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Economic headwinds and reduced consumer spending in the second half of 2023 began to have a tangible effect on the luxury industry, hurting the bottom line for luxury brands. Kering and Ferragamo witnessed reduced sales in the third quarter of 2023, while challenges at luxury e-tailers Matchesfashion and Farfetch saw acquisitions from Frasers Group and Coupang, respectively.
A wider consolidation trend may be at hand. One that reaches luxury fashion houses themselves: Kering acquired a 30 per cent stake in Valentino as of November 2023, with Tapestry announcing its acquisition of Capri Holdings in August 2023, set to complete this year. While 41 per cent of luxury consumers are expected to reduce their luxury spend if price rises persist, brands have the potential to pay dividends by straddling both luxury and accessible luxury.
A bright spot for the industry is China. After wading through its post-Covid recovery in 2023, retail expansion has continued within the market — Chongqing and Xi’an, in particular, have seen a promising number of shopping centre openings throughout the year. Consumer confidence also appears higher, with 16 per cent of consumers in China expecting to up their luxury fashion purchases despite price increases, in comparison to 9 per cent globally. As China’s travel revival continues this year, optimism around luxury’s next travel-retail hub is rising. And, with Louis Vuitton Men’s Hong Kong show last autumn, Dior menswear’s plans to show autumn 2024 and the presence of major luxury brands within the city, all eyes are on the region for the year ahead.
Stone Island made its first appearance in the Winter 2023/24 edition of the Vogue Business Index as the only new addition since Spring/Summer 2023. The Italian outerwear label ranked 42 out of 60, supported by strong financials and above-average environmental policies, thanks to the halo effect of parent company Moncler. Although with brand sentiment trailing slightly behind its competitors, global awareness emerged as a particular area of improvement for the brand.
Meanwhile, names to watch include Coach and Prada, with their “fastest riser” statuses, each ascending the rankings by five and three positions, respectively, since Spring/Summer 2023. Prada benefits from a strong-and-steady approach, through consistently strong performance across most pillars assessed. Alongside brands such as Hermès, Fendi and Balenciaga, Prada holds a commitment to its creative director, maintaining Miuccia Prada as co-creative head despite Raf Simons’s recruitment as creative director in 2020. Brand refreshes may result in short-term gains on socials, but our findings indicate that the deepest benefits are found within creative consistency.
Coach has taken strides across digital and consumer sentiment, offering a strong example for brands looking to lean into platform-native marketing. Coach’s lo-fi TikTok aesthetic, juxtaposed with a more polished approach to campaign videos on its YouTube channel, made the American label a leading contender. Other brands, meanwhile, have harnessed the power of nascent social media stars, catching them on the rise, such as Hugo Boss’s collaboration with Tube Girl, aka Sabrina Bahsoon. In the coming year, brands with a pulse on culture — from social stars to upcoming TV celebs — are set to reap the rewards of more cost-efficient campaigns.
Despite retail offerings, such as in-store reservations or online loyalty programmes, only being implemented by a small number of brands, luxury labels are beginning to stagnate their omnichannel initiatives. As a result of this stagnation, small changes have resulted in big shifts across the rankings. Burberry’s removal of its onsite loyalty programme saw its omnichannel rank drop from first to third, while Dior introduced a WeChat brand store in China that triggered significant gains for the heritage house within the pillar.
Exclusive events or innovative retail concepts could help set brands apart, as well as improve the quality of in-store experiences. Brands such as Coach and Tommy Hilfiger have utilised the power of AR try-ons in physical spaces like stores and events, facilitating improved digital discovery — and upping their innovation rankings.
Innovation is finally finding its place: in the real world. Many innovations in 2023 were on the back end, with AI providing a particular opportunity for brands. Zegna’s customer-facing chatbots, along with Bally’s now-rapid A/B testing, demonstrate the tech’s power to streamline processes and maximise efficiency.
Across ESG, we see the social impact of luxury fashion continuing to come to the fore for many consumers. While the cost of living crisis continues to kick up global implications, issues such as a living wage for supply chain workers are wrangling their way into the consumer psyche. And, despite a tougher audit on those brands offering a living wage — ensuring they are global policies offered along supply chains — Kering has proven more progressive by collaborating with the Fair Wage Network.
Sixty-seven per cent of consumers consider living wages as an important factor for brands (ahead of environmental policies at 65 per cent), yet only 15 per cent of Index brands currently offer this. The luxury industry should take note of Kering’s progress and look towards building a more transparent industry that rewards all those involved in success fairly.
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