — including world-famous store Barneys New York — and others into unprofitability.
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"I really don't see a world in which you're going to have all of these competing multi-brand retailers who are all selling the exact same inventory," said Jennifer Hyman, chief executive of fashion rental service Rent the Runway. "They did not disrupt themselves."
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The luxury goods maker is seeking pricing harmonisation across the globe, and adjusts prices in different markets to ensure that the company is”fair to all [its] clients everywhere,” CEO Leena Nair said.
Hermes saw Chinese buyers snap up its luxury products as the Kelly bag maker showed its resilience amid a broader slowdown in demand for the sector.
The group’s flagship Prada brand grew more slowly but remained resilient in the face of a sector-wide slowdown, with retail sales up 7 percent.
The guidance was issued as the French group released first-quarter sales that confirmed forecasts for a slowdown. Weak demand in China and poor performance at flagship Gucci are weighing on the group.