This Vogue Business Index article is part of our Advanced Membership package. To enjoy unlimited access to The Long View from Vogue Business, The Fashion Exec s Guide and bi-monthly Market Insights Reports, sign up for Advanced Membership here.
While the previous two indexes saw no change in the population of the top 10, with only a minor shuffle of the order, the new ranking shows more competitive movement, reflecting the shifting fortunes of brands in a challenging economic climate.
Notably, Loewe has entered the top 10 for the first time, in ninth position, followed by Fendi, which has see-sawed between the 10th and 11th spots for the last four editions of the Vogue Business Index. The two brands have knocked out Ralph Lauren and Balenciaga, meaning the top 10 are now firmly dominated by ultra-luxury brands. Loewe’s stellar rise to the top 10 over the last few studies, coupled with Hermès’s return to the top five for the first time since H1 2021, also indicates the strength of leather goods leaders, especially at a time when consumers are looking for versatile investment pieces to stand the test of time when confidence is low.
It continues to be a tough time for brands, with Burberry reporting a significant drop in retail revenue in the three months ending 29 June, Hugo Boss posting a 1 per cent sales decline in its second quarter, and Q2 sales at Gucci plummeting by 19 per cent. LVMH appears to be weathering the storm better than most, but fashion and leather goods sales grew by just 1 per cent in its Q2 statement. It’s a worrying set of results and reflects a deepening downward trend as the year goes on.
For executive leaders, in this fragile economy, you are only as good as your last sales report, and this sentiment is reflected in the C-suite shuffle that we have seen. Burberry, Mulberry, Marni and Fendi all welcomed new CEOs in the last six months. While sales can slip in just a few short months, it can take much longer to reverse the trend, and it’s likely to get worse before it gets better.
Consumers seem mindful of this. Most notably, our latest global luxury survey, which underpins this study, indicates that nine out of the top 10 brands for consumer sentiment saw a decline on whether they offer “good value for money”. Additionally, since the H1 2024 edition, nine of these 10 brands saw their average score decline on metrics tracking brand quality. These include consumer views on whether the “cuts and fittings of the clothing” are good or if a brand “offers high-quality pieces”. This indicates that consumers are requiring brands to deliver more in terms of quality but are less willing to spend on it.
While purchase intent has generally remained stable, as many as four out of 10 global luxury consumers say that increased prices would mean they would shop less for designer fashion. In some markets, this level of caution is more concentrated, with our quarterly tracker on Chinese luxury consumers showing a dip in consumer confidence, leading to increased frugality. This hesitation, in a region that has long sustained the growth of the luxury industry, is having critical ramifications on global performance. Yet, stalwarts including Chanel, Dior, Louis Vuitton and Saint Laurent remain popular with Chinese consumers, even as purchase intent in China wanes.
Anujeet Kaur, VP of client servicing at Phronesis, our research partner for the Vogue Business Index, believes this is indicative of increasing caution among aspirational shoppers: “Aspirational consumers — a quarter of the luxury market — are becoming more cautious. There is an ongoing shift in luxury spending; part of it driven by macroeconomic reasons — like the inflation of the last few years and the exhaustion of pent-up demand post-pandemic.” If our survey data shows us anything, it’s that consumer positivity is dwindling, with brand affinity and average perception ratings dropping across the board since the last study. Moreover, generational differences in behaviour are compounding market difficulties. Kaur adds: “Gen Z and millennials combined will reach two-thirds of the total spending. These younger consumers differ from previous generations in their values and purchasing behaviour.” The fragmented loyalty of this growing demographic makes it harder for brands to secure long-term custom.
These results so far paint a rather bleak picture for the luxury industry. However, there are some bright spots, and shaky sentiment overall means that brands have a greater opportunity to win engagement and loyalty by differentiating through innovation, strong campaign strategy and investment in omnichannel capabilities. Despite most luxury brands having VIP programmes aimed at enchanting their biggest spenders, these are typically opaque and decentralised. Bosideng, one of China’s leading premium fashion brands to be gaining global ground, has introduced a new, points-based loyalty club. Members can earn points through various activities, not just sales, including engaging with the brand on social media and writing product reviews. It’s a well-structured strategy that not only provides the brand with data on shopper preferences, but also incentivises advocacy for the brand.
Our updated omnichannel analysis reveals strong investment in physical footprints in Latin America and the Middle East, the latter offering a lifeboat for luxury in the face of declining spending in APAC. Brazil represents a fast-growing opportunity for brands as tax reforms and infrastructure upgrades make expansion more viable in what has historically been a prohibitive emerging market for luxury brands to engage with.
In digital, cultural collateral has seen some unexpected rises, with Marc Jacobs ascending through the digital ranking on the back of its TikTok strategy, tapping into viral moments such as the Tinashe ‘Nasty’ dance and enlisting celebrity influencers. What’s more, Louis Vuitton has knocked Dior off the top spot for digital — a position it had held for the last six editions of the Index since H1 2021. This milestone marks the success of a similarly celebrity-led strategy for Louis Vuitton, whose digital ambassadors in recent times have included Stray Kids’s Felix, actor Deepika Padukone and tennis pros Rafael Nadal and Roger Federer.
Meanwhile, Versace has taken surprising leaps in innovation, with a multi-platform effort that brings its coveted Mercury sneakers into the metaverse. Its high-profile partnerships with Fortnite and Snapchat helped the brand to reach new audiences, while also providing gamers and Snapchatters with a chance to try on virtual versions of the sneakers — as well as dress their avatars in designer clothing. Despite advancements in the virtual world, the latest innovation analysis exposes a waning appetite for rental and resale, in favour of rising acceptance of buy-now, pay-later, which encourages shoppers to prioritise new stock. While unsurprising, given the declining fortunes of luxury brands this year, it’s a disappointing indication of the slow uptake of more sustainable business models.
Which brings us to ESG, which saw very little movement at the top in the first half of 2024. This plateauing of brand performance in ESG earlier this year was a precursor to what is now an alarming trend of brands missing or reducing their environmental goals. In spring 2023, a quarter of brands were aiming to be carbon neutral by 2030, with this now reduced to 10 per cent of brands just over a year later. The majority of brands are now looking to meet the bare minimum requirements of the Paris Agreement, which states companies have to be net zero by 2050. While brands are quick to highlight new and ambitious goals, there is a distinct lack of accountability from luxury fashion companies when falling short of their targets — or worse, abandoning them altogether. One promising shift, however, is the rising implementation of repair schemes, with Coach, Bosideng and Hermès leading the charge for this service.
Despite these pitfalls, survey indicators suggest a sustained interest in luxury brands and strong desirability, even when consumers are cutting back, and there are opportunities to cultivate better relationships with shoppers to secure future spend. One area to watch out for is the store experience where, on average, consumer opinion about what brands are offering has declined, with luxury shoppers seemingly reluctant to engage in mindless browsing. And yet, the role of the store in delivering magnetic brand experiences and compelling discovery journeys remains just as important as ever as brands continue to invest in dynamic flagship boutiques.
Sign up to receive the Vogue Business newsletter for the latest luxury news and insights, plus exclusive membership discounts.
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
You can learn more about the Vogue Business Index and Advanced Membership here.
