The luxury industry may have lost a bit of its luster lately: in 2014, Prada’s third-quarter profits sunk 44%; LVMH sales growth has slowed down; and the share prices of recently listed luxury companies have fallen by a quarter.
There are several reasons for this. First, weak economic performance in parts of Europe and Asia is deflating consumer demand in those areas. Second, societal shifts, including a crackdown on corruption gift giving in China and last year’s protests in Hong Kong, are stealing some of the industry’s cache. At the same time, a lack of truly innovative products has failed to energize consumers.
But there is a big and most important reason is that the luxury consumer base has changed. It’s not your grandmother’s luxury market today, which brings tremendous growth opportunity for the luxury brands that can evolve with the changing face of affluence and market to these new customers based on their individual needs. [Read more…]