2023 is the year of a "return to reason" for the luxury industry. The uptrend after the epidemic has ended, the global demand for luxury goods has declined, and the luxury industry is returning to its normal operating cycle. However, this is not a return to calm, "mergers and acquisitions", "adjustment" has become an important issue for every luxury company.
Looking back at the beginning of the year, what do you remember?
The specter of the pandemic that has hung over the world for three years is gone.
On the first day of the year, Rolex carried out a global unified price adjustment, which was the first price increase of the brand in three years, an increase of 2%-8%.
Louis Vuitton is making a big push for their joint collection with Yayoi Kusama, and Japan and China are their first markets.
The giant Yayoi Kusama statue of Louis Vuitton outside its flagship store on Rue de Champs in Paris, France, in January
Francois-Henri Pinault, chairman and CEO of Kering, rushed to China for the Lunar New Year to visit his most important market.
Almost all luxury brand executives visited China throughout the first half of the year, and all brands chose to keep betting on the "China market."
Everything seems to be thriving.
By the end of 2023, though, pessimism had taken over the industry and everything had changed.
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Frequent wars and economic turmoil
Slowdown in luxury spending
Geopolitical complexities make 2023 a year of conflict.
The conflict escalated, culminating in an all-out war between Russia and Ukraine, with dramatic implications for the energy supply and security situation in the European region.
Entering October, the sudden armed conflict between Palestine and Israel has made the situation in the Middle East more tense and is spilling over. Iran and Israel are engaged in fierce military confrontations in Syria, Lebanon and other areas.
Fighting has resumed in northern Myanmar. Both Afghanistan and Nepal have experienced fierce armed conflicts.
The global economy is in turmoil. Inflation has made spending more cautious.
Luca Solca, an analyst at Bernstein, noted in 2022 that "high-end consumers have not yet been affected by rising inflation and slowing macroeconomic growth." By the summer of 2023, he can only admit that "consumers who bought luxury goods during the pandemic will calm down again, resulting in a slowdown in global luxury consumption growth, and the entire industry will return to normal cyclical rotation."
According to consultancy Bain & Company, global luxury sales are likely to grow by only 1% to 4% in 2024 from 8% growth in 2023, compared with 22% in 2022.
2022 is the end of crazy growth.
On May 16, GUCCI presented the 2024 early Spring collection fashion show created by the design team at Gyeongbokgung Palace in Seoul, South Korea.
As the bellwether of the luxury industry, LVMH Group's revenue in the third quarter of 2023 only increased by 9% year-on-year, slowing down significantly from the 17% growth rate in the first two quarters. The growth engine of the group, the fashion and leather goods department where Louis Vuitton and Dior are, grew by only 9% in the third quarter, lower than the 11.2% expected by analysts. Hermes, the "king of growth" in the luxury sector, also slowed, with 15.6% growth in Q3 and 28% growth in Q2. Richemont's Q3 growth narrowed to 5%, compared with 22% in Q1 and 19% in Q2. Kering Group's three brands GUCCI, Saint Laurent, Bottega Veneta showed an overall negative growth trend, Q3 sales did not meet expectations, down 13%; Ferragamo is also in negative territory, with net sales in the first three quarters down 10.2% year-over-year;
Jean-Jacques Guiony, LVMH's chief financial officer, said: "There is no reason to be certain that we can return to the 20 per cent growth of the past."
Capital markets are increasingly concerned about the outlook for luxury consumption in the US, Europe and China. Luxury group shares also fell, including LVMH Group, Kering Group, Italy's Ferrari and Britain's Burberry, including the STOXX European luxury 10 index recorded the biggest decline since 2020 in the third quarter of this year.
As global interest rates soar, the luxury market is bound to cool, with people preferring to park their money in bonds or bank accounts. Compared with 2022, the middle class will become cautious, and the consumption of the wealthy class will also become hesitant in 2023.
As Johann Rupert, Richemont's chairman, points out, rising prices are causing even affluent consumers to buy less.
On 31 March, the Patek Philippe 96 Quantieme Lune Full Calendar Moon Phase Watch, part of the Puyi Collection exhibition at the new headquarters in Asia, changed hands on 23 May for HK $48.85 million with full commission.
This is directly reflected in the art market, "buy antiques in prosperous times, buy gold in troubled times." "The atmosphere is different now and you have to cut prices," says the global chairman of auction house Foyres. "In the speculative boom, young artists were selling for three times the auction estimate and now they are selling for half that estimate."
In this year's Hong Kong autumn auction, Sotheby's Liu Yiqian's special field did not meet expectations, the turnover rate of 74.4%, the total turnover was far below the lowest estimate, and the high-price lots suffered no auction; Fuis Asia saw a 37% decrease in the number of lots and a 48% decrease in turnover compared with the spring auction.
Asian buyers are not splashing out as they used to at auctions. According to Sotheby's, between 2018 and 2022, nearly a third of collectors who bid more than $1 million were from Asia.
In contrast, in Deloitte's "Global Luxury Power" report released on December 21, Richemont Group's annual sales rose three places in the ranking, surpassing Estee Lauder Group, CHANEL, L 'Oreal Group, ranking third; Chow Tai Fook overtook Hermes Group to take seventh place. Although this data is based on the combined sales of 100 luxury goods companies for the whole year of 2022, it can see the real growth of the hard luxury market in the post-pandemic era.
