by After years of global growth, the luxury industry is facing a new enemy: “underconsumption”. On TikTok #underconsumptioncore emerges as a trending topic, as the next generation of potential shoppers swap tips on looking good while buying and spending less. The entire sector is struggling as consumers grapple with luxury prices, and are frustrated by the rapid change of designers.
Last week, shares in Kering, owner of luxury labels including Gucci, Balenciaga, Yves Saint Laurent and Alexander McQueen, hit a seven-year low after it reported that operating income in the second half of the year would be down 30% after 42 % fall in the first half.
LVMH, the French luxury behemoth, later expressed concern that demand is faltering even among brands with a more affluent client base that do not appeal to younger, typically less affluent shoppers, when the company lost its sales estimates.
Related: Shares in LVMH and Kering down as shoppers rein in luxury spending
Even LVMH’s champagne sales are declining. The company’s chief financial officer, Jean-Jacques Guiony, said it could be that “the current global climate does not cause people to get out and open bottles of champagne”. In the process, the chairman of LVMH, François Pinault, lost $ 19.2bn or 9% of his net worth, according to the Bloomberg Billionaires Index, slipping behind Elon Musk and Jeff Bezos Tesla.
It seems that only brands that cater to the most affluent consumers are affecting the change. Hermes reported a 13% increase in sales. In contrast, Burberry issued its second profit warning in a year, replaced its CEO and shares fell to 2010 levels.
With shoppers reining in their spending after splashing out their pandemic cash in the face of an ongoing cost-of-living crunch, some wonder if consumers are losing their taste for luxury. Some people in fashion are worried that the last few years will be seen as a luxury bubble – the result of 0% interest rates.
After a post-Covid price hike, some brands are heavily discounting to lure Asian consumers back into the market and tackle overstocking.
In the past, “everyone was a winner” in China’s luxury market, Jonathan Siboni of fashion data company Luxurynsight told AFP. “Now there is polarization between the winners and the losers.”
Kering noted that it was affected by “uncertainties in the evolution of demand from luxury consumers”. This indicated that it may not be as easy to strategically attract younger consumers to become heavy consumers later on.
A new era of retail is emerging that is less transactional
Chloe Lacombe
That seemed to be the case in the vintage clothing stores of Williamsburg, Brooklyn, this week. A thousand miles from the biggest fashion stores in SoHo or Fifth Avenue, Williamsburg has long transitioned from a hipster hangout to a mainstream shopping mecca with its thrift stores, restaurants and indie bookstores. The latest change was all about luxe. Chanel opened its first Williamsburg store last year selling makeup and Hermes followed suit, selling dog bowls, scarves and belts. Last summer, the brand held its post-fashion week party in Williamsburg with filmmaker Taika Waititi hitting the runway, Kim Gordon playing a set and Matt Damon in the crowd.
The high-end brands may be here but vintage fashion shops rule the strip and have some ideas on the lager.
Katina Fauteux, 30, of Chickee’s Vintage, said luxury was just a learning curve. “If big houses took advantage of vintage, they could appeal to the younger generation. They could resell it, like Levi’s sells old 501s. If Prada did that, it would bring in a new customer base my age or younger.”
In Fauteux’s opinion, even fashionistas have been excluded by the big brands and fashion houses turning to their designers so quickly that it was impossible to settle down and pursue a career. “They’re nowhere near long enough to make an impact,” she says, and points to Christian Dior’s black suit, “created to make money”.
Around the corner, at the Chickee men’s store, Chloe Lacombe said that generation Z had not lost interest in fashion – quite the opposite – but that the luxury brands were “losing us when it comes to shopping”.
“People my age don’t usually go to a Gucci store or a Louis Vuitton store. We want to find it elsewhere, in a [vintage] shop like this. A new era of retail is emerging that isn’t as transactional as those stores you walk into, a thousand dollars everything, great customer service but you can’t chat with them about your day or where the local coffee shop is the best. They are there to sell you things.”
There are also ecological and exploitative concerns that have spread from fast fashion to high-end fashion. A court in Milan recently named Dior and Giorgio Armani owned by LVMH as two brands whose products were made in sweatshop-like conditions in Italy. Bloomberg found that Loro Piana’s $9,000 vicuña sweaters relied on free labor from indigenous Peruvian farmers.
Related: Wearing a second-hand suit these days is something to brag about, rather than whisper about
The big brands still hope that luxury marketing can solve their structural and reputational problems. LVMH created the medals and the trunk for the Olympic flame at the games in Paris, as well as many of the outfits for the opening ceremony – perhaps a little too clearly.
Fashion writer Amy Odell noted the company “managed to turn the opening ceremony of the Olympics into a giant advertisement for itself… LVMH’s brands weren’t just inserted here and there, they were more like a marketing patina over the thing all.”
Not everyone is convinced that money is well spent. In Williamsburg, Marco Liotta, founder of Amarcord, one of Williamsburg’s first high vintage fashion outposters, said his customers “don’t want to be categorized. They want to be known for the uniqueness of the look, to be differentiated and not be associated with something that took 50 gallons of water to produce.”
He said the big houses needed to find new target groups, including communities they had never served before. Bottega Veneta, noted, pointed out recently in Atlanta “because the biggest community of rappers and the Black community who have money”.
“Brands should get rid of the filthy rich because they are always going to buy Gucci,” he said, “and look at communities they have never served”.
