In the luxury sector, key players like LVMH, Kering, Hermès and Prada Group navigated diverse fortunes in the first half of the year.
In Kering’s portfolio, for example, Gucci sales mirrored downward trends in Q1, while Bottega Veneta celebrated record-breaking revenue in Q2, notably in APAC.
Hermès continued to display robust growth across all regions and especially in Asia, where strategic expansion and revamped boutiques bolstered its presence.
The luxury market’s resilience hinges on trends such as sustainable consumption, cautious financial planning, and an evolving travel landscape. As the sector adapts to dynamic market forces, the allure of certain brands can be determined by a range of factors.
“There is a mixed picture when it comes to luxury spend among affluent and HNWIs in Asia. Some categories have fared better than others, while different countries are also outperforming their neighbours,” said Meryam Schneider, chief marketing officer of Altiant, a global consultancy whose services focus on luxury goods and wealth management.
First-half winners
Looking at sales alone, LVMH managed to weather a slowdown while some groups, including Hermès and Prada, performed exceptionally well.
Kering, as well as Aeffe and Lanvin, were not as fortunate in the first half as their brands continued to falter.
For Prada Group, the APAC market made good progress during the period, showing a 12 percent increase (see below graph).
Prada’s momentum remained strong as the brand leveraged impactful strategy and a well-rounded mix of categories: a blend of novelty and classics sustained leather goods, RTW and footwear.
Miu Miu was also well-received, with special initiatives like Miu Miu Upcycled, Miu Miu’s first Literary Club “Writing Life,” and the travelling Miu Miu Summer Reads programme.
Hermès saw all geographical regions demonstrated substantial growth, even amid a high comparative baseline in Asia during Q2.
The brand’s exclusive distribution network continued to evolve through the introduction of new stores and expansions. In Asia (excluding Japan) growth of 10 percent was witnessed across all countries (see above graph).
Increasingly key to the luxury experience is the physical retail journey. Italian luxury association Altagamma noted in its latest consumer retail insight report that brands are “rushing” to secure real estate on key shopping streets as they look to elevate boutiques with size and design. These upgraded store now include an important component: client advisors who liaise with “beyond luxury” VICs.
It is certainly the case for Hermès, which in 2024 alone has seen retail expansion at a high point. Noteworthy reopenings included an expanded Lee Gardens store in Hong Kong, the renovated Beijing SKP store in China, and the Mumbai Jio World Plaza store, the brand’s third establishment in India.
The Prada renaissance appears to be in full swing and it is benefitting from both heritage roots and a newly acquired clientele of young, trendy consumers.
The likes of Hermès, on the other hand, are leveraging VIP services and a reputation for being at the pinnacle of luxury.
“Experts might attribute [these groups] resilience to several factors, with Prada Group’s strong sales driven by Miu Miu in Asia. What we can contribute is insight into the deep brand loyalty both Hermès and Prada enjoy among affluent consumers,” said Schneider.
In Altiant’s brand awareness surveys focused on sustainability and luxury, both brands demonstrated high spontaneous awareness, particularly in APAC, Schneider said.
Shopping continues to boom in Japan
Revenues in Japan surged for luxury groups including LVMH and Kering.
“Japan is witnessing a ‘two for one’ dividend of [first] a massive surge in tourism, and [second] a very low yen,” said Michael Causton, founder of the research intelligence firm Japan Consuming.
“Combined, this results in visitors splurging on luxury goods and other high ticket items, which look very cheap compared to most other countries,” Causton said.
That could mean consumers with plans to visit Japan are holding back on spending at home, preparing for a frenzy of shopping while in Japan.
Causton noted that some retailers in Japan – such as Apple – no longer offer tax-free purchases.
At the same time, Causton pointed to Japan’s attractive retail environment. “The customer service levels are exceptional and especially alluring for those not so used to them, and the environment of endless shopping variety excites a consumption appetite.”
But it’s not just tourists who are spending: local Japanese continue to buy into luxury brands across the spectrum, from fashion to beauty. While some department stores have reported declining sales, wealthy locals remain keen to support directly operated luxury boutiques as well as department stores operating at the highest end with VIP offerings.
The presence of wealth in Japan is a major factor – and one that has allowed other rich destinations, including Hong Kong, to weather economic downturns.
“Consumption of luxury, and discretionary shopping generally, remains an important form of leisure activity [in Japan],” said Causton.
“Wealth has grown thanks to high asset price growth, notably real estate and stock markets as well as a shift to more incentivised pay structures. All of which should sustain luxury brands and department stores over the medium-term but, if tourism spending falls sharply, the sector will feel it – and hard – because tourism does account for a significant part of the current splurge.”
A key question for the industry is whether the consumption boom in Japan will continue, and for how much longer. While it can be hard to predict the yen’s trajectory for the rest of 2024, the yen remains the primary indicator of tourist spend in luxury.
Said Causton: “Even with a higher yen, the high growth in tourist numbers should sustain consumption of luxury for some time but recent history suggests that inbound tourists are highly sensitive to small fluctuations in the exchange rate and will stop purchasing in Japan if prices start to look equal to home markets.”
Travel spending earning a piece of the pie
Big spenders remain keen on luxury travel, with only 6 percent expecting to spend less in 2024, according to Altiant. Forty-nine percent, in fact, plan to increase their spend, with wellness retreats growing in popularity.
A report jointly presented by luxury travel event organiser ILTM and marketing firm Finn Partners noted that 54 percent of high-valued Chinese female consumers intend to spend further on leisure travel over the next three years, include hotels and accommodation.
Luxury for these consumers is no longer associated mainly with material goods but with experiences, reflecting a new definition that has shifted away from external validation to self-fulfilment.
The ‘underconsumption’ trend
The growing ‘under-consumption’ trend could also be dampening purchases, especially in younger age groups, according to Altiant.
Affluent and high-net-worth individuals continue to view the financial system with caution—56 percent of those surveyed by Altiant consider it ‘unstable’, and 16 percent find it ‘very unstable’.
From a market confidence perspective, Asian respondents already stand out as the most optimistic, with 39.6 percent expecting an improvement in stock performance over the next 12 months—significantly higher than their European and North American counterparts.
“Looking forward, most of these affluent/HNWIs expect to keep their spending about the same in the different categories. The best performers look set to be travel and wealth management, with around half of wealthy APAC individuals planning to spend more in these categories in the year ahead.
“Global uncertainties – including the economy – appear to be nudging people towards the need for better financial planning, but also facilitating a ‘seize the day’ mentality,” Altiant’s Schneider said.